1/1/2015
guest
Putting the money towards a HELOC instead of the electricity bill will pay of a well purchased system in 6-7 years. A much better value than a $20/month savings for a few years. Your argument is that computer companies sell computing power, so ownership is irrelevant. In 1985, a twenty year computing contract at a bit less than current cost would have been a horrible deal for the buyer.
I wonder how many affluent people with a solarcity PPA will buy green bonds. The irony is wonderful. Making a bad financial deal, and then buying your poor deal back in the form of a solarcity securitized asset. Financial ignorance at its finest.
The friction created by solarcity and similar will be removed by a maturing market. It always is. They are training up their own employees to be future local competitors. No IP. Small barriers to entry.�
1/1/2015
guest I said nothing of the sort about computers...
as of last year, 80% of all solar capacity installed was lease/ppa. That's 80% that purchase electricity, not panels.
People want savings now. If they have to pay hundreds extra per month for a 5-7 year loan, they won't do it. Average home ownership is between 7-9 years, so many won't see a return. Solarcity allows a person to buy the lease out at any time down the road, so they can have the infront savings and the option of ownership of they so choose. That's what the marketplace is clearly indicating by the success of Solarcity, vivint, sunrun, and others with similar business models...�
1/1/2015
guest Buying calls at this price. Some of the negative arguments are ringing hollow imo.�
1/1/2015
guest A recently saw a decent Sunrun prepaid lease of $6,000, 3.5kWh, and 20 years. At 4.5%, $112/month pays off in five years. Then fifteen years of $0. No "hundreds per month extra".
These numbers are the near future. How profitable is solarcity at these numbers?
No green bonds. No $2/watt "retained earnings". No $5K+ customer acquisition costs will work with the solar prices coming in the next few years.�
1/1/2015
guest What was the actual cost of the system, and what system would they install? (Is that 3.5kWh a typo?).�
1/1/2015
guest contract�
1/1/2015
guest So that works out to 23.5 c/kWh all paid upfront. If you finance with a loan, that adds the cost of interest. Yes, even Sunrun needs to turn a profit.�
1/1/2015
guest You are having math problems�
1/1/2015
guest 3.5 system is extremely small. My house is small, 2200 sq ft, and needs a 10kWh system.�
1/1/2015
guest Ok, going by this agreement, the purchaser agrees to pay the greater of 14 cents or 10% less than the utility average price per kWh. The initial payments of $500 and $5500 are prepayments against the per kWh rate. There is also performance guarantee that reimburses just a fraction of the kWh rate if the system fails to delivery the guaranteed amount of energy.
I fail to see how this contract is better than SolarCity's PPA at 13 c/kWh plus small fixed escalator, with no upfront payment at all.�
1/1/2015
guest I'm not sure it is better, but it is a serious contract from a major competitor that can is simple enough to be deconstructed. It is a contract that indicates June competitive conditions in the bay area.
Solarcity claims $2/watt retained earnings. Solarcity claims $2500 customer acquisition cost. Some analysts say it is $5K+.
Neither of these numbers are remotely possible on the amount of this contract ($6K + ITC).
The last California Solarcity contract with a purchase option I saw was $5.19/watt. About triple the Sunrun offer. At $5.19/watt there probably is room for $2 of retained earnings and a large sales commision.
How can solarcity maintain even its current profitability?
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This person is probably buying a small system to just remove the top PG&E tiers, which is ~$.28-$.34.
Without the tier pricing, small systems don't seem to usually make a lot of sense.�
1/1/2015
guest Again, insulting forum members is not a good way to behave here. I think you need to step back and re-evaluate your approach to interacting with forum members.
Now you're quoting ppas? I thought you were all about ownership? Your position against Solarcity is confusing. Please clarify in a respectful way.
secondly, Solarcity has many different options for consumers from ppa to loans. The underlining theme is price per kWh of electricity the consumer will pay with no up front investment, production guarenteed and insurance. Compare that to current utilities, and you have a new solarcity energy customer.
Solarcity solar bonds return is better then treasuries and CDs. So an investor in bonds will be very interested in solar bonds... And that is a bottomless capital market for Solarcity to tap into. In addition, solar bonds are the lowest cost of capital along with ABS offerings. That means Solarcity is getting cheaper capital then all the competition. Cheaper capital means lower all in costs to produce electricity which funnels down to a lower price per kWh for a solar customer which expands the market by billions for every cent shaved.�
1/1/2015
guest He was having math problems, as his later work showed.
I'm not promoting leasing. I'm examining a solarcity competitor and the current market prices for leases/PPA. This is an investment thread.
Another point from the solarcity PPA contract:
"SolarCity agrees to sell you the power generated by the System for 20 years"
They have NOT agreed to provide power the house at their stated rate (15 cents or so), as far as I can tell. What happens when net metering goes away?�
1/1/2015
guest thats interesting you mention net metering since anyone under the current system is grandfathered for 20 years if net metering went away forever. Homes with grandfathered net metering agreements are seeing higher home values in California and Arizona already. Secondly, net metering has recently increased to 44 states in the United States. It will be quite some time before the current net metering regime will be gone. In addition, net metering will most likely never go away, but rather will evolve into a different system where each solar system will be seen as power supplier the utility will pay to use... Which will turn out to be compensation similar if not more then today's many current net metering rates. As storage gets integrated into the PV system, Solarcity will have aggregating capability to assist traditional utilities in peak/load management which save hundreds of millions in peak load capacity requirements. As I've said before, Solarcity has already written in their contracts a 50/50 revenue sharing clause relating to this scenario.�
1/1/2015
guest
Right. Solar prices falling. The wholesale price for electricity produced from solar staying the same or rising. The magic of solarcity.
Austin TX just had a utility scale solar project bid at $.04/kwh. So 50/50 revenue sharing is 2 cents, while paying 13-15 cents?
Home storage will likely never be competitive per kwh with grid storage. The powerwall cost more per kwh than the powerpack. The utility should be better off paying for grid storage rather than paying solarcity a higher price that covers the cost of the home powerwall.
The trouble with claiming possible future revenue from grid ancillary services, such as voltage support, is that everyone with devices on the grid is going after that function. What home storage is likely to be used for is time shifting usage in the home and backup power only.
Musk has deliberately dampened expectations of powerwall sales. Probably in response to overstatement by his younger cousins at solarcity.�
1/1/2015
guest No, not wholesale. Whole sale would mean the utility incurs the cost for transmission and distribution. However, distributed solar is on site or near the site of demand. Therefore, those transmission and distribution costs are incurred by the distributed solar provider. Also, the resposiveness of distributed solar is far greater then centralized peaked power plants and far less expensive. All those values cost money to provide the utility. Therefore, aggregated distributed solar will receive far more then wholesale, not to mention epa/clean air/carbon reduction values as well. That fee/compensation is what Solarcity will split 50/50. Totally different then whole sale.
No, utilities are not going to deal with each individual home owner. The utilities will deal with the aggregator. That aggregator is Solarcity. The power of aggregation is in the numbers. That exactly what Solarcity is doing currently. So, when a person becomes a customer of Solarcity, they are a piece of the aggregation which brings additional value to a Solarcity contract that is unavailable to the completion at the moment.
lastly, Elon was speaking before a utitliy conference. The comment was made to placate them and to assure them the power pack is an attractive buy for them. If you remember, the whole issue with Solarcity stemmed from a click bait article that spliced a quote from johnathan bass of Solarcity stating the lack of savings available in the United States for purchasers of the 7kwh powerwall. Then an analyst quoted the click bait article on the last tesla conference call which confused Elon and JB since it was the first time they heard of it. Once clarified, Elon made a statement claiming the article misrepresented bass's statement. Secondly, Solarcity is chasing the low lying fruit first, which is the home back up power market. This market is substantial and ready for sales immediately. But make no mistake, Elon and Lyndon are firmly on the same page on aggregating distributed solar assets. Power pack is just as important to transform the utility scale as is powerwall is on the distributed side. It's a matter of how to get the light bulb to go off in the fossil fuel centric traditional utility mind. The sooner that light bulb goes off the more time and effort is saved in transforming the grid. The best warriors win the fight before a single shot is ever fired. Although this may not happen here, it's clear Elon is attempting to ease the utilities into the future in a less confrontational way then has to be done. My impression after watching the utility conference talk you reference is that's what he was trying to do with his comments about speaking to Solarcity about their ideas of distributed storage.�
1/1/2015
guest Actually my math was fine. Your inputs were faulty.
6,000�3.5�365�20
=0.2348336595
Problem one is that $6000 is not the purchase price of the system. Problem two is that this is not a 3.5 kWh per day system.
Note that under the contract, the customer is obligated to pay more than 14 c/kWh upto the guaranteed output. If the buyer wants to get out of this, they have just a few opportunities to buy the system at Fair Market Value as determined by a Sunrun appointed appraiser. Even if this is truly fair, it means that the cost to get out is based on the average price of a system adjusted for aging. Thus, Sunrun is definitely not providing the lowest cost system.�
1/1/2015
guest A residential neighborhood with high demand means solar electricity is likely being used in the home where it is generated. That use may have the local grid benefit of demand reduction, but that benefit isn't monetized beyond the cost savings of purchasing more expensive electricity.
The larger scenario is a solarcity investor relations person's fairy tale. There are no 7kwh powerwalls installed. The chance that a significant number being retrofitted into existing PPA customers before well into the next decade is slim to none. This decade, installing into an existing system is probably a minimum cost of $4-5K. A revenue stream returning a decent ROI on that upfront expense is unlikely. The powerwall only hold a couple dollars worth of electricity.
Even if one is installed, the capacity of existing panels is insufficient to support home demand plus supply grid power.
Batteries distributed at substations where needed is a realistic scenario. It just doesn't involve solarcity.
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First, the minimum kwh are part of the contract (at the top). So "nope" again. Your numbers represent lower production, which would require Sunrun to write a check. Divide total kwh by cost, which gives the minimum benefit under the contract.
Second, I'm NOT recommending this contract! I don't know why anyone would sign a twenty year contract with a corporation unless it was absolutely necessary, like a mortgage.
What I'm doing is examining solarcity's primary competitor. They are offering a non-ridiculous number in a prepaid lease, unlike solarcity's purchase offers. So I'm taking Sunrun's simple numbers and asking questions.
Solarcity offers "retained value" as the primary metric of forward profitability from past sales. With their PPA's and exotic accounting, their numbers are opaque.�
1/1/2015
guest Electracity, my first calculation was based on the information you provided, not the information in the actual contract. You presented the idea that it was posible to get a 3.5 kWh system for 20 years for $6000. If you look carefully at the actual contract this is not at all what they are offering. I'm afraid that your misunderstanding of the contract may in fact be a error that many buyers may be falling into. It is simply too good to be true that you can buy a contract worth 102,724 kWh for a mere $6000. That's just 5.84 c/kWh. Apparently you fell for this because you wanted to tout this as evidence that SolarCity is overpriced. In fact this is a contract to buy 102,724 kWh at 14+ c/kWh, which is at least $14,381, but the rate is actual pegged at 90% of the local utility rate which very well may increase a percent or two each year. The total payments for power could be more like $16,500. If this is actually a 3.5 kW system (not 3.5 kWh), then it probably costs Sunrun $7k to $10k to install and maintain, after ITC, about $5k to $7k net cost. Thus, Sunrun stands to make about $9k in gross profit. Now we also see why Sunrun charges $6k in upfront payments as this essentially covers the net cost of goods, minimizing the need for heavy financing as built into SolarCity's business model. Essentially, Sunrun is getting it's customers to finance a longterm lease for them so they do not need to go to the bond markets. In fact, I suspect that many Sunrun customers may be taking out loans to cover this upfront payment, thus incurring additional financing costs on behalf of Sunrun.
Whether this constitutes a bad deal or not, I will leave to Sunrun customers to decide for themselves. But I would point out that compared with SolarCity, Sunrun may be paying an extra 1 c/kWh, while SolarCity is providing real financing. That is, SolarCity is going to the bond markets and other investors for the capital needed to offer electricity at a rate about 3 c/kWh below the utility. By contrast, Sunrun is going to the customer for capital and lock customers into a contract that only saves about 10% off utility rates. I think many of the criticism that you have leveled against SolarCity seem to apply much more aptly to Sunrun's business model. Specifically, if one can come up with $6k upfront, why not buy such a system for $10k to $14k, offset this with the ITC of $3k to $5k, and finance the rest? Of course, you may not be getting the guarantees, insurance, monitoring and maintenance that Sunrun is packaging, but you also avoid the vulnerable situation of having to pay some appraiser's idea of FMV to get out of the 20 contract, even if you just need to sell your house. By contrast, SolarCity offers a free exit and removal of system, if you sell your home. Clearly, it is hard to compare these different packages, and in time consumers will become savvy to which deals are better than others. There may well be other advantages to Sunrun that I am overlooking. But for me the biggest difference is that SolarCity is offering real financing to customers using its access to capital markets, while Sunrun is pushing much of the burden of raising capital back onto its customers.
As someone who works in banking, I believe that financing creates real value for customers and would not trivialize what SolarCity is doing in this space. In fact, I believe that solar systems are complex enough that only a specialist can offer the best financing posible in this space. Banks are generalists, and they simply do not have the specialized capabilities to assure that solar systems are well designed, properly installed and maintained. The sort of business controls needed to do this are not easily developed and are not present in banks. So banks like Goldman Sachs and Bank of America can lend their expertise directly to companies like SolarCity, which then offer specialized financing to solar customers. This is really the smartest way for banks to participate in solar financing. In fact, the mortgage crisis has raised serious questions about the ability of banks to handle mortgage defaults. Many banks still have REO properties that have sat vacant for years. The foreclosure business is very messy, and banks are not well suited for physically managing foreclosed properties. It could be much better for mortgage lenders to pre-negotiate contracts with REITs to handle the contingencies of real estate as collateral. Banks have core competencies in financing, not real estate. And banks have even less competency for handling distributed energy assets. I'd also point out that utilities lack competency in managing distributed energy assets too, though some are trying to evolve in this space. But financing and managing distributed solar assets is exactly what SolarCity specializes in. They have core competencies here that neither banks nor utilities possess. This is why SolarCity exists, and this is why they will continue to exist within this rapidly evolving space. Consider the possibility that distribute solar may come to generate about a third of all power. Should there not be companies that serve as specialists to optimize the value of these resources? If you start to think about how do you capture all the economic potential of distributed solar and batteries, you'll see that it will take strong innovation, financial and operational capabilities. It's not as simple as installing a roof or hot water heater. These things only create value for use in a single building or home. Rather the electricity produced on someone's roof has the potential to power many homes and business. So the exchange of power between multiple parties is key to unlocking the full economic potential. We are just beginning to tap into that potential, but as this evolves it will lower the cost of energy everywhere. By analogy, it's not enough to put personal computers and telephones into homes that can afford these. Much greater economic power has been released by networking computer, forming the internet, and dropping land lines and a good number of computers for smartphones and many other Internet connected devices. Networking solar systems, batteries and other devices will create possibilities that few of us can imagine at this point. There is nothing conventional about bring energy into the internet age. If utilities, electricians and bankers knew how to do this, they would have already. We need more specialists like SolarCity to make pioneering leaps into this new space. As Lyndon Rive has said, "Going off grid is a really bad policy outcome." He says this because he understands that much greater things can happen as solar resources become part of an interconnected web of energy and information. This is where SolarCity is going.�
1/1/2015
guest Thank you JHM, your last paragraph above was a very informative and thoughtful read. I think I'll hold on to my 1,500 scty shares a while longer. I started buying at $9 way back when.�
1/1/2015
guest Great insight there jhm. SCTY's strengths and competitive edge comes from, as you point out, their golden position as the middle man between the finance market and the end customer.
I would add that their current large market share and obvious great access to credit in the financial markets is allowing them to, in addition to the above, seek to establish one more substantial advantage over the competition: reductions in costs from developing their own panels (note their purchase of a panel manufacturing company), development of better and more cost effective mounting systems, synergies in distributed networks as well as of course economies of scale (from being large and growing rapidly).�
1/1/2015
guest What happens when the roof you are installing these on needs to get replaced? Do we as homeowners pay for uninstall and re-install?�
1/1/2015
guest Normally yes. The standard advice is to always repair the roof first.�
1/1/2015
guest i replaced my roof in spring 1999 before i got my PV system. (which is shading the roof underneath and lessening ageing) kinda obvious.�
1/1/2015
guest The issue of financing solar is non-trivial. I'm putting together a community solar project in Portland, Maine, and it's not trivial figuring out the financing for buying a share of a solar project that is not located on your house (but out in a field). In theory this is easy: there's a physical asset to secure the loan. In practice, banks here haven't seen anything like this and most are not inclined to take the time to figure it out.�
1/1/2015
guest I wonder if SolarCity could help with that. Recently they announced a community solar project in Minnesota. Otherwise I don't think they do any business in that state, and some other company is doing the actual installation. So I think SolarCity's contribution may be focused on financing.�
1/1/2015
guest Solarcity said something interesting in the last conference call. They said they are two companies in one: a development company and an energy company. So, I'm thinking the Minnesota deal is Solarcity will act as the energy company and the Minnesota developer will take on the development piece. Overall, the ability to raise the 200mln is a significant leverage point to lock in best rates as well as big volume, economies of scale advantage. The Minnesota community solar is a $200mln project, largest community solar project in the country as I remember. They are clearly taking advantage of community solar policy there, however Xcel is definitely trying to slow this project down right now. I think Solarcity is branching into two separate companies to take advantage of possible REIT or yield co possibilities down the road. They masters at seeing all avenues of capital raising available to them. Next year they are going to have to raise over $5billion to keep up current growth rates so I wouldn't put it past them to uncover another way to tap the capital markets.
Maine is interesting. It's in the middle of a big revision of net metering and the "value of solar." The governor veto was just overrides by majority vote in state congress so not the most favorable conditions for Solarcity right now. Not sure if solar will have a big foothold in Maine while policy is in flux.�
1/1/2015
guest Selling 20 % of my holdings @ $149.00 Staying with the rest!�
1/1/2015
guest Outstanding post.�
1/1/2015
guest Dude! Another "nope".
But lets do some more maths anyways.
I believe Solarcity has said that 80% of PPA's so far have been transferred to new owners when a house is sold. Does that mean 20% have had to pay off Solarcity for the remainder of the lease? If that is true, even the claimed ten percent PPA saving is wiped out. Here is what I came up with.
C = current cost of electricity for 20 years.
.9C is the sometimes claimed cost improvement with a PPA
If the average home is sold in eight years, 20% of PPA owners pay 60% of total contract value as a penalty. The expected average cost of a PPA:
.9C + .2*.6*.9C = 1.008C
The expected value in the real world wipes out the 10% savings, assuming the monthly 10% lower electricity bill was actually achieved.�
1/1/2015
guest 98% of agreements are transferred to the new owners, not 80%. See FAQ here:
http://www.solarcity.com/residential/solar-energy-faqs/buying-selling-solar-homes�
1/1/2015
guest What will be the transfer rate in eight years when owning a new solar system is very inexpensive? How many of the 98% of sellers had to make concessions to the buyer? How many house sellers lost sales from the many financially astute people who have no interest of having such a contract.
There is no real estate agent who thinks having a solar lease contract attached to the property is helpful in a sale.
Why leased solar panels may not be an asset when a house is up for sale
�
1/1/2015
guest Those are all deflections to other arguments I have no wish to participate in. I was simply correcting your erroneous assumption.�
1/1/2015
guest
You are invested in the wrong company if Musk is your thing. A recent Musk tweet:
Credit for SolarCity is really due to Rive bros; great team there. My contribution is fairly small.
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I would not either if I had signed a PPA contract.�
1/1/2015
guest Again with the faulty assumptions.�
1/1/2015
guest In eight years SCTY will be installing over 20gigs per year and even if more people do start defaulting it will matter little
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One of his recent "very small" contributions was convincing the Rive brothers to become the largest Panel Manufacturer in the world. In musk's world that is a small contribution. In the world the rest of us live in it is a monumental contribution.�
1/1/2015
guest Their earnings are poor with claimed $2/watt retained earning.
How will they have $2/watt retained earnings when systems can be purchased for less than $2/watt? How will they have $1/watt retained earnings? even 50 cents?
We are at the edge of an era where people are purchasing systems that can be paid off in five years for $100-200 a month. Who is going to be signing these long term PPA contracts?
Musk suggested his kid cousins start a company to sell solar. That business wasn't particularly profitable, as there is no significant IP and few barriers to entry in the solar installation biz. So in the great tradition of American capitalism, they switched to complex financial products that allow sufficient ambiguity to game customers out of the benefit that is derived from installing solar to the home.
Why isn't Musk using his stature to sell solarcity to potential buyers? All he does is the occasional "use solarcity" shoutout. Why won't he take a more visible position? People like Musk don't get to where they are by signing long term contracts like solar PPAs. He knows that solarcity may hurt his reputation.�
1/1/2015
guest Electracity, you are trying my patience.
Are you aware that Elon Musk is the largest shareholder in SolarCity with 20,681,528 shares, worth over $1B of the $5B market cap? I'm sure that if Musk had any doubts about the direction of SolarCity, he could find better places to invest $1B. For example, he recently sold a 10% share of SpaceX to Google for $1B. He's not exactly running out of ideas for new enterprises!�
1/1/2015
guest These are excellent points. I think this community project merits some special attention because it shows SolarCity evolving into a new business model and bringing their capabilities to bear in a new market. This goes well beyond the PPA lease model.
I'm not sure I want to see SolarCity spin off a yield co. We should have that discussion.�
1/1/2015
guest Can't have the 4th of July on TMC without some fireworks!
There seems to be a strange thing happening here: some people don't support Solarcity, but love Tesla as an investment. I've been very curious as to why since most people(maybe all) that post on TMC really think Elon is a special businessman with vision that can execute on big ideas. Elon owns 21%+ of Solarcity. He is the chairman of the board. He was the initial investor in Solarcity, he bought millions in common stock, and has continued to invest in solarcity reference SpaceX with over $150mln in Solar Bonds. SpaceX Headquarters has a Solarcity system on top of it. Tesla Design Center supercharger has a Solarcity canopy over it, as well Tejon Ranch and plans for others. Elon was at Lyndon's side at the IPO in New York. Elon was with Lyndon at the announcement of the Silevo acquisition, where Elon even said he envisions Tesla energy production being co located at future 5-10GW Solarcity factories. Solarcity helped to design the two man lift handles on powerwall. Elon even goes as far as saying Solarcity plays a fundamental part in his master plan of help establish a renewable production(solarcity) and consumption(Tesla) energy economy. With that said, Elon is pretty much all in with Solarcity.
So how can someone believe in Elon, but be so adamantly against Solarcity? My answer is that those that work or have worked with utilities love... love... electric cars, but don't like revenue snatching solar companies, specifically solarcity. I have a feeling there are a few current/former utility employees that may frequent here and make this abundantly clear in various posts. Lets be real: electric cars consume grid electricity. They increase revenue for the traditional utility. Heck yeah, go Tesla! Solar companies reduce revenue to the traditional utility. Heck no, go home solar! See the friction around Elon? On one hand, he's putting new dollars in utility's pockets, but on the other hand, he's taking dollars away. It makes perfect sense to have people hating solarcity here, but yet love Tesla. Thus, we hear repetitive and consistent arguments that say Solarcity is a bad business and Tesla is a masterful business... and both arguments said in the same breath most of the time. Invest in one, but not the other. I feel we'll have this repetitive argument appear here regardless of Solarcity success or not. Just going to have to live with it, I guess. Doesn't mean we have to respond to them. Best policy is to ignore and drive on with keeping the debate moving forward with those that want real dialogue and knowledge about Solarcity as an investment.
To add, those that follow the short interest and now being at record high levels.... my belief is that the more money Solarcity pulls in from tax equity investors as well as any capital raising deals done with the big banks is that they hedge their release of capital with SHORT BETS. All these big money players not only have given solarcity money, but they are placing short bets to hedge. Solarcity has taken in more capital over the past year then they have in their entire history of their company's existence. We're talking $300mln-$1bln a pop now. That requires a lot of mitigation on behalf of the big banks. So, to me, much of the short interest has nothing to do with fundamental shifts in the business success. It has a lot to do with capital risk management. A company doubling year over year accumulating massive levels of revenue generating assets and long term revenue streams is hardly a start up internet company on the brink of collapse every quarter earnings report. Sometimes we all just have to honest with ourselves and delve deeper into why somethings don't make sense, especially with short interest. Contrary to what some of us believe on this thread, Solarcity is a pretty solid company with continued strong growth ahead of itself.
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jhm,
Yeah, from what the CFO was saying at the last conference call, I don't think the yield co will be an option for the foreseeable future. The way he was talking, the solar bonds and abs are more cost effective options for capital.
update:
A Solar Revolution
solarcity now has 12k employees. they've hired 1500 people over q2. That's pretty impressive.
also, they now have 100k solar ambassadors. Last I checked, that's 65k more than last quarter. Again, impressive. It boggles the mind that some people actually think Solarcity is a bad investment with these type of human capital growth numbers.
... Solar for life sweepstakes promotion too... Wonder how big that ambassador program gonna get now...�
1/1/2015
guest At the risk of jumping into a firestorm, for me Tesla is doing things no other company in the world is doing while SolarCity is doing what hundreds of other companies are going. The only difference there is that SolarCity is national and the other companies are local. In my local market, there are dozens of local companies and SolarCity ended up being about halfway down the list when I went comparison shopping a couple years ago.�
1/1/2015
guest Well since you jumped in. .. there are way to many differences between solar city and the local competition. ..if you read the last 5 to 10 pages they are for the most part now covered pretty well in this thread. . Or better yet. . Listen to an earnings call or two.
You currently sound like people who say when the
Big 3 decide to get into electric cars they will smash tsla. You are on this subject uneducated my friend. I highly respect your tsla knowledge and highly encourage you to dig a little deeper into what seperates scty from everyone else.
If you do I suspect your opinion will change.�
1/1/2015
guest Very good info, wish I'd said all that!�
1/1/2015
guest When getting quotes, be sure and check independent installers for a system purchase. I recently was quoted $3.85/watt for a 25KW system with a fairly complicated installation.�
1/1/2015
guest From the last conference call:
__________________________________
Brian Lee (Analyst - Goldman Sachs):Hey, guys, thanks for taking the questions. Will echo Patrick's sentiment on the kudos for the new disclosures. On the Q1 deployments being $1.07 per watt here, Brad, how should we expect that number to trend in 2015 and even into 2016, given pricing mix, cost assumptions? I know there's a lot of moving parts there.
________________________
The are installing a 5kw system for $5,350 direct cost, and pricing it at $25,950 ($5.19/kwh) in a business with no IP and no barriers to entry.
Here is solarcity's fundamental long term problem. They are not making money with high margins and ITC. They can't maintain high margins as potential customers become sophisticated.
Lots of nonsense in the last conference call. Customer's with batteries will self consume the power they produce.�
1/1/2015
guest Moderator's Note
I've moved some posts off to snippiness; apologies for not being on top of this forum during the holiday weekend.
The snippiness started NOT with @electracity but with those who shifted from rebutting his quantitative analysis with facts and just went straight to ad hominem arguments. You may not like what @electracity is saying, but flaming him isn't appropriate here.
Bears and skeptics serve an extremely valuable role in helping tighten up our investment thesis. Read carefully what these people say, challenging their facts and logic, so that you can reach your own conclusion as to their merit and whether it has any bearing on your investment decisions. Dismiss them out-of-hand at your financial peril.�
1/1/2015
guest Well said, Robert. Those calling for bans based solely on disagreement, replying with ad hominem attacks, etc do no service to anyone here.�
1/1/2015
guest
At first 98% sounded pretty good to me. While this percentage means 1 in 50 customers have written solarcity a check for presumably $10,000+, the percent is low so far. But here is a chart of cumulative customer. They have acquired a large majority of customers in the last three years. So 2% of a very new customer base has already had to pay of their contract off. This is a timebomb of future customer dissatisfaction.
�
1/1/2015
guest Might I reiterate Solarcity has 100k solar ambassadors. That's up 65k people over the last quarter. Solar ambassadors are not employees. They are advocates for Solarcity. The receive referral fees for referrals that lead to installs. That's right, referrals are only paid once install is contracted. So, to me, they are not a dissatisfied customer base. They are actively promoting Solarcity on their own free will. Solarcity also has the highest rating you can achieve from the BBB.
also, I reiterate Solarcity now employs 12k people. That's up from 10250 in Q1. This is a clear indication people want to work for solarcity, and falls in line with Lyndon's rating as one of America's most liked CEO to work for.�
1/1/2015
guest tick....tick...tick�
1/1/2015
guest I believe that Brian Lee is referring to the NPV of $1.07/W as on page 11 of the investor presentation deck for Q1 2015. So this is value created for equity, $147M for that quarter. It is not the direct cost, which is $2.95/W, but what is netted for sharholders. So customers got $407M of installed equipment, while sharholders will get over the next 30 years $147M NPV at 6% discount rate.
I would encourage everyone to read the investor presentation. It really is quite informative.�
1/1/2015
guest Robert.Boston... And this post above is high quality quantitative analysis? I appreciate you stepping in, but it might be appropriate to review his/her posts in there entirety. The above type of post is clearly not analysis nor appropriate tone/attitude for constructive pro or con contributions to this thread.
Please consider the complaints from multiple forum members in this regard. The frustration of inaction on their behalf is what generates "snippy" comments, not the fact the above poster is a "bear."�
1/1/2015
guest This is a faulty arguement. The 98% transfer rate only applies to customers who have sold their home, not to the entire base of customer. It does not matter how big or how recent the installed base is. These factors do not impact the transfer rate.
Additionally, it is faulty to suggest that 2% of home sellers not transferring are writing of the contract. Non-transferring customers have the option to move their system to their new home and some elect this option. Owners of solar systems would have this same option too.�
1/1/2015
guest What is that supposed to mean? Is it some type of scare tactic designed to appeal to emotion rather than reason?�
1/1/2015
guest More on batteries from the Q1 conference call:
cousin Peter:
Our solar battery backup system will sell for $5,000 as an add-on to a lease or a PPA, which is comparable to other backup generator option. It's important to note that the Tesla price of $3,500 doesn't include the inverter, permitting, the installation, management software and electrical equipment to wire out the circuits that need to be backed up.........
�....Our product, and by that I mean the contract 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 contract that we have with our customers.
We're not in a position to estimate what these revenues could be, but it's interesting to note that in California, it's currently estimated to cost $190 per kilowatt per year to meet new peak load. The other strategic options that batteries make available to us are hedges against bad policy outcome, with examples being changes in net-metering and solar penalties like high fixed charges.
Let's unpack this. They are going to sell, not lease, the 10kwh powerwall as an add on. In other words, the is no room to game the powerwall sale into high IRR situation for solarcity, so we will just get the money up front. Perhaps in the future we can sell some power from that battery, but we are really not sure.
The 10kwh powerwall can not be cycled daily, so as a revenue generator, it can only be used a few times a month. And again, no battery IP, no protection from competition. The powerwall isn't unique to solarcity. They are selling this storage at $500/kWh.
This new product is completely consistent with Solarcity's approach of a sales process that presents the illusion of value to naive customers. Tick Tick Tick.�
1/1/2015
guest Is your name Ron by any chance?�
1/1/2015
guest Nope, who is Ron?
- - - Updated - - -
I made an earlier reference that the 2% contract payoff rate was a customer dissatisfaction timebomb waiting to explode. The response to my comment was about current solarcity conditions. My tick tick tick comment was saying that I wasn't talking about current conditions.
Although one in fifty people needing to buy solarcity out of a contract that was sold to them as a money saver is a pretty bad current condition.�
1/1/2015
guest Who is Ron?�
1/1/2015
guest Solar prices are going down. Solarcity contracts have escalators. The rate these contracts will need to be bought out to make a home sale will increase every year. Lots of people will he hatin' on solarcity. But great revenue for solarcity in the contract buyouts!!! Woohoo.�
1/1/2015
guest SolarCity adds Tesla battery to its new solar-plus-storage home product | Utility Dive
solarcity is including powerwall in $0 down business model beating local utility electricity prices/kWh. Solarcity owns the OS software IP.
interest in Solarcity/powerwall product has been extremely high according to the CFO. And according to Johnathan Bass, the number of calls/requests for powerwall after Elon's presentation were the most interest in a Solarcity product in the company's history.
The "naive customer" argument has been espoused by a few bears for literally years, specifically about two years on this thread/associated threads. Over those last two years, Solarcity has gone from about 70k to 218k customers. A tripling of customers over the period the sirens have blared in warning from bears and Solarcity competitors that Solarcity is borderline "scam" and "illusion of value." With all these warnings over the years, Solarciry still has managed to triple in customer base. Over the last couple years, Solarcity has managed to achieve the highest rating from the Better Business Bureau of America. And over these past couple years, they have managed to amass an100k strong advocacy group, not employees, to advocate for Solarcity as an energy company to friends, family, and neighbors... That's then highly coveted "word of mouth" marketing that all businesses wish they could generate, and now Solarcity seems to be growing it in spades.
It might be advatangous to a bear argument to adjust assumptions as facts have come in over time. Each day the out of tune sirens toot, a little more aware people become of its lack of fidelity.�
1/1/2015
guest It will be interesting to see how SolarCity packages Powerwalls. Peter Rive seems to be anticipating the potential to split revenue with customers as SolarCity aggregates storage as a grid service. He considers the standby rate of $190/kW per year. Suppose SolarCity could get a deal a fraction of that, say $100/kW per year. So on a 10kWh / 5kW Powerwall. That would generate $500/year from the grid. Over a ten year contract, that covers the $5000 cost of the Powerwall add-on. But the Powerwall also creates the benefit of backup power to the customer in addition to the value created to the grid. There is at least a $1B addressable market for home backup generators. So SolarCity has the potential to package this in such a way as there is only a trivial net cost to the customer for in home back up power. Again we'll need to see how the details work out, but if SolarCity can leverage it's scale to get a solid deal with utilities, this could be a big win for both SolarCity and Tesla. Also I suspect that SolarEdge figures into this as they work closely with SolarCity and are developing an inverter customized to work with Powerwall.�
1/1/2015
guest The pool of naive buyers isn't empty yet. Get 'em while they are ignorant. A portion always will be deceived, I suppose, but those people won't be as reliable payers as the current crop of more upscale PPA buyers.�
1/1/2015
guest I use this chart as an honesty factor, whats going on with PV Numbers are in terawatt hours
note specifically: planetary production doubles 2000 - 2003, doubles 2003 - 2005, doubles 2004 - 2006, triples 2007 - 2009, triples 2008 - 2010, triples 2009 - 2011, triples 2010 - 2012, then slows to ONLY doubling
Terawatt-hours 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 US 0.5 0.5 0.6 0.5 0.6 0.6 0.5 0.6 0.9 0.9 1.2 1.8 4.4 9.1 18.5 Europe and Eurasia 0.1 0.2 0.3 0.5 0.7 1.5 2.6 3.8 7.5 14.2 23.2 46.7 72.1 86.5 99.7 Asia/Pacific/China/Japan 0.4 0.5 0.7 1.0 1.2 1.6 1.9 2.3 2.8 3.9 6.4 10.9 18.2 36.0 62.6 total world 1.0 1.3 1.6 2.0 2.6 3.7 5.0 6.8 11.4 19.3 31.4 60.6 96.7 134.5 185.9
this data is from bp-statistical review of world energy 2015 workbook excel spreadsheet (free download) this is one reason I have a few hundred shares SCTY among others.
I hate using the trite phrase "paradigm shift" but thats what seems to be happening to utilities (and those with no utilities for micro grids)
my philosophy of trading this stock, SCTY (and TSLA and others) is buy and hold using dollar cost averaging. (MY ASi PV system went active in April 1999)(very inefficient, but works)
I would also reccomend, as I have earlier "the economics of LOAD defection" from RMI. I investigated a PbA battery system, killed 2 very expensive ones for my lead sled EV's. I need items like a power wall and everytime I get off plane in Florida, there are items on the wall "Hurricane Charlie destroys power to 384,000 homes." and such. a 21-30kWh power wall would be handy for a radio and fridge. In DC area I had the ONLY street light as it was a cheap LED PV street light for 2 days.
I dislike the "negativity" and what I regard as trollishness of some, but it gives me messages/writers to autoskip
anyway, i enjoy these threads�
1/1/2015
guest He's a solar system installer who it seems is having his cake eaten by SolarCity and takes every chance to post on various forums, news websites etc. under various different synonyms with the same arguments as electracity here.
P.S. Some typical comments that are like that ron guy:
"The pool of naive buyers isn't empty yet. Get 'em while they are ignorant."
"They can't maintain high margins as potential customers become sophisticated."
"business with no IP and no barriers to entry"
�
1/1/2015
guest Looks like Foghat just scooped me on the new announcement of SolarCity offering a package with storage. The article came out today. That's how damn fast this industry is moving.�
1/1/2015
guest I like this guy�
1/1/2015
guest winfield, thanks for the chart and insight. I think solar specifically is now considered a real competitor to traditional utilities which operate under a legal monopoly system. This legal monoply system the utilities operate under is devised to encourage competition to participate when competition develops. Solar now is a viable competitor so the grid has to be available to them to reach customers. Many people don't understand this. They only assume utilities have exclusive rights to the grid but they don't. This is why anti-trust laws are now being "activated" by Solarcity. Legal history is clearly on the side of competition and dismantling monopolies when competition is viable.�
1/1/2015
guest Yeah, this is good. I'd also point out that SolarCity is very selective about which geographical markets to enter. They are even moving employees out of Arizona because the damaging monopoly power those utilities have exerted. So they are only certain markets with the US. If you look at the US figures in your chart, you'll see that solar has been doubling every year for the last three years. SolarCity is gaining market share in a national market that is doubling. That is an awesome combination.
BTW, I do expect SolarCity will return to Arizona once they have an off-grid package to deliver. The utilities may be able to get political protection for a while, but they will lose once ratepayers are given a choice.�
1/1/2015
guest Hit the nail on the head. As an investor, this is clearly where my radar is pointed. Just look at Warenn Buffet's reaction(PURPA rebuke)and you'll see this is some serious revenue potential for Solarcity. The utilities are already trying to fight this battle tooth and nail right now...�
1/1/2015
guest Moderator's Note
"tick...tick...tick" does not even come closing to being snippy. I read it as a reference back to the "time bomb" @electracity discussed in some detail just a few posts before, a bomb that no one has defused since. By way of rebuttal, it was offered how many customers SolarCity has willing to accept cash to refer their neighbors, a point that doesn't speak to a potentially growing base of people who are coming out on the wrong side of the lease/buy decision, nor to @electracity's point that, as solar prices fall, these older lease prices are going to be potential liabilities.
@electracity has as much right as anyone to post his analyses and thoughts, and to remind us when rebuttals are not on point. Keep the conversation civil, and if you prefer not to see @electracity's posts, put him on your personal ignore list. Though I still think you'd be better off reading his posts; if you disagree, move on.�
1/1/2015
guest go to this link Statistical Review downloads | About BP | BP Global
it has energy data from 1965. they update the excel sheet once a year, in june it seems. sheet ?54? has PV, sheet 50 has hydro electric, sheet 56 has wind, all in terawatt hours.
note:Germany, Spain, Italy China, Japan and the US are huge consumers of PV. additionally, Ireland, Denmark, UK, portugal, sweden and Turkey like wind turbines. It gives you an overview sense of whats going on where
glad it's useful (as a VERY obscure reference, I've liked PV every since I read about the "Douglas/Martin sunscreens" long ago)�
1/1/2015
guest Why do you think that SCTY will not package the Powerwall into a lease/PPA in the future at least in high electricity price markets like HI? And more and more markets will come into that fold unless you see utilities stagnating or dropping electricity rates? Why is 5000$ for the powerwall installed an illusion of value? Can you get something similar cheaper?�
1/1/2015
guest Then I guess this would be a good number to track. Is the rate of buyout increasing or decreasing? Why would they need to be bought out at increasing frequency given lower solar prices? Wouldn't a system that is currently on a roof, and producing electricity cheaper than the utility still be attractive? It might not be the best possible deal, but still worth having.
I'd think as people become more comfortable with solar, that the buyout rate would decrease as home-buyers would value taking over a contract that provides electricity cheaper than the utility instead of being scared by solar. It's also assuming that the home-seller views the buy-out as a negative. It's possible a paid off solar system increases the value of the home or makes it a more attractive purchase.�
1/1/2015
guest So you, as a moderator, are a "bear" on Solarcity as an investment. It gives me this impression when you feel it necessary to defend his posts. My response was to show the evidence points to a potential massive majority of "satisfied" customers down the line, where electracity was noting the opposite. In addition, jhm pointed out his own misinformation discrepancies in electracity's post, yet you failed to note that in your comment that electracity's post was not responded to in kind. It was electracity who did not respond in kind, but with a non informative and unproductive response of "tick... tick... tick..." which seems to be how he responds to all rebuttals to his comments.
Many forum members have tried to engage in civil debates, however electracity does not seem to want to debate but rather incite anger and incendiary responses from other posters. If you can refer back to his very first post in this thread, we can see the inciting theme within dozens of posts later. Again, many have tried to engage in civil debate, but yet he/she does not seem it necessary to be respectful nor add to the pro/con argument when challenged.
It is not a matter of "allowing" electracity to post, it is a matter of keeping the thread civil in debate and being even in judgement on the content and context of posts here. Many people have noted a disrespectful tone and approach by electracity. It is only fair to the many members that have noted this to address the issue. Not one person is arguing against his "bear" case to be expressed here in this thread. But most are offended and discouraged to participate because of his combative tone and disrespect for others opinions.�
1/1/2015
guest Here's the falsehood of the solarcity pitch. The competition isn't the utility, it is the customer's ability to produce his own power. In ten years I don't want you old solacity PPA that is now at $.18. I want my own system that produces solar ar $.08. You want me to buy your house? Either remove the lease, or cut your home's sales price.
A PPA contract has effectively sold the solar rights to the house for twenty years. That is only is a good deal in the beginning. The retained value solarcity boasts about is because of the poor value to the homeowner by the end of this decade, well before the contract is even half over.
As people become more comfortable with solar they won't want PPAs and leases. You can't even add a battery to a solarcity system except on their terms.�
1/1/2015
guest Moderator's Note
@Foghat, I have no position on SolarCity, financially or intellectually. I'm reading his posts and have failed to find anything that requires moderation (at least until @atang got personal). I explained why I thought the "tick...tick...tick" post was reasonable, and it remains in the thread. If you disagree with me, please report the posts you find objectionable and ask the head moderator, Doug, to review them. My explanation of my reasoning wasn't intended to agree (or disagree) with @electracity's post, but rather to point out that the posts that intended to rebut his "time bomb" argument had not.
This forum is not a fan-boy site for Tesla or SolarCity. Opinions on both bull and bear hypotheses are welcome.�
1/1/2015
guest Agree�
1/1/2015
guest By saying fan-boy you clearly stating your bias. The many of us ARE investors that have done due diligence before we even started posting here. Many of us investors come here to discuss solarcity as investment to judge long term holdings. Elon and Tesla are a SIGNIFICANT piece to the success and an integral part to solarcity business today and in the future. I've been following this forum for a long time before I decided to be a member. I know that Curt started a solarcity thread nearly two years ago that someone(anti-solarcity advocate/utililty employee) deemed fit to change into the alternative energy thread. Why? Why couldn't someone just start an alternative energy thread. Curt then had to start another solarcity thread in order to keep the discussion on solarcity. Why? Why is it when someone starts posting disrespectful comments as well as repetitive comments that state a "bear" case do they get to literally have total freedom to say what they want. It is another form of bullying and "snuffing out" of solarcity investors opinions that I thought was not tolerated on TMC. But, many of former members posting positive comments on solarcity are either banned, given the red bar of death, or stopped posting completely. Just read the threads from start to finish and look who got effectively "snuffed out" and who didn't.
As far as complaining to other moderators... you all read what I would say to him... there really is no true objective opinion that would be decided. It's been done before and nothing came of it as I still see a bias against solarcity investors here. Anyone just need to read the alternative energy thread as well as this solarcity investor thread from the start to see it. Don't forget to read the "snipped" comments as well.
I hoping you would take the time to address the complaints of many members that participate here, instead, more of the same in my opinion.�
1/1/2015
guest First, I'm mostly just amused that they are selling a battery to put on a leased system. Those crazy guys.
The first battery to be sold by them is for backup, so the purchase can't really be valued economically. Early adopters of the battery aren't trying to save money.
The long term question is whether Solarcity, as an aggregating intermediary, can provide more value than the homeowner who owns his own equipment and time shifts with a battery. I don't see how solarcity can create enough value to skim off 50%. The economics of home storage work even better at larger scale. If some peak rates are very high, everyone has access to the technology to get those rates.
It's unlikely future homes will be putting battery power out to the grid. What will happen is homeowners being paid for demand response by switching to battery power when requested by the utility. No one needs solarcity to do that function, unless they made the unfortunate choice of signing a PPA and don't control the equipment in their home.�
1/1/2015
guest Actually...SolarCity or some other entity is required in this transaction. A household is too small to engage in wholesale market transactions, and in most of the country (including California), the distribution utilities don't run the grid; federally regulated Regional Transmission Operators (RTOs) do. Entities like SolarCity (collectively, demand response aggregators) are necessary to bundle up enough customers to bring the transaction to commercial scale (typically at least 100 kW). The RTO then gives signals to the demand response aggregator, who in turn activates the underlying resources.
So, without a demand response aggregator like SolarCity, most households can't sell anything back to the grid on a real-time basis.
Even then, it's unclear whether even this aggregation is allowed. The DC Circuit Court found, in EPSA v FERC, that retail customers can't participate in PJM's wholesale markets, even through an aggregator. That decision will be reviewed by the SCOTUS in its next term, and most of us in the industry are hoping that SCOTUS reverses the breadth of the circuit court's finding. (FYI, the DC Circuit Court is the court of first review for all federal agencies, including FERC, and it's the only circuit court whose findings are binding nationwide.)�
1/1/2015
guest The proposed CASIO rules don't require a certain type of aggregator. But I'm talking about demand response. "Stop using power for 15 minutes". No reason the inverter can't respond like a water heater.�
1/1/2015
guest Signal from whom? The distribution utility? In most of SolarCity's markets, the utility doesn't have any real-time function. The utility could act, in effect, as the aggregator to offer its customers's capacity to the RTO, but now we're just talking about who gets to take a piece of the action, the utility or SolarCity.�
1/1/2015
guest Historical decisions have favored competition over monopoly. Since distributed solar is growing significantly and become a player in the retail electricity market and a viable choice for electricity consumers, the utilities must, according to law, not impede access to that viable choice on its grid. In addition, current utility legal provisions require traditional utilities to PURCHASE electricity from energy providers(i.e. solarcity DG energy) when it leads to LOWER COSTS to retail electricity consumers. Therefore, Solarcity and others look to have a strong legal case. Aggregation looks to be a "GO" from historical standpoint and thus as an investor should be aware of the impact of this revenue source/development over the medium-long term.�
1/1/2015
guest The PPA is for buying electricity from solar panels.
The (10kW) Powerwall is a back up system.
There's a natural synergy between solar and storage, but they aren't dependent on each other.�
1/1/2015
guest <br>
Thanks again winfield. Will take a closer look.
My personal cross hairs are on Africa right now, specifically Nigeria and Tanzania. Everyone has a cell phone, but there are millions of homes without electricity. They have to go into town to charge their phones and use kerosine to light their houses at night. The significant point here is that DIGITAL CURRENCY like M-pesa and bitcoin are used by almost all cell phone owners. The significants of this perfect storm, is that solar installs for those without electricity are cheaper then paying to get their cell phone charged town as well as buying/maintaining kerosine lighting at the home. What brings it all together is that they can pay-as-they-go through their phones using the digital currency. Once they pay for the electricity, they type in the text messaged code in their system and solar power(and battery) is turned on. Right now there are over 10 million homes in Tanazia/Nigeria alone that would benefit from this type of solar set up alone.
This is a testing ground for what might mostly spread across the world with DG. The implications are mind boggling. Interestingly, Solarcity bought a piece of a solar company in Tanzania last year that eerily has a similar solarcity business model and goal of reaching 1 million customers in the coming few years.
You just have to start looking at the global numbers on cell phones, digital currency, and lack of electricity to homes, and you will see a massive "low lying fruit" market ready for DG solar. Just India alone has approximately 300 million people without electricity, but yet there are nearly 1 BILLION cell phones in use right now.
I'm sniffing Solarcity already has developments brewing in this area as I write this. My "ear is on the track" as they say....�
1/1/2015
guest SolarCity Launches Its California Energy Storage + Solar Offering | CleanTechnica�
1/1/2015
guest All hybrid inverter manufacturers are implementing this technology, including solaredge independent of solarcity. Anyone could be the aggregator. If the utilities don't have real time functionality yet, the inverters will respond to IP commands. Solarcity won't be unique.
The only way solarcity can leverage their installed base is to get the leasee to a install battery. I think this is actually a disadvantage for them compared to the likelihood of solar owners installing batteries.�
1/1/2015
guest Solar City is working directly with new home builders, and numerous partners to significantly reduce the cost of Solar Panels and battery storage. Solar City is also partnering with other companies to significantly reduce customer acquisition and installation costs.
For many people, installing Solar Panels and battery storage with Solar City is cost effective. It is true that Solar City is not the most cost effective option for everyone. However, things to consider when choosing what company to go with, include factors beyond any "up front costs", and the amount you pay per month.
For many customers, Solar City is the best and most cost competitive option. For many customers, with different needs, cheaper and more expensive options exist.
For most people, the main concern is that the technology works are described. Most people who have cable aren't concerned with how the technology works, wouldn't know the first thing about installing their own system, and would rather leave any system management to an expert.
Most people would rather call a plumber than try to fix the problem themselves.�
1/1/2015
guest All Solarcity contracts come with 50/50 revenue share on "aggregation" capability. Utilities won't deal with individual DG home energy providers. They will deal with aggregators that have a substantial capability to produce and control many individual DG electricity producers. Not everyone can be aggregators. Again, Solarcity already has it in their contracts when aggregation capability is active, they will share in 50/50 in revenues. Currently there are over 400 solarcity pv+tesla battery systems actively producing/storing electricity right now. Starting in October it will grow into the thousands.
There is no other DG solar company going to be even close to Solarcity numbers for awhile. The likelihood Solarcity will have first mover advantage in DG aggregation is extremely high.�
1/1/2015
guest
I think there are some sort of regulations, requiring utilities to contract out battery storage, and Solar Panel installations. Anyone know more about this?
http://acee.princeton.edu/distillates/files/2014/06/Andlinger-Energy-Tech-Distillate-Storage-Article-7.pdf�
1/1/2015
guest I think you are right. Here's a shocker on the NPV of $1.07:
Tyler Frank (Analyst - Robert W. Baird & Co):Hi, guys. Thank you for taking the question. I apologize if these have already been asked. I've also been bouncing around. It looks like a large portion of the $1.07 per watt is coming from cash flows from the renewal years, years 20 to 30. Can you break down the $1.07 on the original 20-year contract versus the renewal?
Brad Buss (CFO):It's not a number we are looking to split out right now, but it's, I would say, roughly two-thirds, one-third, just in that ballpark area. That's about as far as we want to go.
Tyler Frank (Analyst - Robert W. Baird & Co):Two-thirds coming from the -- from years 20 to 30?
Brad Buss (CFO):Correct. Yes.
Aaron Chew (VP of IR):Don't think 20, 30. Contracted versus non, because keep in mind MyPower is a 30-year contract. There's no renewal assumption with MyPower. So roughly two-thirds contracted, one-third renewal.�
1/1/2015
guest Public Utility Regulatory Policies Act - Wikipedia, the free encyclopedia
"PURPA was the only existing federal law that requires competition in the utility industry and the only law that encourages renewables, if it is cost competitive with conventional polluting resources."
Buffet's recent PURPA reform:
Buffett's Berkshire Hathaway Energy pushing for PURPA reform | Utility Dive
Not surprising, Buffet subsidiary fighting PUPPA solar in Idaho:
http://www.mtexpress.com/news/blaine_county/solar-project-in-jeopardy-over-idaho-power-co-request/article_283a0f34-15f4-11e5-bd61-0f32584111a4.html
PURPA surge in Utah (funny I saw a tweet for a Solarcity job post opening up there last week):
The Utah Solar Boomlet: PURPA Lives! Breaking Energy - Energy industry news, analysis, and commentary
[FONT=proxima_nova_rgregular]�Twenty years fixed at that price, in our view, that�s a screaming good deal for ratepayers,� Wright said. The utility disagrees. It continues to fight to defang PURPA."[/FONT]
PURPA coming alive in Colorado:
In Coloado, a door squeaks open for rural energy independence | SummitDaily.com
JD Supra legal point of view a recent PURPA case:
FERC Confirms Distribution Cooperatives Must Purchase QF Output | Sutherland Asbill & Brennan LLP - JDSupra
Bottomline, looks like Solarcity will get paid for putting its solar energy onto the grid whether net metering exists or not in the future....�
1/1/2015
guest Its worth noting that Solar City as well as all of the bears and most of the analyst foresee Loans continuing to gain ground over the PPA/Lease model. Have you checked the NPV for the MyPower loan? I believe it was over 3.00 in the last quarter.
- - - Updated - - -
Since this post I have checked Solar City now nearly every day and have not seen 6 GWh since lol.
I think the other number really is astounding for the amount that people will save on the electricity in their first year. The nation is saving over 200k a year for every day the Solar City sales force is out there. Pretty amazing stuff.�
1/1/2015
guest Can you link us to Buffet's reaction? That could be interesting.�
1/1/2015
guest That's right. If you look at the numbers on page 11, you can work this split out exactly. Essentially, the initial term, 20 years, must cover the cost of the system. The next 10 years is gravy. My expectation is that to get those renewal terms, SolarCity will have to back off on the price per kWh. In twenty years, new solar may well be a third or less the cost of current systems. Moreover, that is long enough to break down utility rates. At some point, utilities will be forced to reduce residential rates or face mass defections. Imagine getting rooftop solar at 5 c/kWh plus storage for 5 c/kWh, for an average cost around 8 c/kWh. At these prices, neither SolarCity nor utilities will be able to hold customers at 12 c/kWh. FWIW, I am not a fan of escalators either, which would push the price upto something like 18 c/kWh in 20 years time. Of course, if SolarCity keeps doubling every couple of years for the next 20 years, this won't matter much. The 20 year old leases will be such a small fraction of their book, they'd be able to reduce rates to retain customers. The loss against pro forma assumptions will not be material. So the key thing is to keep growing and keep applying pressure on utilities till they crack. This is what the whole distributed solar industry will do.
Here's another curiosity. Notice that SolarCity's gross retained value for leases is $1.86/W vs. $3.66/W for MyPower loans. Thus, SolarCity has nearly twice the incentive to push loans over PPAs. The longterm value for loans, say 20 years out, is much better. While someone in year 20 on a PPA may start shopping for a new system, the borrower is locked into paying off the debt regardless. That is, the borrower owns the residual value of the system, while the lessor has the option to walk away. This is true of auto loans and leases as well. So one way that rational consumers mitigate the risk of obsolescence undermining residual values is to lease. This is why many corporations lease laptops for their employees rather than buying them. They don't want to get stuck with the risk of owning four-year-old laptops. Likewise a rational solar consumer may opt for a lease over a loan precisely because they do not want to get stuck with owning a 20-year-old solar system. They would prefer the likes of SolarCity to absorb that risk. So why again would SolarCity want to push customers into leases over loans? I would argue that they don't, but that is not the end of the story. What is critical to SolarCity is the value of the customer relationship. It trust that when the time comes SolarCity will reduce rates, not because they are forced to, but because preserving relationships longterm will be key creating sustainable value. SolarCity will fight just as hard to retain customer as they did to acquire them.
The problem for the utilities is that they think they can exert monopoly power over ratepayers. They really do not know how to compete to retain customers because they never had to. So right now is the golden opportunity for SolarCity to steal marketshare from the utilities. Once utilities have taken a big enough beating, they will change their strategy, and some are just beginning to do that. Once we truly have a competitive market for retail electricity, strategies will change. So they question is, how much marketshare can SolarCity capture before utilities become competitive? In 2014 in the US, all solar generated 18.5 TWh, and over the last 4 quarters SolarCity generated 1 TWh. So already, SolarCity has over 5% marketshare of the US solar market. Within 30 years time, solar could come to provide 50% of the entire energy market, including transportation and heating, which combined is about 3 times the size of today's electricity market. So if SolarCity can grab and hold 10% of that expanded energy market that would be huge. So why can't they double their share of the solar market and continue to grow with it from their? They key issue is the velocity at which they seize market share from utilities. This is why they are willing to lead with leases when loans would give them more retained value with less residual value risk. It's all about grabbing customers quickly.
Another thing we should watch is that SolarCity will be improving it's capital structure so that it can offer MyPower loans at a lower interest rate. Currently it offers 4.5% financing, but if they can reduce that to 4% or 3.5% that would be a tremendous win for SolarCity. They would be able to attract more customers to MyPower loans and retain greater value than with leases. One more thing. I would not be surprised if SolarCity were to begin to offer mortgage financing products. Think about it.�
1/1/2015
guest im not sure if this is apropo, but about 3 years ago thre was a white paper, I think from EESI or EPRI moaning about the utilities losing 1% of their steady, stable revenue stream to renewables, specifically wind and Solar (PV). about a year ago Rocky mountain Institute (Amory Lovins) came out with a paper "The economics of GRID defection" then recently "The economics of LOAD defection" the load defection paper analyzes in 5 differant areas, Hawaii, Newyork, SW US , 2 others using -> photovoltaics and lithium batteries <- "In general, grid-connected self-consuming solar will become economic for nearly all customers imminently, with grid-connected solar plus-battery systems following soon after" AND "This load defection will essentially relegate the grid to a backup-power-only role for customers that adopt these systems. ..... our key findings are: Solar-plus-Battery Systems Rapidly Become Cost Effective Distributed solar first and then solar-plus-battery systems covering only a portion of a customer�s load will have compelling economics without the support of incentives or feed-in compensation in many important markets within 15 years" You can download hte executive summary or the whole pdf (free) there are a lot of brain hours that went into the analysis The Economics of Load Defection
SCTY seems to be at the present forefront of these "changewinds" of distributed generation�
1/1/2015
guest MyPower is a 30 year term. Can there really be that many buyers in the world?
Whether 20 or 30 years, most of these agreements will not run to conclusion. Solarcity will be paid off to go away. That's your shareholder value.
Prices of purchased system in Australia in June ($AUD):
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guest Component cost? Installed Cost? includes incentives?�
1/1/2015
guest Residential solar system prices for June 2015 - Solar Choice
This is what a mature solar market looks like today when the b.s. is squeezed out.�
1/1/2015
guest But *after* generous subsidies are included:
Of course, SolarCity's lease rate is also after ITC incentives, but it's not necessarily apples-to-apples.�
1/1/2015
guest I wonder if an Australian customer asked for a 20/30 year labor included warranty on all components, online monitoring, power production guarantee etc. that SCTY provides, what the increase in cost would be. I paid prices not too far off from Australian prices after federal rebate for my system. But I have none of that stuff. I also don't know if SCTY is using solaredge on all installs now or not. That would add some cost and also something I don't have.
In any case, comparisons to SCTY can never be apples to apples with small installers because of this.�
1/1/2015
guest The Aussie STC looks less than the ITC, but it is pretty close after adding in the U.S. panel tariff. The table is also Australian dollars with is .74 to USD today. I don't believe there is a Australian solar panel or inverter industry. They import from China like solarcity.
20%-30% cost variance on the Australian numbers doesn't matter. Solarcity and many other large and small high overhead installers can't be profitable in a mature solar market. Solarcity provides the numbers to prove their untenable position.
It's the wrong long term business model. The competition is tradesmen seeking a good wage.
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Here is part of the myth making. The expensive hardware pieces have manufacturers warranties. All installers, including solarcity, have no intention of keeping your system fine tuned. If a panel goes out on a medium to large system, it probably won't be noticed by the owner. Solarcity or any other installer is not coming out to figure out why production dropped a bit unless asked. And that will probably require repeated asking.
As far as the inverter, an owner probably wants to replace it after 10-15 years. The new models will be more efficient with more features. There may be batteries added. More panels may be added. The whole system should be inspected. Solarcity will do none of this. They will replaced a failed inverter with an inexpensive oldschool version of the current model to keep their costs at an absolute minimum.
A solar system is about as reliable as a refrigerator. I know it's more reliable than my fancy front load washer. Yet I wouldn't consider signing a twenty year lease on a front load washer.
Anyone placing a very high premium on ease of use shouldn't lease or buy solar anyways. Just use grid power.�
1/1/2015
guest Actually SolarCity wants MyPower customers to pay back early. The customer saves on interest at 4.5%. Meanwhile , SolarCity values this loan using a 6% discount. So prepayment increases retained value. The 30 year term is simply there to give the customer the greatest flexibility in making monthly payments. You make it out as if this is some sort of entrapment. It is not. The customer chooses SolarCity to install a system for no money down, the customer gets a very flexible loan at 4.5% interest. And the customer pays off the loan as quickly as they like. Additionally the customer receives the ITC tax benefit and can elect to apply this to pay down their loan once they get their tax return. Of course the customer must repay the principle, but the amount of interest payment is entirely at their discretion. There is nothing underhanded in this set up.
Apparently you know you have lost this debate because you have pivoted to the irrelevant topic of the price of solar in Australia. Redirection is a really lame rhetorical device. You have argued that loans are better customers than leases. I have pointed out that SolarCity also has an interest in steering into loans rather than lease. Your response is to bemoan the fact that borrowers are expected to pay back their debt and to pivot to the price of systems in some other market. Your next step will be to rationalize the relevance of your pivot and make a few snark comments about how stupid SolarCity's customers must be. In all this you are attributing malevolent motives to SolarCity. This is essentially an ad hominem attack on the character of a corporation. I often find that people who attribute false motives, contempt and hatred to others are in fact projecting what is in their hearts. I have argued that SolarCity's best interests lie in offering the very best service, products and financing they can muster. I regard SolarCity as a highly ethical company. If you want to continue to impune the character of SolarCity, that is your choice.�
1/1/2015
guest FWIW, the best local solar installer here in Portland (Maine), ReVision Energy, has arranged with a local bank for 2.99% APR fixed-rate 12-year financing, which helps make their systems very affordable to buy.�
1/1/2015
guest 0% here if you live in the City of Charlottesville for 2 year financing- https://www.uvacreditunion.org/sites/www.uvacreditunion.org/files/files/leap_rate_reduction.pdf�
1/1/2015
guest That's really great. It's really good for local installers to team up with community banks. I would expect these are secured loans.
The term is good. I suspect that SolarCity could share 50 to 100 basis points off the MyPower loan simply by offering at 10 to 15 year term option. I noted that in their solar bond offerings the are offering 5.75% and 5% yeilds on 15 and 10 year bonds. With a shorter term MyPower loan they would not get so much exposure to longterm rates. Their solar bonds are quite comparable to CDs but offer much higher interest than most banks. I suppose much of the may be teaser rates to build up a base of investors. But what they pay on the bonds limits what they can offer on the loans. Banks are ahead of them in this regard and have the benefit of FDIC insurance on CDs. But SolarCity avoids a mountain of regulation by not being a bank, so there are pros and cons to both.�
1/1/2015
guest There are. The local competition is *consistently* cheaper. The local competition *consistently* does a better and more professional job. On the other hand, Solar City typically has more financing options.
Solar City *is not in the solar power business*. They're in the financing business. This may be a good business, it can be highly profitable, but it's really hard to tell. Financing companies are very tricky to evaluate. They can go belly-up overnight.
Elon Musk is in SolarCity... but Elon doesn't really care, long-term, whether his companies make money, remember? Even if Solar City goes dramatically belly-up in 15 years, they will have sharply accelerated the adoption of solar panels, so Mission Accomplished from Elon's point of view. The mission is to get solar panels on the roofs of people who don't have the cash to buy them. SolarCity could be a huge success from Elon's point of view *and still go bankrupt*.
Frankly, so could Tesla -- Elon's been very clear on this, he'd be happy if all the major carmakers switched to nothing but electric cars and drove Tesla out of business that way -- but I think that there are other reasons to believe that it won't, which I've explained elsewhere.
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And this is, basically, the bull case for SolarCity.
But I don't invest in financial stocks for the most part, because I don't feel comfortable with them.�
1/1/2015
guest Totally agree!�
1/1/2015
guest
While I disagree with many of your points the fact that Elon has not given away the patents for this gives me some comfort. I have no doubt Tesla will do amazing from here and I see 2000 a share within 10 years as very possible. That being said I have a little long term unease with Tesla because of the Patent Giveaway. With Elon and Company Focused I dont see anyone catching them but as someone who invested in TSLA primarily to make money it did unnerve me a little.
The good news is I think there will be plenty of time to see if anyone is catching up to TSLA and make adjustments as needed.
That being said all of Elon's companies experience insane highs and lows that come on very quick. For me Solar City is more undervalued than Tesla currently so that is where most of my eggs are but I feel very exposed not being exposed to TSLA like I have been for most of my investing career.
Edit: I should note that I dont really see GM or Ford or any legacy auto as a threat to Tesla but am more concerned with Apple possible teaming up with an automaker.�
1/1/2015
guest Berkshire Hathaway's NV Energy strikes PPA price of 3.87 cents per kWh for electricity generated by First Solar's 100 MW Playa Solar 2 project, according to Bloomberg.�
1/1/2015
guest I wonder how many years that is based on. I figure these plants will be used for longer than the 20/30 ish years that the PPAs are being sold as.
Nice link. . Although more suited for the alternative energy thread.�
1/1/2015
guest I am guessing you posted in SCTY thread to show that utility solar is far more competitive than residential solar, especially SCTY-solar. And thus SCTY will be left in the dust in the long run.
The way I think about it, SCTY is doing what ever it is doing because that's what provides highest long term shareholder value. FSLR shareholders didn't get much out of that deal. Only Berkshire benefited.
If the opportunity disappears in residential, SCTY can just as easily switch to commercial/utility projects. In that case maybe SCTY wont become a $50Bil company but will stay as a $5B company. Not much to lose but has a tremendous potential upside (if residential market continues to behave the same way). Not a shabby investment!�
1/1/2015
guest In fact this is a brilliant post: there is obvious and certain value in the future commercial solar market (it's showing here and now with $/kWh and $/MV prices being published). This is SCTY's fallback and puts an almost certain floor on the stock value (face it: the worst SCTY could do is grow like a boring, uninnovative, commercial bread-and-butter installation firm) while the upside may be spectacular if home solar takes off globally and ends up making the best financial sense to people.�
1/1/2015
guest That price is crazy low. No way money is being made there. See discussion here:First Solar (FSLR) | Page 12 | The Contrarian Investor Discussion Board�
1/1/2015
guest What makes solarcity a profitable commercial/utility installer?
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Why would there be good money on installing stuff to a house? There never has been, except under unusual market conditions.�
1/1/2015
guest SCTY could likely swap their operations quite easily in to a commercial/utility installer.
Why solar is different is because it can provide freedom from the grid and that the concept of producing the electricity at the point of usage makes so much basic sense, even if right now it doesn't yet make complete technical or economic sense (except as you say under unusual market conditions - read: government incentives). What in investment is about though, is seeing in to the future where it might make a lot of more sense in the most ordinary of market conditions.
See where I'm going with this: people in the 1940's probably said "why would anyone want to have such an expensive and technically complicated device as a television in their home? No, people will want to pay-per-view in large scale facilities where they don't have to interact with the technical machine (called a cinema)." If TVs had remained what they were technically and economically in the 1940's this would still hold true. However, TVs have evolved to a point where most people can afford one easily as well as operate one, and everyone wants to have them. And I'm sure there were good investments to be done in the early years of TV manufacturing if you could grasp the importance of the concept early on.�
1/1/2015
guest More possible unfortunate news for solarcity. The solaredge solarstor inverter uses power optimizers to install the powerwall on a common DC bus. Solarcity probably doesn't have systems installed that can charge the powerwall from solar panels. Their solution probably is from AC and independent from the panels.
�
1/1/2015
guest Q. What makes solarcity a profitable commercial/utility installer?
A. They were the largest Commercial Installer last year and every project they take on shows a profit. They have not gone into Utility yet because the margins there suck.
Q. Why would there be good money on installing stuff to a house? There never has been, except under unusual market conditions.
A. This statement is just false in my world. I have worked in the Roofing and Guttering industry for most of my life and have seen plenty of Roofers make what almost everyone would consider "good money". I know of multiple people that have made over 1 million in profit in the first year of a company. To be fair they were very driven people with a decent amount of knowledge. On the other hand, None of them seemed overtly bright to me...�
1/1/2015
guest The key difference Buffet is just buying power. Buffet still needs to transmit and distribute. The cost of electricity will not change for the end user. That's the beauty of cost plus system. They boost margins by getting cheaper electricity since they don't lower end cost (they get rate increases from the commission as we all know).
Solarcity creates electricity at the place of need. No distribution needed. Solarcity has absorbed those costs. They are making the end user price for electricity cheaper.
Bottomline, the only way the end user will get cheaper electricity is through the distributed solar option. Period.
ps... Solarcity is already the #1 commercial DG installer in the U.S.�
1/1/2015
guest Really bad analogy, especially since SolarCity is the big johnny-come-lately gorilla in the solar panel installation space.�
1/1/2015
guest The analogy probably is terrible, Does not change the rest of it. Solar city was founded less than 10 years ago and installs about the same as the next 50 competitors combined ...and for 10 years people have been saying it will never work ... why are there no nationwide roofers if a nationwide Solar company is such a good idea?
Much like Tesla people will complain that Solar City is overvalued for years and years to come. They complain now at 50 a share and next year at 100 a share it will still be too high
�
1/1/2015
guest When is the roofing and gutter IPO? There won't be, of course, because this sort of work isn't managed efficiently at a national level. The owner needs to be closely connected to the work to be profitable. If roofing and gutters were a new type of business that was not well understood, a national company with a good sales pitch could have high sales for awhile. Especially with subsidies. But as the market matured, this industry would become what it is today.
Solarcity is nothing like Tesla or SpaceX. No IP, no barriers to entry. Scale beyond a point adds overhead relative to smaller competitors. No small competitors when building cars or rockets.
Big companies can work with no IP when their scale has efficiency their competitors lack. That sure isn't solarcity.�
1/1/2015
guest SolarCity has the same advantages as WalMart: a brand name and buying power. I'd be stunned to learn that SolarCity isn't getting better pricing from its equipment suppliers than local installers. And never underestimate the value of a brand name: even if the trust isn't warranted by anything factual, most people feel it's less risky to buy from a big-name firm. Take a look, e.g., at the hotel industry, where the vast percentage of new hotels are branded under one of the majors. Likewise, McDonalds doesn't make a particularly good hamburger, but it can still out-compete local hamburger joints.�
1/1/2015
guest Solarcity is unquestionably getting significant lower equipment costs than their small competitors. But as I have said before, there are no analogous national companies doing custom home installs of anything, even those these economies of scale are available. A national HVAC company would fail due to inefficiencies of management.
McDonalds are locally owned because nationally owned restaurants are unsuccessful. It is profitable for Mcdonald's to give up the franchise percentage to have a local owner who often has all his wealth riding on his restaurants. Walmart is profitable on product purchasing power and the ability to make a capital investment in a huge store that can't be matched by local merchants. The Walmart brand is valuable because of lack of customer alternatives for selection and price.
Solarcity equipment cost on average is less than 1/3 of their selling price. If equipment was 2/3 of the price of solar, then the industry would consolidate to a few major companies. But when the manufacturers are producing most of the value, the modern approach is to squeeze the profit out of the middleman. (e.g. Tesla direct sales)
Solarcity also has little business methodology to franchise. They install near commodity equipment that produces a commodity. No Big Mac. No Model S.�
1/1/2015
guest You realize they bought Silevo HE panel manufacturing process, already own the Zep system tech, and are building their own panel manufacturing plant in Buffalo right? That will be their own Big Mac or Model S product.
Also, your comment about national business HVAC is wildly inaccurate as their are many such companies competing today.
HVAC Repair & Maintenance – National HVAC Service | Johnson Controls Inc.
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guest Starbucks and Chipotle don't have franchises.�
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guest Silevo builds a functional commodity (price per watt), it is no Big Mac. If the price performance is good, that business will be valuable. More panel manufacturing startups fail than succeed, so that venture probably doesn't add a lot to the stock price at this point. People playing the hardware side are probably making other simpler investments.
Did you follow your own link, and look at where the Johnson Control truck is parked? Do they have any residential business? Is Johnson Control not in the HVAC business, but rather the provider of hot and cold air with no money down?
List what was installed by a national company in your own house. Even carpeting bought at a national department store chain is installed by a sub.
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True, and Chipotle is an interesting exception to the franchise rule.
But comparing solarcity to food chains with extreme repeat business is getting lost in the weeds. Everyone understands why we personally repeatedly use the most successful of these businesses.
Solarcity installs a home appliance that provides a function. There are many good business analogies to examine. Even going with "solarcity is a power company" can be examined by analogy.�
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guest Solar companies say NV Energy misled them on cap limit - Las Vegas Sun News
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guest An aptly named newspaper....�
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guest Solarcity does do business in Maine... They actually have the largest installation in the entire state at Bowdoin college interestingly enough...
How the REV initiative is changing the way New York utilities do business | Utility Dive
looks like New York utilities are looking to work with DG companies like Solarcity on new way of doing business. It's funny how Warren buffet can say it's a cost shift onto customers but yet New York and California are already making efforts to accept the fact DG is a benefit and develop new business models as such. Buffet and his subsidiaries in Washington, Utah, Idaho, and yes, Arizona and going to left in the dust if they continue to the anti- DG stance. There will be serious consequences of anti trusts suits go to court.
What could Elon Musk's SolarCity (SCTY) Be Hiding? - TheStreet
Its clear this individual has a short play because this sure was a lame attempt at scaring traders away today. It's funny how Solarcity has literally grown 600% since the federal investigation was initiated in 2012. That means the government has forked over a lot of ITC (and pre itc) credits during that time without issue. Secondly, the author failed to point out the courts have set a court date for 2016, so everyone knows it's not confidential material. It's a public court case going to be settle next year. Other then that, it's pure speculation as to why the CTs recently. If we're going to speculate, I'd say Solarcity has made an offer to Verengo for the west coast operation. As far as I understand it, NRG didn't buy it, so maybe Solarcity is picking it up. Wouldn't hurt to pick up #3 installer in California in my mind, but again, this is pure spec just as the article is.�
1/1/2015
guest Why would think this isn't good news for SolarCity? Who do you think will install the majority of these specialized inverters in the US? I believe SolarEdge is already a supplier to SolarCity. Moreover, SolarEdge seems to have a cozy relationship with Tesla. It is plausible that Tesla declined to put a bidirectional inverter in the Powerwall, as originally conceived, because Tesla wanted to leave an opening for this and other innovations. I read this as a very good development for both SolarCity and Tesla. I'm even thinking about investing in SolarEdge as part of the Musk ecosystem.�
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guest The Rapid Growth Of Community #Solar Gardens - thecherrycreeknews.com
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guest Solarcity is over 20% of ALL solaredge business... I think we have to get things in the right perspective... Elon has nothing to do with solaredge. Powerwall was NEVER designed for solaredge or any other inverter company. Powerwall was designed to be PLUG AND PLAY with any PV system . So it made no sense what so ever to design anything around any inverter company or anything outside of Tesla energy tech.
Solarcity has been doing emery storage pilot with tesla since 2009. Six years they've been piloting energy storage with Solarcity PV systems. There is no two ways about it... Tesla storage is designed to optimize Solarcity business first, everyone else that wants powerwall will need to work around that design intent, everyone else with have to implement what Solarcity is setting up as optimal.
solarcity is really the lead on DG storage, not tesla. Tesla has taken all the cues from Solarcity on how this will work best in the field.
So, solaredge is only working with tesla because of solarcity's approval as well as future plans for their products. Lyndon said they are choosing partners with the best tech as well as the ability to keep up with their aggressive growth projections. I think in this case, more credit goes to Lyndon then Elon here. We have to remember, Lyndon started a million dollar company in high school and also sold his first software company for over $200mln to dell by his early 20's. I'd say he pretty close to as business genius as Elon as one can get. Don't rule him (and his brother) out as building a parallel empire.�
1/1/2015
guest its funny, the clouds here in Southern California (LA) rolled in on July 1st and have been rolling in every morning through mid day ever since. Not sure if it's the same state wide right now, but clearly have lowered the overall MWhs produced. I'm seeing consistently are 5-5.5GWh per day with the SoCal cloud cover. El Ni�o is in effect through early 2016 they say.
However, still seeing some phenomenal bookings happening everyday. I'm feeling another record breaking quarter in the booking category for sure again.
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Buffet's reaction:
http://www.utilitydive.com/news/buffetts-berkshire-hathaway-energy-pushing-for-purpa-reform/398767/
i think ink buffet made a big bet on the traditional utility business and is in deep. He's obviously a man who does not like to lose or experience risk in his investments. I learning quick he's not this great oracle for his altruistic ways. His good old aw shucks persona is a masterful schitck in my opinion. He's does not like DG solar and it is very clear by which states are giving DG a hard time: all his utility states. Remember, he loves utitliy level solar because he still makes a crap load of guarenteed returns approved by te commission in monopolist system. It is estimated that only about 20% of the cost of getting electricity to the end user is the generation of electricity. All the cost is in infrastructure, transmission and distribution. Those are all where the "cost plus" system allows buffet to get away with raising the rates on consumers.
DG reduces the bill for end users and that's not profitable for buffet. Make no mistake either, he wants DG dead or made irrelivent for his profit to keep being predictable.�
1/1/2015
guest Well, that is just fantasy. What solaredge is showing at Intersolar next week is in direct competition with solarcity's plan to sell aggregated service. Sunrun even announced yesterday they will be using solaredge.
What is likely is that solarcity is only selling the 10kWh powerwall because they are only able to install a simple AC based battery system at this time. The solaredge solution announced this week charges the battery with direct DC from the panels. That system requires power optimizers, of which solarcity has an installed base of probably zero.
What solarcity probably means by being "already powerwall compatible" is likely only an AC connection in the lower section on the inverter boxes they have installed. If that is true, no one is going to want to do daily cycling from inefficient AC.�
1/1/2015
guest Foghat, I don't understand your point here. I am well aware that SolarCity was deeply involved with developing Powerwall. So naturally there will be design choices that favor SolarCity's approach.
But where I lose you is that SolarCity does not produce or design inverters. They have been sourcing inverters from suppliers. Tesla made the choice not to package a specific inverter with the Powerwall, rather Powerwall is inverter agnostic. This gives installers the freedom to choice the most fitting inverter for each specific application. This also gives inverter designers like SolarEdge the opportunity to design custom inverters. If they have succeeded in a DC direct solution optimized for self-consumption from PV panels, then I see no reason why SolarCity would not want to source it. Now if SolarCity wants to use a bidirectional inverter so that power from the grid can be used to charge a Powerwall, that would be another use case, and SolarEdge's StorEdge might not be optimal for that use case. However, the self-consumption of solar is a very good use case too and seems worthy of consideration. SolarCity has no vested interest in one inverter over another except to deliver good performance to customers at a good price. If there is something I am overlooking, please let me know. But I do not see how a DC direct inverter is any sort of threat or compromise to SolarCity.�
1/1/2015
guest My point was more for the post you were responding to... I agree with you. Tesla is inverter agnostic. Solarcity is inverter agnostic. Solarcity has a deal with solaredge, which constitutes 20% of all solaredge production(major buyer). Again, pointed toward the comment you responded to, Solarcity could care less who solaredge sells to as long as solaredge meets Solarcity product orders. Solarcity has been running pilot programs with tesla energy storage for 6 years now, so no one should be unclear who where Solarcity and tesla stand in their "partnership" in all of this. Solarcity and tesla are full steam ahead for the long haul whether solaredge is in the mix or not.
it is a stretch at best for the poster you are responding to base a bear case on solaredge selling inverters to sunrun or trying to insinuate tesla is somehow developing its products with solaredge in mind and not Solarcity. As we can he he/she is just plain looking for all and any reason to protest Solarcity success and proliferation. If truly a bear, an investment thesis is clear and pointed toward a major flaw. Rather, what we see here is someone throwing mud against the wall to see if anything sticks. I really don't think this individual has any interest in actually putting any money on the line against Solarcity. They are here for argument's sake. It's truly boring conversation. I just hate to see others here actually engaging and taking what they say with any kind of seriousness.�
1/1/2015
guest Foghat, we're on the same page. Thanks for clarifying.
I think what SolarEdge is doing is really great. Their core products are aimed at optimizing rooftop installation where shading and differences in orientation would otherwise compromise performance of the whole system. This is important for squeezing out an extra kW or two per installation. So adding 20% to a typical rooftop is huge deal for SolarCity. So now optimizing Powerwall integration is very smart. It's the sort of company I could see SolarCity acquiring, a fine complement to Zep Solar (bracketing hardware for efficient installation) and Silevo (high efficiency panels at standard prices). So all three of these companies are aimed at optimizing rooftop installations by addressing the components of inverters, brackets and panels. I'd also mention that SolarEdge has grown gross profit 280% y/y and are building a manufacturing facility in the US to handle NA demand. So clearly they must be bringing good things to market.�
1/1/2015
guest The important metrics of the powerwall are only cost per kwh, and the warranty. The functional external characteristics are important for implementation, but not complicated. It's a 400V DC system. It takes a documented set of commands to turn charge or power the buss, and it reports its status to the inverter. The inverter determines the flow of electricity. The inverter controls the battery discharge rate. The magic in the powerwall is price, not unique functional IP.
Once implemented, the important functional characteristics are usable capacity and efficiency.
What is solarcity's plan here? 1) They have a large customer base, which have low cost systems apparently missing the key hardware piece (power optimizers) needed to efficiently use the 7kwh as a daily cycler with solaredge inverters. 2) They have sold "no upfront cost" PPA. Are they now expecting to go back to their customers and talk them into buying a battery to put on their leased system, and then do revenue sharing? 3) Going forward, will they be selling more expensive battery capable systems, or the low cost string inverter systems?
This explains why solarcity is said they are selling only the 10kwh powerwall. A daily cycling 7kwh powerwall doesn't fit with their primary business model of installing the least expensive system that will provide power. Meanwhile, knowledgeable homeowners who select and purchase a properly configured solar system can take advantage of the 7kwh daily cycling battery using solaredge software. Once solaredge has enough installs, they can aggregate service. So can all other inverter manufacturers who have implemented batteries.
Solarcity will sell 10kwh batteries to their confused customers. But even with the sale, Musk has forced them into installing these batteries at a low margin. When U.S. utilities properly incentive solar users with detailed TOU pricing, many of these owners will realize they have the wrong system, with the wrong contract, and the wrong battery.
Solarcity may be able to aggregated non-customers along with their own contracts. But if that can happen, the aggregators would be competing for solar owners, which would make it a lower margin business for all companies seeking this business.
Everything solarcity does eventually leads to a low margin business because they lack meaningful IP. Complex financial products have perhaps provided a nest egg from early solar adopters, but they will soon need to be competitively efficient at actually selling and installing solar systems.�
1/1/2015
guest "This explains why solarcity is said they are selling only the 10kwh powerwall. A daily cycling 7kwh powerwall doesn't fit with their primary business model of installing the least expensive system that will provide power. Meanwhile, knowledgeable homeowners who select and purchase a properly configured solar system can take advantage of the 7kwh daily cycling battery using solaredge software. Once solaredge has enough installs, they can aggregate service. So can all other inverter manufacturers who have implemented batteries."
The reason they are selling the 10kWh systems as the utilities tend to need peaker plants about ... wait for it .... 50 times a year ... which is what the 10kWh Powerwall was designed for. The 7kWh system was designed for Europe where today it makes lots of sense for rate arbitrage on a daily basis. It will also be used in the off grid systems I am assuming but we really wont know until the first systems go into Hawaii
I am beginning to think you really just dont know about Solar City's business model and might even be willing to smarten up to the reality. Hopefully your time here trying to convince others to short will help you educate yourself to their business model.
One word of warning. The only reason they are so undervalued is people don't understand the company (see above poster). Every quarter since he came on Brad Buss has done a great job of making things easier to understand. That combined with their stellar business model/execution/free factory will cause this thing to blow through ATH's before long so shape up quick bud. Save yourself some money.�
1/1/2015
guest There is no reason solarcity would have an advantage over a competitor for more than a year or two. After that time, they are at a disadvantage with less flexible, less efficient system. Every hybrid inverter maker is a competitor.
So once again Solarcity will imply long term customer benefits on battery payback that will not materialize. They do have a customer base who falls for their pitch, so that a plus. But with no barriers to entry, the margins become small.
Off grid in Hawaii can't be done with the 10kwh powerwall without voiding the warranty. They will use an off grid hybrid inverter, when available, with the 7kwh powerwall.
Solarcity is in the business of stripping value from the homeowner. They will do it again with the 10kwh powerwall. Sell it for backup, with the implication of paying for a significant portion of the cost through grid services. Hype it in their usual way to gain the interest of the technologically and financially confused.
People in Germany and Australia didn't fall for this nonsense of PPA and leases, and pay a lot less for solar. They will probably make better battery decisions too.�
1/1/2015
guest Here is an example of the difference between buffet solar and Solarcity solar:
http://m.pressrepublican.com/news/local_news/town-of-plattsburgh-solar-project-progressing/article_497cae92-d2f2-5216-9104-f925f66064b2.html?mode=jqm
Solarcity DECREASES end user prices(you and me).
Buffet solar INCREASES prices to end users(you and me) during rate reviews with commissions while Decreasing his costs/increasing his profit by implementing utility scale solar. They can get utility solar down to 3 cents per kWh, still not going to lower the price to us end user in Buffet's world. He likes a fixed game it appears. The biggest subsidy this country has ever seen is government backed GUARANTEED PROFIT. This is exactly why buffet loves traditional utitliy and dislikes competitive market DG. It ef's up his fixed game.�
1/1/2015
guest Residential solar race
The Battle for Third Place in the US Residential Solar Installer Race : Greentech Media
Sunrun coming up third in the US residential solar installation market. It turns out Sunrun does 25% of its own installs and partners do the other 75%. Sunrun also provides financing for Sungevity, which only seems to exist to be a sales channel. Sunrun and Sungevity combined get about 5% marketshare, while Vivint Solar and SolarCity take in 11% and 34% of the market respectively.
It looks like Sunrun really wants to be the financial umbrella for smaller installers. This could be a winning stategy. While small installers may be losing marketshare to SolarCity and Vivint, Sunrun provides a national brand name, lead generation, sales and financing services to help level the playing field, that is if an independent installer is willing to partner.
I wish good luck to Sunrun and all their partners. Grabbing share from utilities is the name of the game.�
1/1/2015
guest Thanks for link. I have really grown to like greentech media. Has anyone seen this article about the secret SEC documents?
What could Elon Musk's SolarCity (SCTY) Be Hiding? - TheStreet
While the article is written to be clickbait it does peak my curiosity about what they are filing secretly�
1/1/2015
guest Yeah, this is nonsense. SolarCity has been filing these CTs since 2012. They redact things like critical FICO score levels and the names of tax equity investors from their 10-K and 10-Q reports. Look at any of them and you will see "[***]" or "[reserved]" where things have been filed with the SEC, but withheld from the public. While it is possible that a management could abuse Confidential Treatment to hide things from investors, the rationale for CT is to protect the shareholder for release of information that may impair the company. Note also that the confidentiality is granted until a predetermined date. If a company were to abuse this privileged, it would become common knowledge. For example, one table granted CT in 2013 had an expiration date of June 7, 2015. I could not find this exhibit, but I bet if it was juicy at all, the SC bears would have made something of it already. So I suspect there is nothing to see here.�
1/1/2015
guest Awesome I figured as much but thanks for shedding some light on it jhm!�
1/1/2015
guest With all the BS floating around I missed this legitimate post, thanks for addressing that article .. it was a thorn in my side for a bit. Im about to go to sleep 10:30 mountain time but I see SCTY got very close to 6 Gig today
and more impressively had a huge booking day at almost 400k in first year savings .. highest I have seen�
1/1/2015
guest 1st free APS-owned rooftop solar installed in Phoenix
Two El Paso Wal-Marts go solar with big SolarCity systems - El Paso Times
�
1/1/2015
guest A system just got turned on in Ft. Worth Texas that is not saving the customer any money. A friend of mine received a sales call from SCTY who lives in Texas and it was the same story .. would cost him more to go with it ... interesting to see people are still going for it without monetary savings.�
1/1/2015
guest @elactricity According to you, Walmart and the US Government aren't knowdgable customers for opting to use Solar City. My bet is your "logic" is flawed and they know exactly what they are choosing.�
1/1/2015
guest Why do you assume selling to Walmart is particularly profitable? Solarcity was the low bidder. If installing solar at Walmart is substantially profitable, what are the barriers to keep other vendors from entering that business? Installing solar is not a complicated undertaking.
In this busy time leading up to the ITC expiration, a well bid commercial job should be moderately profitable. But nothing like a $.18 residential PPA with a 2.5% escalation. Those were the golden days of capturing the value of solar.�
1/1/2015
guest I was hoping you'd say that. I'll let other people explain in detail why your view is very flawed.�
1/1/2015
guest We all have again and again. It is clear that he or she is not interested in any actual debate or willing to change his opinion on Solar City.
My bet is he has a large (for him) short position and during the next 6-9 months as Solar City shoots up to ATH's he fades away from the board bitter to never return.
Solar City currently at 6.3 GWh ! pretty awesome, I wonder what the all time record is? Sure looks like it could be surpassed today !�
1/1/2015
guest Where can I find this number? Their site isn't much help.�
1/1/2015
guest SolarCity Now�
1/1/2015
guest So what? That's the typical business of finance companies. (Pro tip: buy your house in cash; the mortgage lender is in the business of stripping value from the homeowner.) It's often very profitable. For very long periods. It may be extremely profitable. For decades.
Look, both the bull and bear cases on SolarCity are consistent here: SolarCity is a finance company. Analyzing it as a finance company... well, I don't feel competent to do that, bluntly. Keeping information like credit ratings confidential makes it harder to evaluate.
See, I can't evaluate Sunrun *either*. It's also a financing company!
Or is it? Chasing market share can be extremely dangerous if you're in the financing business. It's a classic method of getting overextended with lowered lending quality.
The first key measurement for all these businesses is *loan quality*. The second key number is the effective interest rate received. I can get a sense of the latter, though it's hard; I have no sense of the former.
*Sigh* I'd love to see a serious evaluation of SolarCity, SunRun, and the rest from someone who normally analyzes BANKS.
- - - Updated - - -
If I believed this, I'd invest. But this isn't the worst case scenario.
Actually, they could be faced with major losses on bad loans. With worthless collateral if the solar panels are too many generations behind.
*I don't know how to analyze this risk*. I've tried. I would really like to see a proper analysis of it.
Anyone remember the blowups of GMAC and GE Capital?�
1/1/2015
guest Financing is only one aspect of what Solar City does. I agree there is a lot of the details about Solar City that are very hard to understand. The good news is each quarter it is getting a little easier to understand. Remember that Solar City is hiring around 350 people a month and building a distribution center/warehouse every 45 days. They are in the business of installing lots of solar panels. They are also in the business of financing lots of solar panel installations. There really is a lot to this company. The most exciting thing to me is they are about to be in the business of manufacturing a whole lot of solar panels too. With a factory being paid for by New York, This will add substantial value to the shareholders.
*one of the pioneers of internet banking is the largest shareholder
Here is the best bear case I have heard yet .. http://rt.com/news/273169-solar-cycle-ice-age/ Claims that by 2030 the suns activity will fall by 60 percent.�
1/1/2015
guest
You do have to look at the likelihood Solarcity can continue to sell profitable finance. Consider two identical home for sale in California. Home A has a Solarcity PPA at the state average $.18 with a 2.9% escalator. Home B has no solar. What's the relative value of these homes?
PPA's in California have fallen to $.13 and 1%. Still not a good deal for solar, but allows us to easily compare value.
Home A, the typical Solarcity home, is worth $5K - $10K less than home B with no solar. The loss is the discounted present value of the cash flow penalty required by the more expense $.18 PPA. As solar prices continue to fall, this loss of home equity increases.�
1/1/2015
guest
Yeah right, eventually the house will be worthless, zip zilch nada , cause solar drags you way down .�
1/1/2015
guest Solarcity and similar drags you down. You don't like my math, lets see yours.�
1/1/2015
guest
Ok here we go ! You finally brought numbers into it. This should help clear things up for you. The highest penetration in all metro areas in the nation after Hawaii goes to San Diego with 14.6 Solar Systems installed per 1000 people which equates to about 1 out of every 60 homes. (Source 1)
In your example you compared House A and House B that both had Solar Systems installed. For those two homes there is about 118 homes without solar installed in the area that has the second highest penetration in the whole nation.
The other 118 homes all pay more for electricity then either of your examples. Sure, the one that recently got solar might be a better deal as will the ones that are signed a couple of years from now. What your missing is both of the homes are a huge benefit to any home buyer because they pay less for electricity than almost everyone else.
As solar gets cheaper and cheaper Utility rates will most likely continue to rise making every house with Solar more competitive not less (source 2)
Eagerly awaiting your rebuttal using math.
Source 1 = Portland ranks in the middle for solar penetration
Source 2 = California regulators approve higher electricity rates for most residents - LA Times�
1/1/2015
guest To be honest his example had House B have no solar. His reasoning basically rests on the fact that House B has WAITED to install solar, and the buyer could to it and presumably get a cheaper yet newer and better solar system than House A which is tied by contract with an older system that is basically "on a down payment plan" i.e. the Power Purchasing Agreement with SCTY.
This is basically like arguing: always wait to buy a new computer because next year you can get a better one for less money. This however is not how people reason for the most part (if there was never profit for the computer makers they wouldn't exist and "the next, better and cheaper" computer would never be developed.�
1/1/2015
guest It's not a math issue, it's a thinking issue . Nobody is present valuing anything especially the arbitrage
difference between one power source or another, as if the common person knew the rate differential.
or for that matter compute the arithmetic.
Blue hydrangeas might be a better reason why one property is preferable to another and commands a higher value.�
1/1/2015
guest Yes, it is a thinking issue. Two identical houses with two different long term electricity costs from long term contracts. Add up the precisely defined values, and compare. The problem with the contracts is known by more "common people" everyday.
Anyone can understand a rate comparison of $.18 compared to $.13. Soon the $.13 PPA holder will be underwater on their contracted electricity too.�
1/1/2015
guest Underwater compared to new Solar PPA's maybe but they are still ahead of the vast majority without solar ... and they don't have to deal with the process of having it installed.
Another Day over 6 Gigs ... Love it! I have to ask has it been Sunny in CA the yesterday and today? Less clouds rolling in? SolarCity Now�
1/1/2015
guest As one who made a lot of money with SCTY, and who just had a PPA system from SolarCity installed on our home, I feel great about our decision. Our average electric bill prior to the install was less than $65.00 a month so savings was not top on our list. "Owning"a solar system was. We did not have a down payment saved, so the PPA was the way to go. I like the fact that our contract allows us to purchase the system in the future if we want to or roll it over to anyone who purchases our home in the future. Solar City was our only choice because it seemed silly to have owned/supported Solar City thru stock ownership and currently owning TSLA to go with anyone else. Call me uninformed or whatever, but We believe in what Elon and Co are doing and will/want to support in any small way we can.�
1/1/2015
guest Ke6jph, thanks so much for sharing your experience. What I sense from your remarks is that brand played a huge roll. Naturally as a shareholder you may experience the brand differently than nonshareholder, but it is still a brand that one wants to be a part of. One thought that I have had personally about installing solar is that my power bill really is not that expensive anyway. So saving 10 to 20 percent really would not be a huge factor for me. Perhaps if I lived on a tighter income I might care more, but honestly I don't. What I would want is an extremely convenient installation and maintenance plan. While I could get competitive quotes from six different installers, I really do not have the patience for that. So if a company I can believe in offers me a reasonable package, that would suffice. This is the power of a brand. Consumers use a company's brand for a proxy for trust. Competitors without a strong brand have to work much harder to get noticed and to build trust. Consequently, if you have a weak brand, you often have to compete by offering lower prices. I used to work in marketing in the auto insurance industry, and this was a big concern to us. The strong brands like Allstate, StateFarm, USAA and Progressive did not have to compete very hard on price. Even though all these companies would like you to think they've got the lowest premiums, they don't. They have fair and acurate rates, but you can be insured for less by a no name company that you hardly trust. And there's the problem, you have to be able to trust that when you need to make a claim, you will be treated fairly. We'll if I'm put solar on my roof and have it insured and maintained by the installer, I need to trust that solar provider. If they are willing to absorb the risk of over estimating performance by offering a guarantee, that helps. But I also need to know that the company is not going to go out of business, and I need to know that they care about their reputation. So basically if I'm not concerned about huge savings, but I want convenience and peice of mind, I'm going to go with a solar provider with a strong brand who offers a fair price and solid service. I think this is how SolarCity is positioning its brand. It's the big, fair and reliable brand that homeowners and businesses can trust. This is a real middle market brand, like Progeessive. There is room for a low cost leader brand to emerge, like GEICO. There is absolutely room for both in any market. The advantage of a strong low cost leader brand is that a consumer looking for low prices will have the confidence that they need not look further. Consumers are inherently lazy and will often substitute brand for doing extensive price shopping. Think, when was the last time you got a competitive quote on auto insurance, how many providers did you shop, and were you willing to go with the lowest premium whether you knew the name of the provider or not? If you are like most people, not recently, not very many, and not bloody likely. Brand matters.
And don't anybody give me nonsense about how Musk does not think brand matters. Musk strongly believes that delivering a superior product, with superior service at a fair price is super important. This is the essence of what a brand is. It is the promise to deliver a good customer experience. What Musk dismisses is a empty brand which is just pretty wrapping on a poor customer experience. That is what we call a weak brand. What Musk instinctively strives to delivery is a very strong brand. Tesla, SolarCity and SpaceX are all very strong brands in their respective segments.
- - - Updated - - -
Hey, Blake, I like that you're following the daily production. Last quarter, SolarCity announced they had generated 1 TWh in the last 12 months ending with March. For 2014, all solar in the US hit 18.5 TWh, so SolarCity has at least 5% of the solar market already. So when will SolarCity report generating 2 TWh in a 12 month span? I guess 2016Q1 would be most likely, but perhaps earlier. I would expect them to announce when they hit it.�
1/1/2015
guest Unlike computers, solar doesn't increase utility. There no difference in the electrons from a solar panel compared to the grid. Your comparison would only be valid for people lacking electricity before installing solar.
PPA buyers lock themselves into a rising commodity costs when the cost of producing electricity from solar is falling fast. The correct computer analogy would be signing a twenty year computer lease with an escalating price. As with a PPA, this deal makes no sense for the buyer.
Solarcity has captured a lot of value by selling PPA to date. But it appears that residential PPA prices are dropping considerably faster than their cost of installation. A survey of PPA prices from this year would be interesting.�
1/1/2015
guest "SunSpec PV Finance Conference and Solar Asset Symposium, held in conjunction with Intersolar North America 2015, is the key forum addressing cross-cutting PV technology-, asset- and finance topics. For the 5th consecutive year, key leaders will gather to interact with participants and gain fresh finance insights needed to tackle next year�s finance opportunities beyond policy and securitization."
SunSpec Presents PV Finance Conference and Solar Asset Symposium at Intersolar SunSpec Alliance
�
1/1/2015
guest Moderator's Note
Some posts moved to Snippiness.
Please remember that this is a moderated forum; instead of starting personal attacks on someone posting, please report the post.�
1/1/2015
guest What specific data are you looking at? I'd like to see this for myself.�
1/1/2015
guest The last California quote I saw was 13.8 cents and 1% escalation. I don't know if that is typical now. But it is ~2/3 of the discounted present value of the cash flow they were getting for PPAs early last year. AFAIK, no one is surveying PPA prices. Knowing competitive conditions, especially in the hot markets, would be interesting. Going back just a couple years the PPA sellers weren't really competing against each other, but the utility. They just took the utility price and cut off 10-15%. At 13 cents their pricing is being influenced by solar competitors.
A well purchased system today with the ITC will yield about a 7-8 cent LCOE over 30 years. So the premium the PPA sellers get for providing their financing still seems significant. Although solarcity has a problem with their retained earnings including substantial revenue in years 20-30, as they project 2/3 of PPA customers will renew their contract. The typical PPA California customer from today will be paying solarcity $.30/kWh at the end of their contract, and it is hard to imagine 2/3 being happy enough with solarcity to renew.�
1/1/2015
guest For the first time SolarCity showed up on my Interactive Brokers hardest to borrow list. For whatever that's worth, it appears there are very few shares left to short�
1/1/2015
guest
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(in terawatt hours, US only)(note the doubling starting in 2011)(consumption total)(PV)
0.5 0.6 0.5 0.6 0.6 0.5 0.6 0.9 0.9 1.2 1.8 4.4 9.1 18.5 �
1/1/2015
guest Grid services from behind the meter storage:
http://www.greentechmedia.com/articles/read/sdges-proposes-a-bring-your-own-battery-tariff�
1/1/2015
guest Hard for me to imagine zep solar expanding into the UK without solar city planning an international expansion. The article states they are selling in Japan as well as the US and solar city is not currently in Japan but I would guess both of those markets are potential expansion targets.
SolarCity-owned mounting company Zep Solar targets UK, starting with commercial rooftops | PV-Tech�
1/1/2015
guest Yeah, it would be nice if someone collected stats on this. I would expect quite a bit of variability.
For example, just looking at SolarCity, they reported an average price of 13 c/kWh, but there is variability from one customer to another. There are at least three sources of variability. 1) Specific installations vary in how many kWh/kW per year can be guaranteed. So it you have a shady roof with poor orientation, SolarCity may need to charge more per kWh to assure financial soundness. So adjacent neighborhoods need not get identical quotes, much less different states. 2) State and local incentives may vary. 3) SolarCity tries to position itself about 3 c/kWh below the local utility. Thus, if a utility has a low enough rate, it will choose not to market in that service district.
This last point is particularly important to understand. Currently, SolarCity is able to offer an average PPA of 13 c/kWh. This limits their addressable market to utility service areas with residential rates at or above 16 c/kWh. This is an addressable market worth $60B in retail electricity sales. SolarCity is trying to cut its cost from $2.95/W to $2.50 by 2017. This should enable them to drop their average rate down to 11 c/kWh. At this price, their addressable market grows to $110B. SolarCity aims to keep doubling every year, so to facilitate this rate of growth it is important to double its addressable market in about 2 years. So cutting cost is essential to their strategy as it enables them to penetration more deeply within their established footprint while expanding that footprint. Suppose they quote someone 15c/kWh this year because of poor roofline and did not make the sale. If they can drive the cost down, perhaps they could follow up next year with a 14 c/kWh rate and all the other financing options a little cheaper too. Perhaps at that price, they convert a sale. If not, they could follow up the next year at 13c/kWh. At some point, the prospect converts or is picked up by another solar provider. So its a race to cut prices. The key thing that a utility must do to defend its market share is offer lower rates, but utilities are not likely to do this until they have lost substantial share, and at that point they may not have the financial means to do so. So year after year SolarCity and all the other solar providers will nip away at the utilities' customer bases.
So here's an interesting math problem. Suppose you currently pay 20 c/kWh and consume 10k kWh per year. You can get a 6 kW system guaranteed to yield 9000 kWh per year for $24,000 this year. Or you can wait and install when prices are lower. If the price of this system falls by 10% per year and the utility price is constant, how long do you wait to buy such a system? How would your answer change if you thought utility prices would increase 4% per year? How would your answer change if you though that solar prices would only fall by 8% per year? I'll leave this as an open question. The essential thing one needs to wrestle with is when to lock in a long term commitment when you believe prices will continue to fall. By no means a trivial question.�
1/1/2015
guest since 2003 the utility rates in the areas that Solar City operates has more than doubled, The current projected capex (of utilities) and likely rising interest rates will likely mean more of the same.�
1/1/2015
guest In at least one interview, I remember Lyndon Rive stating that the renewal contract won't be the same price as the original, so the final escalated price (not all SolarCity contracts have escalators btw) won't necessarily be reflected in the renewal.�
1/1/2015
guest This is good to know. You may be asked for citation.
It is important to understand the optionality built into the leases. The customer has the option to renew, upgrade, or remove the system. So SolarCity will not be in a position to force the customer to pay any arbitrary rate. If they ask for too high a rate, the customer can ask SolarCity to remove the system. SolarCity would then incur the cost of removal and the old equipment may be entirely worthless for anything but recycling. So SolarCity had better offer a really low rate or a really good upgrade. I'd also point out that the renewal terms are a significant portion of retained value. So this is the weakest point in the lease proforma. The huge advantage that the MyPower loan has over the leases is that it locks in this renewal value from the outset. This is good for SolarCity, but it also gives the customer the option to prepay the loan. Is the bad for SolarCity? Actually, no. It accelerates the revenue stream in a way that increases the present value retained value. So MyPower is a win-win for both customer and company. Indeed, MyPower retained value is almost twice that of leases.
So how can SolarCity lock in the renewal value of its lease customers and avoid optionality in those contracts? It's rather simple. SolarCity can offer lease customers to option to refinance into MyPower loans. This would be a natural remedy for any customer who may become impatient with slow lease payments. So it is good for customers, but it would also increase the retained value SolarCity has on the books.
So I would expect SolarCity to start promoting refinancing into MyPower loans in the coming years. They are presently working on trying to reduce their interest rate on those loans. So they may want to wait until they can offer better rates, but this could prove a very good way to build retained value without having to send out an installation crew.�
1/1/2015
guest I'm not familiar with confidential treatment order SEC filings...What could be in something like that?
SolarCity - SEC Filings�
1/1/2015
guest So far, the best I can offer is this, from a few pages back:
�
1/1/2015
guest When to go solar
What, no takers on my math puzzle? Well, I guess not everyone is math obsessive like me. So, here's the solution I'm playing with. There are certainly other ways to frame this, but see if this makes sense.
Problem. You are considering buying a solar power system at price P today, but believe it will fall in cost at a rate of d per year. So you think you might do better to wait until t years from now when the price is just P(1-d)^t. However, the system is expected to produce H kWh per year, and for every year you delay purchasing your solar system, you will buy H kWh from your utility that you would otherwise avoid once you get the system. Suppose the utility charges you rate of R per kWh now, but this will be increased at a rate of I per year. Thus, in year t you pay the utility HR(1+I)^t for another year waiting to install. Waiting t years to install will accumulate HR((1+i)^t - 1)/i if i does not 0, or HRt if i =0. We can now put these two cost together, the cost of the system after waiting and the cost of paying for utility power while waiting, to get a total cost of electrical service under the plan of installing in year t.
C(t) = HR((1+i)^t - 1)/i + P(1-d)^t
So we may elect to install the system in the year which minimizes the total cost C(t). For those, who know calculus, this amount to taking first derivative of C and solving for t where this derivative equals zero. The non-calculus version is as follows. Consider the difference in cost as we go from t to t+1:
ChgC(t) = C(t+1) - C(t)
If this change in cost is negative, then we are saving month by waiting another 12 months. But eventually it becomes positive, meaning we are now wasting money by waiting any longer. How much? Well, after a little algebra, I get
ChgC(t) = HR(1+i)^t - dP(1-d)^t
So the question is when does this change go from negative to positive. So we want to solve for t such that ChgC(t) = 0, and know that it is optimal to install within 12 months of that critical value of t. Thus, we solve
HR(1+i)^t = dP(1-d)^t
HR/dP = ((1-d)/(1+i))^t
t = log(HR/dP) / log((1-d)/(1+i))
So there you have it. Suppose P = $24000, H = 9000 kWh, R = $0.2/kWh, d = 10% and I = 3%. Then waiting until, cost you HR = $1800, but saves you dP = $2400 on your system. ChgC(0) = -$600, so you actually reduce energy cost by waiting at least one year. The critical value is t = log (1800/2400) / log (0.9/1.03) = 2.1323. So want to install in about 2.6 years, midway between 2.1322 and 3.1322.
What happens if you expect utility rates to rise faster, say 4% per year? The critical t is 1.99, so you don't want to wait 3 or more years. So if utilities raise rates more quickly, they can expect their ratepayers to go solar sooner.
What happens it expectations around the rate of decline in solar prices change? Suppose d = 8% and i = 3%. Then critical t is 0.5714. This is about 1.56 years sooner than our base case with d = 10%. We see here a great degree of sensitivity. As declining price expectation moderate, consumers will be more eager to buy. We see this in an extreme with the possibility of losing ITC. If it goes down, solar sales will rise in anticipation. Most people understand this at an intuitive level. But what about a more moderate reduction in the rate of decline? This too can motivate buyers not to delay. Some people envision the possibility that PV panel supply might tighten in a few years. Under this scenario, panel prices moderate their descent or even increase, and this could throw customers into motion. If SolarCity has their Gigafactory online by the time this scenario plays out, they would be extremely well positioned for massive installations. Also in terms of marketing messaging, we see that it is good to say that solar is now quite affordable, but not to says that it will keep getting cheaper every year. An installer does not want to encourage shoppers to wait for a better price.
A final lesson from this model is that it is not economically wise to put off buying solar for too long. Some have argued that if you buy now or lock yourself into a lease now, you may come to regret it psychologically as prices continue to fall. You may indeed regret it, but that does not mean that you would have been better off in networth waiting the whole time. There is a clear cost of waiting, and you should not delay once the cost of waiting is higher than the money you expect to save by waiting. One should not hesitate to install and lock in financing when the time has come to do that.�
1/1/2015
guest will be interesting to see where all the variables end up. I guess The sun has been shining bright now because SCTY has cranked out quite a few 6+ GWh days including today�
1/1/2015
guest It would be good for us to start anticipating quarterly results. There may be some nice trading opportunities in it.
Value creation was $157M in Q1, so I guess $175M would be q/q growth on pace with doubling annually. But SolarCity is deeply seasonal, So $180M is more likely what they need to hit.
What factors would we want to look at to anticipate value creation?
Another key metric I think we should follow is the cost per Watt. It came down to $2.95 fir all of 2014, but Q1 is a tough quarter to keep costs down with so much snow in the north east. So it was $2.95, up a little from H2 of 2014. They are targeting $2.50 in 2017, but I think this is sandbagging a bit. They've been driving cost down 14%pa for the last two years. At that pace, they could hit $2.54 in all of 2015. Per my discussion in the previous post, SolarCity has an interest in keeping price reduction expectations low. They don't want prospects to delay installation holding out for a better price. So while cost may decline 14% per year, they may not want to reduce pricing so quickly. The difference of course is higher profitability, which is good so long as the pace of growth is not hindered. This is where it matters that they are primarily competing with big, slow, and expensive utilities. There's no need for installers as an industry to compete with each other on price so long as they can all steal market share from utilities as fast as they can scale operations. I digress, but this is the game for the next 5 years. Investors should watch cost per Watt carefully.�
1/1/2015
guest As we are now in the second half of the year It will be very exciting to watch the factory build out come to its conclusion. If they have a successful ramp up they should blow through their cost reduction targets. They have had those targets in place for a lot longer than they have been planning on being a panel manufacturer. If they truly are the lowest cost/watt manufacturer like they think they will be it is hard to model what that will do to their cost structure but you could hear a smile in Lyndon's voice when he talked about a couple quarters ago.
They are planning to start hiring plant managers and engineers this fall and it will be exciting to hear those details over the next couple of earnings calls.
I agree cost/watt is a very important metric and I think most of the world has missed what the (free-ish) Silevo factory can do this metric�
1/1/2015
guest Very strange movement over the past few weeks. Feels like some large holders had to sell when the overall market experienced a brief hiccup, and quiet accumulation is currently happening. Volume has been extremely low for the past few days. The spike in the morning looks like it was caused by a buy order of 23,000 shares, and the overall market opening strong. The chart is looking more and more like a slingshot, that's about to see a huge move in one direction.
Has anyone seen or read any updates about the estimated completion date or expected output of Solar City's Factory?
This was announced today, and could be significant.
Governor Cuomo Announces Expanded Access to Renewable Energy For Millions Of New Yorkers | Governor Andrew M. Cuomo�
1/1/2015
guest The Riverbend, SolarCity's Gigawatt Factory, will have 1 GW annual capacity. They will begin manufacturing next year and should be at full capacity in 2017. They have a 10-year lease from the City of Buffalo for the plant and equipment. They are expected to spend upto $6B over this term, including operating costs and salaries. They will hire about 5000 employees. Local suppliers will also create jobs and share in this $6B revenue stream.
It sounds like the $6B figure is one of these all in figures meant to impress politicians on the size of the deal. If so, this may be an indication that SolarCity is planning to make 10 GW on a budget of $6B. This implies a cost of $0.6/W or less. More over Silevo is targeting 24% efficiency panels at a price comparable to standard panels at 18% to 19% efficiency. This is enough to cut 25% of the cost out of many of the components of total installed cost. Already Silevo is producing panels at 21% efficiency.
As promising as all this may sound, Riverbend will not even come close to satify SolarCity's demand for solar panels. In 2015, SolarCity intends to install 0.92 to 1 GW, and it should grow by 80% to 100% per year. Thus, SolarCity will need 3 to 4 GW in 2017 when Riverbend hits full 1GW capacity. It is no surprise that that Lyndon Rive would like to set up a 5 GW factory next.�
1/1/2015
guest Its worth noting that solar city has the option to extend the 10 year lease for another 10 years with the same terms. Its also worth noting that New York gets the right to make a "first offer" for the 5-10 gig plant that has been mentioned in the past. Also of note is right now Solar City is at 6.6051 GWh production which I am pretty sure is a record !! Crazy how we did not break 6 for over a week and then it shoots up closer to 7�
1/1/2015
guest 0.60/W is not very competitive.�
1/1/2015
guest It is if you're offering 24% efficiency. That means much lower installation costs, and much smaller footprint. Today's most efficient panels from SunPower are at approx $1.40/W�
1/1/2015
guest Utility Solar May Cost Less, But Its Also Worth Less | Institute for Local Self-Reliance
As Solarcity becomes more widespread, you're going to see the attacks become more frequent and intense. Solarcity is obviously an emerging power house since some big utilities are doing everything they can to slow DG solar. Again, end user cost is lower then any other utility level energy source.
primary utility boiler plate/talking point message to slow Solarcity:
*shift cost onto non solar ratepayers (what happens when most go solar?)
*subsidized industry that is getting hand out with net metering (what happens if DG improves the grid and lowers EVERYONES costs?)
*utilties can provide cheaper Rooftop solar then a free market competitive industry (what do you think's going to happen with this one?)
they also will will try to disrupt within DG industry by:
*buying is better(because leasing/ppa 80% of all solar installs)
*your house won't sell if you have lease/ppa
*you will need to buy a new system in 10 years, so stupid to lease/ppa.
The above arguments will play over and over again like automated clockwork no matter how wrong they are in reality. It's best to recognize it as a sign of desperation and overwhelming success of Solarcity and DG right now.�
1/1/2015
guest Thanks, foghat, that's a nice link and I think your own critique is right on. While I have a strong bias for distributed solar, including community solar, I am also a First Solar investor. It is frustrating to me to see First Solar become polemical within the solar community. Naturally, their low efficiency thin film technology is not we suited for rooftop and other distributed installations where surface area is limited, but their is no reason why they cannot be a strong player in community and commercial solar. Yet they seem to be falling in with the utilities in opposition to distributed solar. It is frustrating to see this sort of split within the solar industry because the real challenge is to displace fossil generators. The problem I have with utility solar is that is mostly that it is put to the service of propping up utility monopolies.
Of course there is the argument that utility solar requires the maintenance of heavy grid infrasructure. Distributed energy resources of all sorts reduce the need to invest in and maintain so much infrastructure. Currently transmission and distribution accounts for 31% and 11% respectively of the retail price of electricity. But most of this T&D infrastructure would not be needed if most energy were produced near the point of use. So it is a self-serving to argue that distributed solar is not paying its fair share of the cost for infrastructure need to bring remote power generation to market. This is a bit like saying that a local farmer is not paying her fair share of the cost to ship produce from South America to the US. The more produce is locally grown and consumed, the less need their is for shipping infrastructure to import foods. So it is with electricity. The more that is produced and consumed, the less copper and capital must be tied up in transmission and distribution assets. The problem that utilities have with solar is not that it adds infrastructural cost, but that it leave prior investments T&D and generation assets under utilized and deprived of expected revenue. This fact is made perfectly clear when utilities try to compete with solar by installing their own solar. Specifically, the problem has little to do with intermittency because, if so, they would not want to expose their business to the intermittency of utility solar. Rather, grid solar is the form of solar which seems to fit the utilities' infrastructure and business model the best. So let's be clear utilities will embrace utility solar only if it enables their monopolistic business model. To say that utility solar will "win" is ultimately to say that the monopolistic utility business model will maintain its control of the energy market. I do not believe this will be the case, and as a ratepayer with very few alternatives, I do not desire these monopolies to preserve their status. I sincerely believe that monopolistic utilities have outlived their economic usefulness. They presently stand more as a barrier to economic progress than as an engine of the economy.
All this is well and good, but how well does utility solar compete economically with distributed solar? I would actually be pleased to see utilities use solar to compete economically. If you know anything about SolarCity's business model, you know that they only operate in certain markets were they can offer PPA leases about 3 cents per kWh below the residential rate the local utility charges. Currently, they offer power at 13c/kWh and only where utilities charge ratepayers in excess of 16c/kWh. The national average is only 12c/kWh. So SolarCity is stealing market share from utilities well above nation prices. They sure strategy for any utility that does not wish to lose market share to SolarCity and a host of other installers is simply lower their residential rates to the national average. It is a painfully simple strategy, but one that old monopolies may not used to. Basically they need to compete for market share. So if utilities can use wind as low as 2.5c/kWh, solar solar as low as 3.9c/kWh, battery storage as low as 5.0c/kWh and even combined cycle natural gas as low as 6.1c/kWh all to deliver retail power at below 12c/kWh, then they had better get on with it. But it they really want to play regulatory ratepayer cost recapture game and charge over 16c/kWh, they they will lose and should be allowed to fail. If they need to divest or write down assets that are no longer economically competitive, then they need to get on with it an not expect ratepayers to compensate them for their losses. Utility shareholders and even bondholders need to absorb these losses as this will afford these companies the greatest chance of survival. And if utilities need to change their business models and begin to do deals with new players like SolarCity, then they had better get on with it. Petty sort of regulatory games aimed at stalling distributed solar will not win on economics. They only breed ill will and bad politics. Simply put, the utilities need to compete, cooperate or die. Until utilities demonstrate that they can deploy solar in such a way that brings all residential rates below the cost of distributed solar, they will lose market share and as consequence so will utility solar.�
1/1/2015
guest http://m.themonitor.com/news/local/h-e-b-unveils-rooftop-panels-in-weslaco-hails-installation/article_bbc6d7bc-2cf3-11e5-8dac-43d8cf880188.html?mode=jqm
solarcity installs a 1.2MW system, the largest rooftop solar installation in the state of Texas, in just 3 weeks. This was finished in June 30th, so should count for q2 numbers. The q2 conference call is earlier this year then last year, so might be an indication of a smooth quarter, hopefully at the high end of expectations.
jhm,
I'm interested in utility level solar as well. Just don't like when utility solar is fighting for monoploy utility over distributed solar. I guess they lose big if they bite the hand that feeds. Utility solar is really just a cost reducer for them, not a rate payer benefit since utilities continue to raise rates every year as allowed by utility commisions. I think utility solar is far less risky because policy is fairly clear and uncontested. The utility is in full control of utility level sat, but not in distributed solar. The risk investment is 100% on distributed solar, however, the biggest reward is in distributed solar. I'm of the opinion distributed solar will eventually win the policy battle and transform the electricity business in general. Utilty level solar is mistaken to support old utitliy structure because ultimately they will be working with distributed solar on the new energy model that shifts traditional utilties into being service distribution and transmission companies.�
1/1/2015
guest The fixed costs per installation are high enough that the intall cost per watt is not that much lower with slightly more efficient panels. A bigger value will come from being able to sell a larger system to some customers who are limited by roof size. Your cost pricing for SunPower panels is way off. They don't sell any mature products that cost them .60/W to make.�
1/1/2015
guest We're on the same page regarding utility solar. The business models will change as installers gain in scale and capability.
I really think there is some excellent information to mine from your link. The thing that stumps me is that 3000 panels provide 1.2 MW. That's 400 W per panel. Where are they getting 400W panels? At standard size, 1.76 m2, this implies 24% efficiency. When SolarCity acquired Silevo they mentioned that Silevo had a 340W panel and was working toward a 24% efficiency panel. Has Silevo now achieved this? Or are they buying from SunPower? Any other source?�
1/1/2015
guest a short comment, then back to lurking. in 1999 i installed 32 ASi (amorphous silicon thin film) mfgd by BP solar (yes that BP) in about 1995-1997 from their Towanda Virginia facility, 277sq ft, 1.375kW system, ~3.8% efficient. they are now down below 3% efficient (lost about 30% of their output) (as measured by peak output). the 32 panels could be replaced by 5-6 present ones (except i'm moving and the house will be bulldozed why I havent replaced. I really like SCTY (and TSLA) It's nice finally seeing PV becoming ubiquitous, and doubling and tripling over the last decade (184 terawatt (million million hours generated in 2014!! planetary is phenominal)�
1/1/2015
guest I think the article was making a generalized statement by saying "over 3,000" panels. To me, that could mean anything over 3000, so not to specific. Not sure silevo panels used, but possible.
In other news, Solarcity now has offices in Ohio. They also are doing business in the UK through silevo.�
1/1/2015
guest That is very intriguing on the 3000 panel and the implications if that is near correct, I believe the UK expansion has to do with the zep mounting hardware not their silevo acquisition�
1/1/2015
guest If 340W panels had been used for the 1.2MW installation, that would have required 3529 panel. I would think a PR person or journalist would say this is "over 3500" rather than "over 3000." Both would be correct, but 3500 is a really compelling number for a right up like this.
So we can't rule out simple inaccuracy in reporting, but this really is an intriguing possibility. If SolarCity / Silevo really does have a 400W panel, this should come out this ER or earlier. Once the market is properly informed, I think this could substantially move the stock price. Certainly it is a big deal for long-term investors. The investment in the Riverbend factory becomes a much bigger winner making 400W panels instead of 340W panels. It increases output by 17% and reduces total installed cost/W in many other ways. It is also a product that con compete with SunPower on the panel market, if SolarCity so chooses. The Silevo acquisition was a bet that they could deliver this. So if they have already won the bet, it should be a big deal for investors.
So what to do before an official announcement? I've been meaning to pick up a few more shares for a while. Given the possibility of this coming to light within a month, I'm thinking I might not want to put this off. Do others see this as a tradable event?�
1/1/2015
guest Doesn't sunpower make 400w+ panels that are not the regular size as everyone else?�
1/1/2015
guest If local suppliers revenue is included in the 6 billion figure than the cost to Solar City will be much lower. Essentially those cost are being counted twice if they are included in that 6 billion figure. Also worth noting that it is "up to" 6 billion.�
1/1/2015
guest Yeah, SunPower does make 400+ W high efficiency panels. Also if they are not standard sizes, that could be a problem using Zep hardware. But my impression is that SolarCity does not use SunPower panels. Of course, I could be mistaken. It would be nice if someone could confirm either way.
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Yeah, those numbers tend to be pretty fluffy. So I see this as only an upper bound. Also 1GW output is a conservative estimate. I suspect the estimate is based on 21% efficiency panels rather than 24%. If so, then 24% could boost capacity by 17%.�
1/1/2015
guest What energy shortage? | Global Development Professionals Network | The Guardian
centralized traditional utilties lose 60% of its energy from generation through to end user. So, it gets more clear to me that Solarcity and distributed solar is much more efficient deliverer of energy to a home owner or business. The writing is on the wall and our policies will have no choice but to support distributed energy going forward. If you look at the increased levels of utility capex projected going forward the price of retail electricity is only going to go up while the price of Solarcity and other DG companies are going to go down. Just using the first solar record breaking utility solar cost, the end user only gets 40% of that energy so NV Energy has to buy 60% more energy just to equal what Solarcity proves to a home owner on a kWh per kWh basis... and that's just on efficiency costs not including transmission and distribution maintenance and build out costs.
It appears very clear Solarcity is going to continue massive growth in the foreseeable future in my opinion whether utility solar and resistent utilties like it or not.
since we're having to live with the presidential crazy season much earlier this cycle, if a candidate can get a handle on the energy transformation and develop a smart energy platform as their PRIMARY campaign platform, he/she could really crush it at the polls and get America to levels unknown before. If we're worried about national security, jobs, new manufacturing coming back, exportation increasing, and an overall heathier country and world... then a smart energy economy platform as the PRIMARY campaign platform is a no brainer and has my unbridled support.
and just read Elon loves and is currently reading the book "Excession." What is interesting about this book is that a primitive culture is presented a more advanced tech or way of existence, but fails to pass the test as they say and the new tech disappears till they are ready. Wild to think that Elon might be reading fiction in order to do mental gaming of how to approach the public/long entrenched energy stake holders on his grid transformation ideas(and automobile & rocket & banking/currency industry stake holders as well).
update:
new hour long "fireside chat" interview with Solarcity CEO Lyndon Rive...
http://www.youtube.com/playlist?list=PLUrqcWVF3ueknKHCQJtFreSkwKEtcmQsO�
1/1/2015
guest Thanks for the links and I agree about the next presidential race. Without getting too deep into politics, I'm afraid the only one that could do this would be Bernie Sanders, which I'm ok with because I like him out of everyone else so far.�
1/1/2015
guest Very excited about fire side chat, also like that sun Edison bought Vivant at a 50 percent premium�
1/1/2015
guest interesting. did not realize how water usage intensive electric generation by utilities is�
1/1/2015
guest Is there any immediate reason for the nice upward movement in the stock price today?�
1/1/2015
guest Dang, I should have kept quiet about 400W panels. I was hoping to buy more shares today.
Stock up over 7% right now.�
1/1/2015
guest Vivint acquisition by SUNE�
1/1/2015
guest thx, woah - nice! Didn't catch that for some reason. Should have diversified more. SCTY is the only solar stock in my portfolio. Vivint and SUNE should've been there, too. ...I'm such a EM fanboy... geez�
1/1/2015
guest Solar is luck of the draw. I have SPWR, CSIQ, JASO, JKS, TSL, SCTY and almost everything is red since my buying. SUNE and VSLR are not on my list but I'm not entirely sure how to value SUNE. Almost make me wish I had just stuck with Tesla for all my money.�
1/1/2015
guest Yep, same here. So going back and forth on the merits of SolarCity as a company is fine, but they must be doing something right because they are the only ones with their stock rising.....�
1/1/2015
guest that depends on the time frame. So far each of the three buys I've done has been at a lower price point than the previous one.�
1/1/2015
guest Ditto here!�
1/1/2015
guest Does anyone have valuation comparisons between SCTY and VSLR? Retained Value, Growth etc.
I can look up but if anyone has it readily that would be useful.�
1/1/2015
guest I've seen comments at Seeking Alpha about retained value comparison putting SCTY at 112$ based on Q1 numbers. No idea about other stuff.�
1/1/2015
guest FWIW, just now heard that Raymond James put out a note saying theoretically SCTY would be $100 based on VSLR buyout price. Looks like they are primarily basing it on Retained Value multiple.
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SUNE's purchase of VSLR provides quite a validation of residential solar.
If residential solar is as stupid as bears make it out to be, why would SUNE, which is primarily in solar-farm business buy VSLR at a steep multiple to retained value?
Take this electracity!�
1/1/2015
guest If you're interested in Sun Edison (SUNE), who just bought Vivint, listen to their CEO interviewed on this recent podcast: SunEdison CEO Ahmad Chatila on Megatrends Changing the Energy Business : Greentech Media. He sounds super-smart, friendly, and comes across as someone I'm happy to invest with.
SUNE's accounting is a complex beast, with Terra Power (TERP) holding a bunch of their assets and emitting dividends. There's no way I personally could provide a valuation, but I like the person, I like the industry, and I like their success.�
1/1/2015
guest Vivint solar currently has 1.2 billion of contracted payments remaining after q1. Solar City added 1.2 billion in contracted payments in q1. Only Solar City has a 1 gigawatt factory that someone else is paying to build�
1/1/2015
guest Well, I'm sure Buffalo and the state of New York is over the moon to receive the billions in new tax base dollars from new residents and well paid employees and ancillary businesses making more taxable income. Solarcity may single handedly rejuvinate a city that has not seen this much economic activity in nearly 40 years.
To me, Buffalo seems to be the one winning this investment by far. The success of New York's investment will bring many states to Solarcity's doorsteps with incentives to build 5-10GW factories.
i laugh every time I hear people say tesla and Solarcity get hand outs, but at the same time enjoy the bounty of new long term jobs and new roads, better schools, higher quality of life, Solarcity and tesla employee tax dollars have brought and continues to bring to their communities. I think between tesla and Solarcity, they now employ 25k people and counting...
My challenge to those nay sayers is who is doing the same right now in American industry?�
1/1/2015
guest After watching these, I have to say it again - I love listening to Lyndon speak. His passion and knowledge is infectious and can see him inspiring people that are in their 20s and younger to make sure the shift continues with their generation.�
1/1/2015
guest Here's a quick comparison. Vivint is now worth $1.66B on $1.2B in contracted payments. That's a ratio of 1.38. SolarCity is currently at $5.4B on $6.1B in contracted payments. At Vivint's ratio, SolarCity could be worth $8.44B, which is 56% above current stock price.
This very simple comparison does not account for other assets SolarCity holds, Zep, Silevo, and Riverbend. So this 56% upside is likely quite conservative.�
1/1/2015
guest Don't mean to be a party-pooper but even after a big rise today, in my view there is a lot of money left on the table.
SCTY hit 52.77 on 5/20/13. That is more than 2 years ago!
Think of all the progress that has been made over the last two years. Yet, the stock didn't move much at all.
The average analyst price target is 82.20 with the highest at 99 (by Credit Suisse).
I have been worrying, given the price trend, sooner or later the retained value will overtake the market cap and some PE firm or Buffet or whoever else will come over and take the company private, pretty much taking away all the future growth from us... I really hope the stock price will rise in synch with the company growth to avoid that situation.�
1/1/2015
guest That's why I bought back in the other week at $57 before the recent drop. I sold out at $55 in 2013. To see it there today with all the good that has happened made me want to get back in.�
1/1/2015
guest Jim,
SunEdison bought Vivint for $2.2bln, so much higher ratio. Solarcity is worth 5X that right now. Keep an eye out for what happens in q4 and throughout 2016 when Powerwall installs start to ramp up. California ISO just put out that they are going to accept aggregated distributed energy at market prices. So when we see 10k Powerwall+Solarcity pv installs come on line by the end of the first quarter 2016 and each storage+pv homeowner getting the lowest cost per kWh on the block, there is no way anyone could compete on solarcity's level no matter how much consolidation.
elon proved Friday battery tech is going to make 5% and more improvements every year moving forward so, this is only going to drive Solarcity costs down further and at the same time increase sales many times over. The point of no return will be when homeowners see their bill after aggregation of solar+pv in California starting next year, in my opinion. The 10k nest thermostat giveaway is just a glimpse at what Solarcity is going combine with it and value add along the way.
solarcity and tesla have been planning this for nearly a decade. It is paying and will continue to pay to be a visionary brand that sticks to its independence along with it first mover market position compared to the rest.
sbenson,
yeah it's been frustrating with the volatility, but expected somewhat given the completely new entrance of DG solar as rising powerhouse within the energy sector. No one really knows much about it so when oil goes down some investors freak out, or when utiltiies propose ending net metering or any type of policy change is proposed, they hit the sell button. The other factor is the hedging by being done by those that have given large amounts of capital thus far.
to me, the fundamental shift is clear and no matter how bumpy the road may get along the way, Solarcity is reaching the rare air one way or another...sooner or later... Those big valuations can run, but never hide...�
1/1/2015
guest This 56% upside takes the stock to $87. Other analysts are doing a more careful job and getting to $100. For me, the 56% upside was enough to motivate me to buy some J16 calls. I expect the market to price most of this upside in pretty fast.
My view is the Vivint acquisition will change the way the market will value distributed solar and disruption in the utilities. I suspect that other installers smaller than SolarCity will become acquisition targets. Utilities need their expertise immediately. I do think that SolarCity is too big for acquisition and doubt that Musk would sell his 20% share. So the utilities will need to cut deals with SolarCity if they want to survive. The more pressure Vivint and all the other installers put on utilities, the more willing they will be to cut deals. So all this is a new day for distributed solar.�
1/1/2015
guest Ah on such a glorious day as this where TSLA is inching up towards an ATH and we're finally seeing some big moves in the distributed solar business... Where's electracity?�
1/1/2015
guest solarcity will never sell. They probably won't do yeidcos for the next 30 years either. Solarcity will be much bigger the local utilties. Solarcity will be a global brand. Solarcity already has possible entries being established in Japan, Australia, Kenya, Tanzania, and the UK as I write this. They are already starting international micro grid pilots using Bitcoin-type payment mechanisms for a pay as you go business model. They are operating 10 years ahead of where they currently are working and already are the #1 residential AND commercial distributed solar energy provider in America. they are developing the biggest community solar in the country, the most micro grid projects in the country, as well as produced the most distributed rooftop solar electricity as a single company on earth.
why would they even remotely want/need to sell?
this acquisition today is a learning moment for the market as to the true value of "retained value" and distributed assets to an energy portfolio. It actually serves more to legitimize(as you've said) Solarcity as the real deal in the energy sector then to give SunEdison any competitive leg up.�
1/1/2015
guest There is this concept of hostile takeovers.
Lets suppose the net-retained-value reaches $10B but market cap stays $5B. Then Carl Icahn can come in offer 100% premium and take the company private and put it under his control. Even worse he will finance the purchase putting the company as collateral!
Then what happens to all the future growth? that's simply taken away from us for free.
In my view that's the biggest risk for long term shareholders who want to see a multi-bagger out of SCTY. The stock price better keep up with the company growth or else it can get taken out.�
1/1/2015
guest so any thoughts on the sudden use of a small amount Si in the battery?�
1/1/2015
guest Foghat, you're right. Using Vivint's market cap is probably over conservative. I do think that SolarCity continues to be hugely undervalued. So I am hope even for a rather conservative valuation to get the stock price over $80.
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Nobody is going to strangle this goose while it is laying golden eggs. Musk, who owns 20%, is certainly not going to let that happen. SolarCity is undervalued, and now the market knows that. I am not worried about a hostile takeover.�
1/1/2015
guest That is more than a little deceptive. About 54 percentage points of that "60%" is in the conversion from the theoretical heat content of fossil fuels into electricity. Transmission and distribution losses are only about 6% of generated power. By this standard, solar loses about 75% of its energy from the get-go, because typical residential solar panels are only about 25% efficient, plus inverter losses.�
1/1/2015
guest Only if enough shareholders accept the 100% premium to the share price and tender their shares. You could vote no in that instance. And there are some big individual share holders with a mission - would they accept that price in a hostile takeover? Would the board recommend for or against acceptance of a 100% premium, and how much of the owner base would be swayed by the input and argument that the Board would make in that instance?
I barely follow Solarcity, but I suspect the answer is that any friendly or hostile takeover that doesn't have the full backing of Elon and the Rives is dead, however that backing is achieved. And I don't think that a purely monetary offer, absent silliness, can get it done (and a good chance that an offer with nothing for it but money, even at silly levels, also fails).�
1/1/2015
guest Burton celebrates going solar - News - Porterville Recorder
First school with tesla storage and Solarcity PV installed. 1.8MW system.�
1/1/2015
guest Thanks for that Foghat, the future is here!�
1/1/2015
guest I am hopeful that SolarCity may post some growth in the commercial segment. It has not been growing for several years, while overshadowed by more than annual doubling in the residential segment. I think Zep has made some big advances in hardware to reduce the installed cost of commercial installations. Last ER they mentioned a flat roof that would ordinarily require 20 days to install being completed in 3 days. So hopefully these efficiency gains are translating into more commercial work.
We may even be able to track large installations in the media. A few days ago HEB got 1.2MW and now Burton is posting 1.8MW.
Of course, the big project will be the Gigafactory, which could be over 100 MW just on the roof.�
1/1/2015
guest SunEdison boosts Australia presence as it targets global oil giants : Renew Economy
SunEdison aspires to grow by acquisition.
How SunEdison views their standing amongst peers.
SunEdison aspires to add 1GW of renewable assets per quarter. They recently acquired Vivint Solar for $2.2B and First Wind for $2.1B. They also created TerraForm to serve as a yeildco. So their acquisition strategy seems to be rather horizontal. They want a large, diverse portfolio of renewable energy assets. SunEdison wants to play on both the utility and distributed energy side.
SolarCity should add about 1GW for all of 2015, but doubling every year leads to 1GW per quarter in 2017. This is organic growth, not growth by acquisition. SolarCitySolarCity's acquisition strategy is quite vertical. All the components facilitate delivering distributed solar energy.
SunEdison's market cap stands at $8.0B, but once the acquisition is complete the combined company may be worth $10B. SolarCity's market cap stands at $5.44B. If properly valued relative to the Vivint acquisition, it may be worth in excess of $10B. It will be interesting to compare how these two contenders grow in the coming years. My money is on SolarCity, but there is plenty of incumbent market share for both to feast upon in the coming decades. Supermajors? Not yet.�
1/1/2015
guest
I read Lyndon Rive's comment on the acquisition and couldn't agree more... Sunedison now will contribute to the political/policy fight against Anti-DG utilties with deep pockets.
Hawaii appears to be in the midst of determine the value of solar and net metering compensation moving forward. Sunedison support could be some added ammo in the fight. Here's an article out today on it:
Inside Hawaii's landmark regulatory proceeding to value distributed resources | Utility Dive
solarcity is growing nearly 100% organically. A big difference with Sunedison. Solarcity has a singular mission under one singular brand. Sunedison is a mix of different brands and organizations. I feel Solarcity will dominate the DG game where Sunedison may not want to be that focused.�
1/1/2015
guest Where was this quote from Lyndon?
So does this acquisition basically represent an interest aligned with the utility business model capturing significant competition to that model? So a 52% premium is what it costs to buyout competition. Sunrun may become the next on the list. Might not be a bad play to buy Sunrun before it gets acquired.�
1/1/2015
guest I think Foghat was referring to this:
�
1/1/2015
guest Thanks. The journalist's read on Rive seems to be at odds with the actual quote. I've heard elsewhere Lyndon express disappointment in another major distributed solar installer (probably, Vivint by name, but I do not recall distinctly) that was not willing to stand with the industry on policy. Lyndon was certainly not happy with that. But if Lyndon is happy with this deal, it may be an ironic view that a captured competitor will be less competition for SolarCity. It will be interesting if Vivint begins to lose market share as most acquisitions tend to destroy more value than they create.�
1/1/2015
guest I think it is very safe to say that commercial segment will grow pretty substantially. Last ER they said their gaining lots of traction in the commercial segment and with the expansion of zep solar into the UK market it speaks very well of the hardware.
Edit:
It has been a little while now but in the GTM podcast that featured Lyndon that I linked way up thread he "calls out" vivant solar on not contributing at all to policy and talks about how they need to step it up since policy plays such an important roll.
In the Fireside chat someone linked upthread (foghat maybe?) Lyndon mentions a bill that almost passed that would require solar installers to list all serial numbers at the time a contract is signed and if any of the numbers are wrong the penalty would be perjury. The insanity of this is you would have to have all the serial numbers before you even ordered the equipment.
In that same interview he mentioned that thinking about the competition keeps him up at night so other than the policy standpoint I question how "happy" this really makes him.
On another note, JHM your new picture keeps freaking me out hah ... Who is that!, I keep asking myself ha�
1/1/2015
guest Thanks, it was that GTM podcast that I had in mind. I thought it was Vivint but was not sure.
So I wonder if Vivint's play all along was to amass a book of business big enough to force some competitor to buy them out. This would be like WhatsApp getting bought out by FaceBook, or any number of other tech plays. You don't have to have a long-term business model, you just need to make it in the interest of large players to take you out of the market. If this was Vivint's intent all along, it would make sense that they would not contribute much to policy advocacy that would weaken the standing of their prospective buyer.
Vivint had 13% market share in Q4 2014, but 11% in Q1 2015. So it looks like the couldn't stand the heat and needed to cut their deal.�
1/1/2015
guest Local story about the main power utility intentionally not hooking up the states 6th largest solar project that was installed last year.
http://www.startribune.com/giant-solar-project-in-paynesville-minn-produces-frustration-no-juice/317662731/�
1/1/2015
guest Somebody needs to be able to rent a bunch of Powerpacks until this is resolved, then keep a few longterm. This is the sort of service SolarCity could be providing its customers to mitigate the risk of utility stalling tactics.�
1/1/2015
guest SolarCity aims to create 1,460 jobs - Business - The Buffalo News
SolarCity start hiring this year to fill 1460 positions at the Riverbend plant.�
1/1/2015
guest Solar can raise home values � if you own the system�
1/1/2015
guest
So positive news from electracity?�
1/1/2015
guest SolarCity Now
Wow, Solarcity hit 7Gwh today. Another all time record. 4,5,6 and now 7 has been hit in 2015.�
1/1/2015
guest Yes amazing, thank you�
1/1/2015
guest It is only showing 6.3 when I look now? Can someone confirm its showing 7 for them still? Might be a cache issue with me?
I did notice that the last installation was in Phoenix interesting to know that there still installing solar there after the SRP decision I know right after the decision they relocated like 10 percent of the workforce and said more would be leaving but with no updates I was curious if they still have people working there.�
1/1/2015
guest Shows me 6.5�
1/1/2015
guest From the link:
Solar panels owned by a home seller add 4 to 6 percent to the value of a home sale, often less than the cost of the panels, according to an analysis of local home sales and reports from real-estate agents. Houses with leased solar panels actually sold for less than those with no solar
"Once it has that new lease payment hooked to it, it actually makes the home value considerably less," said Shaw, echoing the sentiment of appraisers and other experts in Arizona real estate.
�
1/1/2015
guest Shows me 6.3 and 6.2 in two different browser tabs:
�
1/1/2015
guest Right, that's from a real estate agent in a state thay has had solar problems. Maybe it's not that way for other parts of the country....�
1/1/2015
guest That site fluctuates more than that. I've seen nearly a giggawatt looking at it simultaneously from a server in Virginia and a laptop in NYC.�
1/1/2015
guest It is from a study of home sales by Arizona State University, and supported by appraisers and realtors. The fundamentals of the problem don't change by area. A potential buyer can read the unfavorable lease/PPA terms. Every competent real estate attorney is going to warn their home buyer client.
There is resistance to buying homes with attached solar leases everywhere. This article references what is probably the only university study so far.�
1/1/2015
guest Solar is here to stay and grow dramatically given the environmental issues and cost savings.
Arizona real estate agents and lawyers will eventually come around .�
1/1/2015
guest How SolarCity can sell solar in Geoegia
Despite abundant sunshine, Georgia has little sunshine. Why has SolarCity not entered this market. Up until about 6 months ago, it was illegal for solar installers to lease, unless they happened to be a utility. But our state government has passed legislation to remove that barrier to entry. But SolarCity faces another barrier: power is cheep in Georgia. However, Tesla Energy products may change the economics and open a way for SolarCity to turn a profit in Georgia.
I have been helping a condo community sort through options for installing EV chargers. In the process, we have learned more about the commercial rate plan this HOA has. Roughly, this plan prices energy at 9c/kWh and monthly peak demand at $20/kW. SolarCity may not be able to compete with the energy price offering a solar system without storage. While a solar only system can reduce peak energy use when the sun shines brightly and AC hums, but the AC demand at and after sunset as well as monthly variability in solar output can lead to very little relief from demand charges. So without storage, while at 25 kW system could reduce demand in certain hours by 25 kW, the monthly peak demand might only amount to a few kW in hot months. But suppose we pair 25 kW PV with a Powerpack at 100 kWh and 25 kW sustained. The Powerpack along may not be sufficient to reduce peak demand by 25 kW, while it can certainly provide that much power for 4 hours at a time. So if peak loads are sustained longer than 4 hours at anytime in the month, a Powerpack alone cannot reliably cut peak demand by 25 kW , maybe 15 to 20 kW. But suppose the solar and battery can work together synergistically to reduce peak demand by a month average of 30 kW, where solar alone provides upto 5 kW and Powerpack alone upto 20 kW. The extra 5 kW or more demand reduction is the benefit of synergy, and at $20/kW.
So let's figure out what this is worth on an average monthly basis.
Solar energery. 25 kW � 120 h = 3000 kWh @ $0.09/kWh = $270
Solar peak demand reduction. 5 kW @ $20/kW = $100.
Powerpack alone peak demand reduction. 20 kW @ $20/kW = $400.
Synergistic peak demand reduction. 5 kW @ $20/kW = $100.
Thus a PV only system creates a benefit valued at $370 per month or 12.3 c/kWh. Over the course of 20 years this is worth $88,800 or $3.55/W.
However, the combined PV + Powerpack system generates a benefit worth $870 per month or 29 c/kWh. Over 20 years the is worth $208,800. Since the Powerpack will need to get replaced in 10 to 15 years, but in that time the cost could drop from $25,000 to $15,00, even $10,000. So let's assume over 20 years time s40,000 will be spent on storage. We net this from the gross benefit to get a net benefit of $168,800 or $6.75/W solar.
So we see the potential of storage to increase the benefit per Watt from $3.55 to $6.75, a gain of $3.20. Surely at a benefit of $6.75 there is plenty of opportunity for both customer and SolarCity to profit handsomely. Indeed, both could profit to the tune of $2/W or $50,000 each.
Not only does this example illustrate the potential for solar+battery to make economic sense. It also underscores how important the cost of grid capacity is. In most residential rate plans, there is just a rate for energy. This rate includes the cost of grid capacity. But in a plan with demand charges a specific price is put on grid capacity. PV only systems are not well suited to create reductions in required grid capacity and most rate plans do not properly reward owners of these systems for these modest reductions. But rate plans with demand charges do put a specific price on capacity demanded, and solar systems with storage are best suited to optimize rewards for reduced capacity requirements. We make a big mistake in thinking about renewable energy to focus only on energy costs and not recognize capacity costs. In this example, the combined cost that was offset was $870/month or 29 c/kWh, but the energy benefit was only $270/month or 9 c/kWh. So about 2/3 of the benefit was obtained by reducing capacity requirements.
Incidentally, Georgia Power does have two residential rate plans with demand charges built into them, but most residential customers choose other plans without demand charges. I'll leave it to the analysts to workout which combination of PV and battery will yield the best return for each specific utility rate plan, but where a specific price is put on capacity, batteries have an opportunity to capture that value.
Batteries may well expand SolarCity's addressable market, even into Georgia.�
1/1/2015
guest I agree, Solarcity market will only grow stronger with mass market batteries.
SolarCity Now
again, I see 7Gw of production today. Please verify if necessary.�
1/1/2015
guest I hate to quote such a bad article reference again but it is worth pointing out that you're quoting a real estate agent that has nothing to do with the study and then using to study to try and verify with the real estate agent said. If you look at the graph in the study it shows a very small difference like 3 or 4 dollars per square foot four houses with Leased Solar. From what I can tell they don't take into account the fact that houses that lease solar are most likely lower sales price houses and houses that can purchase solar most likely are higher dollar houses which in itself completely explains the $4 per square foot difference and in my mind is evidence that having Lee solar on your roof does not decrease the value of it. Its a poorly written article and the author clearly has an agenda that lines up with the electricity's�
1/1/2015
guest PG for the Commercial Sector : Greentech Media
This article underscores the importance complementing storage with solar. PG&E is closing a rate plan without demand charges that had favorable net metering for midsized commercial solar installations. This is a problem for solar systems without storage. As utilities struggle with distributed solar, we may see more efforts to put ratepayers onto plans with demand charges. In all I see this as a good opportunity for Tesla and SolarCity to provide systems with storage. The transition can be difficult for the solar industry, but as a market for battery storage expands, storage prices will decline which will ultimately move toward a leaner and more stable grid.
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I'm frustrated with SolarCity Now because it simply is not reliable. I see numbers move around just by reloading the webpage. I'm afraid it does more reputational harm than good. They need to fix this or take it down.�
1/1/2015
guest Why would you make such an assumption? I certainly wouldn't.�
1/1/2015
guest Same here although solar city has never publicly talked about the site as far as I know. I think it's on beta testing. I currently see 6.4 :/
On a bright note, it seems like the solar bond site continues to gain momentum. One of the many "barriers to entry" that bears keep repeating don't exist. I am betting local mom and pop shops would have a hard time getting a 9 million dollar short term loan at two and a half percent interest rate
RSF Social Finance Purchases $9 Million in Solar Bonds from SolarCity | 3BL Media�
1/1/2015
guest As someone who works in banking, I am in awe of what SolarCity is doing with these solar bonds. These products are quite comparable to CDs, but without FDIC they offer better return. SolarCity is disintermediating banks and the traditional bond market. By going direct to the bond investor they are able to offer better rate. I would add that they are also able to bypass most of the heavy regulatory burden now plaguing banks. People outside of banking do not understand how much this burden has increased in recent years. My expectation is that banks will become increasingly slow to innovate, and this will lead to non-financial institutions like SolarCity becoming the place where real innovation and economically efficient financial product emerge. So good for SolarCity, they are able to provide financial products without massive regulatory overhead.�
1/1/2015
guest SCTY is up 3% in premarket. Anybody know why?�
1/1/2015
guest Robert W. Baird upgrades SCTY to Outperform from Neutral and raises their tgt to $71 from $61 as they believe co's pullback of ~14% since May 14 provides an excellent buying opportunity on the stock most levered to the rapidly growing U.S. rooftop market. Additionally, co's cost reductions and scale should strengthen its position in the�
1/1/2015
guest Baird upgraded from neutral to outperform and raised target from 61 to 71. This is for memory let me grab link details might be slightly off.
SolarCity Corp Upgraded to Outperform at Robert W. Baird (SCTY)
edit, Winfield beat me to it�
1/1/2015
guest Benzinga - Actionable Trading Ideas, Real Time News, Financial Insight
Goldman Sachs analyst Brian Lee upgrades SolarCity and others on macro factors and an expected production beat for Q2. Very exciting.�
1/1/2015
guest As of 6/30, short interest was 22.8 M shares or 23% of outstanding. Days to cover was at a staggering 11.7.
So between the Vivint acquisition and recent analyst upgrades, shorts are running a serious risk of a short squeeze. This could get interesting.�
1/1/2015
guest I read Massachusetts is looking strong to raise its solar cap in a unnanimous state senate committee vote.Also, Nevada is also looking to raising its cap until they make a decision on a new policy by the end of December.Both Nevada and Mass are key growth states right now. Last night likely cap raise news bode well for Solarcity.My estimation is they will do very well on bookings again, q2 report next Wednesday. I also feel they will beat install guidance. I'm also looking for a surprise amount of capital raised from solar bonds as well. My only question mark is revenue. Not sure about the accuracy of the Solarcity now website, but it did show them hitting above 6GW for the entire last week of q2. Rough indicator revenue potential better then some expected.�
1/1/2015
guest Nice info on state caps. Short run this is the game utilities can play. Longer term, Powerwalls blast a hole through this barrier.
It's interesting that SunPower and SunEdison are down today inspite of improving macro conditions. I think regulatory risk particularly around net metering is larger for installer that do not have an affordable battery supply chain. I think the backing of Tesla Energy is worth quite alot for SolarCity as it mitigates policy risk.�
1/1/2015
guest
I think it's difficult for investors/analysts to project Solarcity numbers because of the regulatory changes currently happening country wide. Hard to predict when the regulatory goal posts keep moving. Therefore, in my opinion, current stock price reflects more worst case policy outcomes then favorable/best case. So, I think, more then anything, policy news will move Solarcity in either direction decidedly, more so then any company news(at least domestically, international news would move the needle as well as 2016 guidance).
I feel there not much debate on Solarcity growth momentum, but the policy constraints on that growth velocity are still unknown. More policies become clear and framed in time, the more likely Solarcity will reflect an appropriate high growth valuation.
adding to my back-of-the-envelope estimates in previous post, Solarcity should hit $3bln+ on retained value and over $7.1bln on total contracts which might translate to a new base stock price of at least $60 post q2 conference call. It would have to be a really rough political/regulatory outcome in the coming month or two to drop the price from the 60s being baseline soon.�
1/1/2015
guest SolarCity Corp (SCTY) Stock Upgraded To Outperform By Baird
baird estimates 1.3GW - 1.5GW for 2016 guidance. This to me says they see growth slowing down by 50%-70%. Solarcity has been nearly growing 100% compounded for years now, so would be a significant growth slow down if what they predict is correct. Lyndon has indicated Solarcity could grow at current near 100% rates for "at least a few more years" so 2016 could be a significant catalyst if they decide to give it out 1.6GW or higher guidance next Wednesday. My feeling now is we won't see 2016 guidance until q4 conference call next February. It would be a pleasant surprise if they did it sooner though.�
1/1/2015
guest Foghat, I think you may be reading more pessimism into Baird's estimates than necessary. They have raise their expected guidance from 1300MW to 1500MW. That is, 1500 MW is their new estimate. Moreover, SolarCity's guidance for 2015 is 920 to 1000 MW. In Q1, they deployed 153MW, and Baird is filling out the lower guidance to 180, 262, 325 for Q2 to Q4, respectively. Add it up, and you get 920 MW. So Baird is confident that guidance will be met and new guidance will be 1500MW for 2016, a 63% increase. I'd also point out that 503MW were deployed, so 920 MW guidance for 2015 represents an 83% increase. Of course, SolarCity could beat this and deploy 950 to 1000 MW this year.
To get 1 million customers by mid-2018 requires an annualized growth rate of 60%. So I think Baird may be basing the 63% increase in minimum guidance on that, i.e., 920�1.6=1472. Basically, Baird could be mapping out minimal guidance to get to the million customer goal. I might point out that this implies minimum guidance of 2355 MW in 2017 and 3768 MW in 2018. This is a cumulative 5 GW by mid-2018. I think they'll do much better than that.�
1/1/2015
guest Peak Utility Generation
These data tell an interesting story about how the generation mix has changed over the last 12 months. So fossil and nuclear lost 10.58 GW while renewables gained 10.33 GW, nearly a zero sum game, or is it? (See FERC: Legal Resources - FERC Staff Reports & Papers �Energy Infrastructure� reports.)
US Total Installed Operating Generating Capacity (GW)
The FERC solar numbers do not include distributed solar. According to this source (U.S. Solar Market Insight | SEIA), total installed solar in US Q1 2015 was 21.3 GW, but FERC reports 12.12 GW at this same point in time. Non-utility solar then is nearly half the total solar in the US.
Source
2014/6
2014/12
2015/6
2014/12 - 2014/6
2015/6 - 2014/12
2015/6 - 2014/6
Annual Chg %
Coal
329.51
326.60
311.66
-2.91
-14.94
-17.85
-5.4%
Natural Gas
486.21
492.97
495.45
6.76
2.48
9.24
1.9%
Nuclear
107.41
106.87
106.89
-0.54
0.02
-0.52
-0.5%
Oil
46.42
46.07
44.97
-0.35
-1.10
-1.45
-3.1%
Water
99.64
98.39
100.06
-1.25
1.67
0.42
0.4%
Wind
61.45
64.77
67.82
3.32
3.05
6.37
10.4%
Biomass
16.05
16.10
16.31
0.05
0.21
0.26
1.6%
Geothermal Steam
3.87
3.87
3.91
0.00
0.04
0.04
1.0%
Solar
9.25
11.17
12.49
1.92
1.32
3.24
35.0%
Waste Heat
1.13
1.13
1.11
0.00
-0.02
-0.02
-1.8%
Other
0.80
0.81
0.77
0.01
-0.04
-0.03
-3.8%
Total
1161.72
1168.76
1161.44
7.04
-7.32
-0.28
0.0%
So accounting for non-utility solar, we may well be reaching over capacity. The FERC total declined 7.32 GW in the first six month of this year. This may be stronger evidence of a glut. Non-utility solar installations were about 2.1 GW in 2014, and this could grow to about 3 GW in 2015. *The utility total capacity hit a peak 2015/2 at 1173.35 GW and has rapidly shed 12 GW in the last 4 months. Is this the beginning of a long decline or just a hiccup along the way? I suspect that with non-utility installing an extra 3 GW this year and doubling every couple of years, this may well be the beginning of a long descent.�
1/1/2015
guest consumption in the US (only) in --> terawatt hours of Solar and Wind over the last 4 years (note consumption doubles every year)Note 2011 - 2014 wind is up 50%)
2011 2012 2013 2014 1.8 4.4 9.1 18.5 121.4 142.2 169.5 183.6 �
1/1/2015
guest The FERC data is only measuring utility installed capacity. Utility solar is definitely slowing its rate of growth.SEIA data bears this out, meanwhile the growth rate of residential is strong. This support my contention that distributed solar will ultimately surpass utility storage. The utilities are running headlong into a glut of generating capacity. Without batteries they need to stabilize the grid with gas peaking capacity. So solar just intensifies this need. Grid batteries will give utilities some relief but they will still be saddled with overcapacity. Assets are becoming stranded.�
1/1/2015
guest Total "electricity generated" from the EIA -- and I don't know for sure whether this includes distributed solar, but I think it doesn't -- is about the same as it was back in 2005. It's important to recognize how *weird* that is -- electricity generation and usage was growing every year for about a century.
If the EIA numbers are also missing distributed solar, this accounts for part of that puzzle. The actual increase in electricity generation is distributed, and as a result it isn't showing up in the stats.
Depends what you mean by a glut. I think the natural effect of this will be accelerated retirement of coal-burning plants, which are already being retired quite quickly, and which have mercury regulations, CO2 regulations, and general public opposition gunning for them. The merit order effect means that the solar (which is still being installed) gets used, while the coal shuts down. There will probably be some nukes shut down too.
So in some sense it's a glut on the electricity market, but I don't think it's going to touch solar or wind deployment, which are going to continue accelerating.
The next major hurdle for solar deployment overall comes when the daytime market is saturated. This still won't stop rooftop solar deployment until the utility companies change their rates to make daytime electricity cheaper than nighttime electricity. Then we have to carefully watch the deployment of batteries to figure out at what rate they will displace nighttime generation.
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Definitely? I'd like to see evidence. It still seems to be doubling every year...
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They are NOT comparable to CDs precisely because of the default risk. Which SolarCity has not adequately managed to explain.
- - - Updated - - -
Nobody's disputing that. (At least nobody here.) The question relates to the financial arrangements. Houses are here to stay, and so are easements, but certain types of easements will sink the value of your house.�
1/1/2015
guest Solarcity's Gigafactory, some perspective. China hoping for 200GW installed by 2020. China eyes further PV target increase in 13th five-year plan: pv-magazine. China will install about 18GW this year (2015), must increase about 20%/year to reach 2020 goal. SCTY factory to start producing 1GW next year. That's a very small amount. There must be many gigafactories already producing for China to install so fast! What makes Solarcity's a big deal at all?�
1/1/2015
guest Solarcity doesn't need to sell their production to anyone else. They expect to install 1gw this year. So the vertical integration will give them better margins.�
1/1/2015
guest 
Solar Market Insight Report 2015 Q1 | SEIA
The SEIA reports thar in Q1 2015 residential solar installations are up 76% y/y while non-residential installations are down 3%. Specifically utility installations for Q1 2015 were lower than for any of the preceding 4 quarters.
So is looks like growth in utility solar may be flattening out at around 3 GW per year. It may take another year to confirm that growth is no longer exponential but merely linear. Logistic growth models anticipating exponential growth in the early adoption phase followed by declining growth rates as cumulative reaches the longterm level. Between the exponential and sublinear phases as a roughly linear phase. This linear phase typical happens when cumulative capacity is about half the longterm capacity. Thus, we could look at the current 12.5 GW utility solar capacity and speculate that the longterm capacity might only be 25 GW. Short of changes in technology and policy, this is what one may expect. However, I think that development with grid batteries could move the grid to much greater utility solar penetration. The spoiler, however, will be the ability of distributed solar to capture market share in the mean time.
So for now, investors in solar companies that primarily serve utilities, for example, FirstSolar which I own, need to consider the implications of US utility solar installation capping at around 3 GW per year and declining longer term. Meanwhile, residential solar continues to grow exponentially at a rates in excess of 35%.�
1/1/2015
guest What makes SolarCity a big deal is they believe they will be able to produce higher efficiency panels at a cheaper price than anyone else in the market. They then install these panels with a 30 to 50 percent gross margin. If they are right on the cost of current gigafactory then they will in short order begin production of a 5 gigawatt plant.
they are also nearly doubling installations and plan to do so for the next 3 to 4 years with significant growth after that.�
1/1/2015
guest And just to put a fine point on the last paragraph, in 2017 they'll need 3 to 4 GW while the Riverbend will only produce about 1 GW. So SolarCity will still need massive supply from China. So Riverbend reduces but does not eliminate supplier risk. It should give them a little better leverage with suppliers.�
1/1/2015
guest Looking to be a strong few days into Solarcity earnings:
--Hawaii looking at co-op structure and denying Florida's Duke energy aqusition.
--Nevada raising solar cap in short term.
--Massachusetts senate unanimous vote to raise solar cap
--warren buffets PURPA changes rejected
--Hillary Clinton states she wants 500 million new roof top solar panels on American roofs by the end of her first term and extend and strengthen federal tax credit among other pro DG policies.
Add this context to a record breaking earnings report and things are looking good post earnings as well...�
1/1/2015
guest Here is your answer.
Heres Why SolarCity Plans to Build a 1GW Solar Factory : Greentech Media�
1/1/2015
guest DTE (Michigan utility) implemented an abnormally large increase to electricity rates this year of ~7-8%, effective July 1st, depending on the plan and usage. Of importance is the average cost per kWh (without the flat fees) went from a range of $0.12-$0.13 to $0.13-$0.14 on the base plan causing it to rise above Solar City's average.�
1/1/2015
guest I love it. They are virtually inviting the likes of SolarCity to come in and take market share. Have they never seen a vampire movie? You never invite a vampire into your house.
BTW, SolarCity is able to enter a market where retail utility rates are 16 c/kWh with a $2.96 cost per Watt. To enter MI with 14 c/kWh, SolarCity needs only reduce their cost to $2.58/W. SolarCity will get quite close to this in 2015. Watch for it this ER. So SolarCity very well could enter MI within 12 months. They may want to get a jump on it, though, to take advantage of the sting of a 7% rate hike. They actually could start marketing now to build up an order book prior to rolling out installation capacity. A huge chunk of their cost per Watt is marketing and sales. So if they can tap into the ratepayer frustration with such a big hike, they can realize a low acquisition cost per Watt. This would make it economical to enter sooner. Their marketing department needs to pounce on this.�
1/1/2015
guest I'd love to see ITC and other pro DG issue become an issue in the presidential election. I think raising awareness will really start to change perspective on solar regardless one's political orientation. It's hard to argue with cheaper, cleaner and more open to individual choice. The problem for the Republican candidate will be a campaign paid for by fossil fuel interests. So he'll need to be about a free market for DG to attract free market conservative votes while not pissing off the Koch brothers. That would take some savvy politicking. Clinton, however, can exploit the consumer choice freer market angle and appeal across the spectrum. She can easily debate her opponent on free market principles applied to retail energy. So her opponent will be forced to choose between defending a politically constructed monopolistic market or come out with a pro DG stance on principle. The latter would be a huge win for renewable energy regardless the outcome of the election. So I really want us to have this debate.�
1/1/2015
guest +1 meeeeeeeeee too! I have high hopes that this will happen, especially with Bernie Sanders out there. But then I wonder if the media will even pick up on the subject because of how they suck at everything.
Edit:
This just popped up on my FB feed:
![[?IMG]](https://scontent.xx.fbcdn.net/hphotos-xpf1/v/t1.0-9/11059916_873367072718298_5236429870077953044_n.jpg?oh=a044e94ca78845508333bd92a77d8c7b&oe=565C9771)
�
1/1/2015
guest I'm glad that Sanders is raising the issue, but I think he needs to work on messaging. I think the language of "moral responsibility" will only speak to a small segment of voters. It also perpetuates the false dichotomy that btween doing what's best for the environment and what's best for the economy. In my view their is no economic downside to moving ahead full speed with renewable energy. So I would prefer a tagine like this, "We have the opportunity to transform our energy systems to improve our economy and create a sustainable future.�
1/1/2015
guest Viking M. Services: CGEP: Solar Power, Net Metering and the Challenges to the Traditional Utility Model
A representative of investor owned utilties says any energy efficiency a customer (you and I) does cost shifts to all other rate payers... So if you put in led lights, you're now mooching off non led customers, same for if you put solar on your roof, etc... The utilties would add a charge on anything we do to lower our own electricity bills.What happens when everyone has led and solar? Who are these mythical customers that will be cost shifted onto?The investor owned utilities position is all smoke and mirrors of this is how they think they will sustain profits in the new energy economy future.Real politics here... Hillary has more campaign funds then pretty much all candidates out there all ready. If she puts out an aggressive renewable plan with actual numbers, she will either push the rest to go aggressive on renewable agenda(good) or she will win and have to follow through on her now public 500 million panel goal(also good). With all that campaign finance, she can hire the right people to get things rolling on the ITC as well as various state stake holders for DG policy country wide. Bernie is a little too abstract right now, he does appeal to emotion which will look good in the polls right now, but will be challenged on substance as we get closer to the election ballots.�
1/1/2015
guest Wow, I'm feeling guilty already. I should go out to a store an buy some incandescent light bulbs so that my neighbors don't have to pay more for electricity.
Or how about utilities let solar owners sell power to their neighbors and we can all get out of the net metering business?
I sure hope Clinton can call the industry on all this nonsense. It is wrong to hold ratepayers hostage through these antiquated monopoly structures.�
1/1/2015
guest With state funding, 83 New York communities planning microgrids | Utility Dive
you think Solarcity might have a significant piece of these 83 new microgrids in NY?
Latest on the Electric Grid Revolution in California and New York - Microgrid Knowledge
here's a look at what Solarcity is going after in the new DG grid strucutre which will really be great for Solarcity investors when it happens...
also read on social media Lyndon rive likes Clinton's new renewable goal(you think?) He also said 33% of all power generation being renewable can be achieved before the estimated 2030 mark.�
1/1/2015
guest Your point is well taken jhm.
I'm apparently in that small segment of voters that this resonates with - my immediate reaction was "finally - somebody I can vote FOR".
It saddens me that I've been voting for nearly 30 years, and at least in the big national elections, I still don't feel like I've voted FOR somebody yet. Plenty of people to vote against, with a more typical choice of wanting to vote against all of the options.
The better point is something Elon has proven fantastic at making happen - align our economic interests with fun and responsibility; it's easy to be a steward of the planet and its resources when its also profitable and fun.�
1/1/2015
guest Adiggs, I think we're on the same page. I am very glad that Sanders is in the race. Whether he wins or not, I think the country will be better off for his forthright presence in the race. We should also not lose sight that government incentives over decades have helped clean technologies evolve to the point where at least wind, solar and batteries can deliver energy below the cost of fossil fuels. Without this government engagement in response to the moral call to such, I doubt we would be at the economic tipping point we presently enjoy. I am specifically grateful to the German government for creating a big enough market for solar that the industry has advanced down the experience to cost competitive prices. So the moral responsibility motivation has gotten us to a place where market forces can kick in in a big way.
What troubles me still, however, is the distortion that pits economics against environmental concerns. This is a false dichotomy that people on both extremes easily fall into, and both camps can feel pretty self-righteous about it. But then comes innovators and entrepreneurs who say, wait a minute, we can find better ways. The internal combustion engine has always been terribly inefficient and theoretically bound to be so, and sunlight has always yielded about 1 kW per m2. But only justification for ICE for the last century is that we just didn't know better, and the only reason why solar is just now cost competitive is that we didn't know how to raise efficiency and drive down cost any faster. So we were stuck in ignorance. Those who oppose clean technologies are essentessentially vested in old technologies and prefer exploiting ignorance to preserve economic order. It is willful ignorance. The best thing for the economy is to embrace the challenges of preserving the environment and creating other social goods and to use that to develop new, better and ultimately more sustainable ways to be at home in this planet. Innovation properly guided will improve both the economy and the health of the planet. Imagine how much faster and more equitable the global economy can grow with distributed solar and microgrids. Energy deprived populations will have opportunities that were never econocally feasible in the age of fossil fuel. Billionaire controlled the extraction of energy, and the poorest of the planet went without. But the sun shines on the poor and the wealthy alike. Over a billion people live on less than $1 per day. Energy enhances the productivity of labor. So the spread of solar will raise global wages everywhere, especially in energy deprived regions. What happens when the poorest billion see incomes grow 10% per year? Economic opportunities emerge all over the planet. But if we can grow things like solar, batteries and electric vehicles at 50% per year, might that also spill over to the poorest billion souls on the planet? Maybe we could see that $1 per day double every two years. I think guided by moral intelligence we can do this. But in the age of oil such things were not conceivable. Centralized energy has alway served to keep the powerful in control, but distributed technology opens up new avenues for economic and political empowerment. We've begun to see the democratizing power of the internet, which breaks up centralized control of communications. I believe we will also see solar and batteries unleash the democratization of energy. So is this good for the economy? Well, if your idea of economy is keeping billionaires in power, then it's not good at all. But if your idea of economy is that people everywhere can thrive, it's a very good thing. Moreover, halting global warming and pollution is very important so people everywhere can thrive. In short, caring for the environment is categorically good for the economy. The moral responsibility is not merely to the environment, but to one another, especially the poorest of the planet.�
1/1/2015
guest $400mln Solarcity ABS soon? Am I reading this correctly?
Kroll Bond Rating Agency Assigns Preliminary Ratings to SolarCity LMC Series IV, LLC, Series 2015-1 | EON: Enhanced Online News�
1/1/2015
guest Very nice, If you use fake sign up info you can get a more detailed report.
Looks like there is around 100million of A notes, with an expected A rating and around 20 million of B notes with an expected BBB rating, Pretty sweet to have an investment grade rating.�
1/1/2015
guest Small to midsized business segment
SolarCity launches plan to bring solar power to small and midsize firms - LA Times
This is very exciting. SolarCity has a new initiative to target businesses with 30 kW to 500 kW installations in southern California. This is an undertapped segment. SolarCity is able to leverage Zep hardware for low cost installation. Moreover, they will bring their financial capabilities to bear by offering lease financing. Note than many smaller businesses struggle to get loans for things essential to their business. Lease financing avoids increasing debt ratios. I also suspect that storage will be quite attractive in this segment. For example, a retail business can lose substantial sales in a power outage, or a business that only operates on weekdays may want to store week end power.
I think this excellent fit for SolarCity.�
1/1/2015
guest I was in an ice cream shop a few weeks ago noticing all the ice cream quarts sweating in the refrigerators learning the power was out for over an hour. You better believe the owners were scrambling to get the utility to get power back up as fast as possible. As most of the customers were walking away they were swearing up and down they were going to invest in a back up generator. Now with this pace financing, Solarcity and tesla energy might be getting a call very soon.
my only reservation with small business and 20 year leases is the high turn over rate. Many small business go out of business or move locations over 20 year period. I'm assuming Solarcity understands this and probably has plans for lease transfers and other continuity plans when new leasees take over at some point. Maybe they have a plan to work with building owners then the business themselves. Also, small business community solar seems like a winner program as well.�
1/1/2015
guest SolarCity Introduces Nations Most Affordable Solar Power Option for Small and Medium Businesses - NASDAQ.com
The PR release gives more details, including that this is only for owner-occupied businesses with flat roofs. I can understand starting here, but I hope they can develop an approach for business that lease their property.
Think of a typical strip mall. Could SolarCity set up a deal with the building owner such that tenant businesses use the electricity and the building owner is duly compensated. Basically a microgrid would be deployed, but I am not sure what utility laws would run afoul. If a share of the solar power were included within the property lease, perhaps the building owner could simply charge higher rent. Community solar is yet another option.�
1/1/2015
guest Solarcity has a .56%(one half a percentage point) 180 day delinquency rate. Less then 1% don't pay their Solarcity bill. That's pretty incredible. Although 50% of all installs were last year, that's still mythical delinquency rates for systems dating back 9 years now.http://www.structuredfinancenews.com/news/abs/solarcitys-latest-securitization-tackles-tax-credit-in-new-way-257472-1.html�
1/1/2015
guest getting pretty close to shareholder letter / earnings call, It feels nice having a little momentum going into earrings. First time in a few earnings I dont hold any short term options so we should double the share price this week lol
http://files.shareholder.com/downloads/AMDA-14LQRE/38984614x7889658x841998/1F20DCE1-B37D-445A-8E2A-C955C9234D6A/SolarCity_2Q15_Earnings_Presentation_FINAL.pdf
Looks like they knocked it out the park. added 44k new customers ! wow.
40 percent of the float is short! What a good time to be long (sorry electricity)�
1/1/2015
guest Huh, that's odd. Clicked on the link for today's webcast (not yet started) and I'm hearing the ER for Sketchers?�
1/1/2015
guest Hell Yes! That's what I'm talking about. Thanks for the link.�
1/1/2015
guest Wow, 395MWs in bookings this quarter?!? That's more booked this quarter then Vivint has installed in total... Sunedison just bought them for $2.2bln! Solarcity booked that in a quarter. Major increase in Commercial bookings. Amazing growth and amazing demand.
$7.7bln in total contracts... Over $3bln in net retained value...
Fantastic quarter.�
1/1/2015
guest The short float is nearly 40% that's crazy..�
1/1/2015
guest Making great progress toward the million customer goal. 262,500 now. Need only grow 56% per year for next 3 years to reach goal.�
1/1/2015
guest They are growing at 86% compounded growth right now, so we may see a 1.8GW guidance number for 2016 annual guidance. Lyndon Rive said they need to hit an annual 1.5GW per year beyond 2015 to reach 1 million customers safely by mid 2018. With current 86% compounded growth rates (as well as Lyndon's hint that they expect 2016 guidance to exceed 60% industry wide growth rates), I also believe they will increase the 1 million customer guidance for mid 2018. Thus, I conjecture we'll see 2016 guidance and revised 2018 guidance together come either q3 report or q4 report.
also, I've seen a media report describing Solarcity hitting 10,000 customers in three major Bay Area towns/cities. I'm wondering if 10,000 is a trigger number for aggregation? I mention this because solar city's highest concentration of tesla energy storage is in PG&E territory in the Bay Area. If orders/installs look good come q3 report in early November, could we start to see aggregation start as early as q1/q2 2016? I think California aggregation returns are better then net metering returns, so could this mean another cent or two drop in price per kWh (solarcity blended retail price)? If so we could see 10s of billions more in market value open up for Solarcity. Powerwall numbers and guidance come November could be significant indicators to how soon this aggregation will occur.�
1/1/2015
guest By the end of this year they will either need to revise their goal up or tell their installation team teams to slow down!
When they end the year with over 350k customers a one million goal by mid 2018 will look foolish or bearish coming from management.
I stick by my mid year 2017 goal as being more appropriate.
- - - Updated - - -
That is odd and really funny�
1/1/2015
guest Nice to see SCTY coming back into the green today after this morning's volatility. Higher than average trading, too.�
1/1/2015
guest From the latest shareholder presentation deck
"Economic Value Creation of $196M for equity shareholders in Q2, or $2.02 per basic share"
I always wondered if this can be interpreted as conventional Earnings. Just to be sure even though they are based on future cash-flows, they are discounted back.
IF we were to interpret it as earnings $2/qrtr is $8/year meaning SCTY is trading at a P/E of 7.5!
Even ignoring the growth entirely, if we were to assume that SCTY will generate that sort of share-holder value every quarter pretty much forever, just taking the P/E to S&P 500's average of 18.5 would put the stock at $148.
The end result is not very different from various other valuation models that analysts/us have been using. This is just another way of looking at it.
What do you guys say?�
1/1/2015
guest Value creation is a net present value calculation on the value of solar deployed this quarter. It does not relate directly to earning because there are all sorts of accounting rules around when exactly revenue is to be recognized. So much of the NPV is discounting of cash flow to be recognized well in the future. So it represents the longterm value being added to SolarCity's book of business. So they are creating longterm value for shareholders, only a small portion of that is presently recognized in earnings. Earnings lag the value being created; thus, you can simultaneously be losing money and creating value.
My own view is that net retained value is an apt value metric for SolarCity. It would be reasonable for the stock price to trade at a multiple of net retained value, but I'm not sure the market agrees on this point. What is curious is that if SolarCity were to ever spin off a yieldco, the primary value transfered would be this net retained value. That is what the yieldco would own, and it would pay a dividend on the contracted payment streams. Thus, yieldco investors would be inclined to value that security on the basis of dividends and sustainability of held value. This would potentially attract an entirely different class of investors oriented toward dividends rather than growth. So for now, I like to think of net retained value as a proxy for the value of a yieldco that SolarCity might one day spin off. Also keep in mind that when SunEdison acquired Vivint Solar, part of that transaction was to strip off the solar financing contracts and sell that book of business to SunEdison's yieldco. So we now have an example of how such an assets might be valued by an acquiring party. If SolarCity market cap were to ever drop well below its net retained value, it theoretically could be acquired by some other entity and have its book of business sold to a yieldco for a profit. I don't see this ever happening to SolarCity, but it illustrates quite clearly why the market cap of SolarCity should always trade above net retained value (properly valued).
So it is important to see that quarter after quarter, SolarCity is actually adding value to net retained value.�
1/1/2015
guest Thinking a little bit more about value creation, I think I may have an approach to valuing SolarCity. The idea is to think of the Development Company and Power Company as two separate entities. Specifically the DevCo markets and installs solar systems and sells the financing contracts to the PowerCo, which holds these assets as a yieldco. The DevCo sells these assets to the PowerCo at a fixed discount to net retained value. Thus, the value of SolarCity is the sum of the values of DevCo and the PowerCo.
First, the value of the PowerCo is $3B.
Second, the DevCo is able to create about $800M in incremental net retained value over the next 4 quarters. For simplicity, suppose it is sold to the PowerCo for $800M. Moreover, let's suppose that the DevCo can be expected to grow at 15% per year. (This is extremely conservative given track history.) SolarCity has a beta of about 3. So under CAPM theory, the discount rate should be 20% = 2% + 3�6%. (I don't really like this theory, but I'm trying to put forward a conventional argument.) So the Gordon growth model for the DevCo puts the value at Earnings / (discount - growth) = $800M/(.20 - .15) = $16B.
Thus, the combined value for SolarCity is $19B. This works out to $196 per share. Clearly, the market is not valuing SolarCity in this manner. Current, market cap is just $5.77B. But what is interesting here is that if SolarCity were actually to spin off PowerCo as a yeildco, the market would inclined to value DevCo and PowerCo along these lines. Upto this point, I have not been interested in SolarCity spinning off a yeildco--I actually like the combined company--but in the current situation SolarCity is severely undervalue. A yeildco could rectify this. Essentially, this is just a trick of accounting. With a separate yeildco, the $196M in value creation from last quarter gets fully recognized as earnings when sold to the yieldco. If SolarCity were actually posting this as quarterly earnings, the stock would not be stuck in the $50s.�
1/1/2015
guest I follow the reasoning in your post JHM and think it makes sense, but I am curious about your reasoning regarding the discount rates used here?
Thanks�
1/1/2015
guest This is a fairly standard set up. Beta measures the correlation with the market as a whole for which the market expects about an 8% return. The correspding risk free rate of return is about 2%. So that 8% breaks down to 2% for risk free return and a 6% premium for market risk. Now SolarCity has a beta of 3, so it represents 3 times as much market risk as the market as a whole. Thus, for SolarCity under this theory and efficient pricing, the risk adjusted return should be 2% + 3 � 6% =20%.
I am not a fan of this approach. It imies that you should be able to predict the growth of stocks based on beta, but this does not hold up well in statistical practice. Beta may be a reasonable way to measure exposure to market risk, but it is a lousy way to predict growth. And frankly, if it lacks this predictive validity, I think it is unfit for discounting cash flows for valuing stock. This is why I would prefer analysts to calibrate their DCF models to actual market prices for the stock, than to use a weak theory to tell the market how it ought to be discounting cash flows for a given stock. This is the fundamental error of fundamental analysis.
Even so, I use this conventional nonsense here to get a sense of how a conventional stock analyst might treat a separate DevCo.�
1/1/2015
guest Doesn't change the fact that 2/3 of their fanciful retained value calculation occurs in PPA years 20 to 30, AFTER the contract has expired. Seeking Alpha reports solarcity has change in PPA terms to "Auto Renewal", and says:
"Note that the auto renewal clause is likely intended for busy customers who may forget to cancel or seniors and other sensitive groups who may not comprehend contractual obligations. This "snooze you lose" clause sticks the hapless customers with an additional year on the contract term if they do not cancel the contract at least 30 days prior to termination."
http://seekingalpha.com/article/3368805-solarcity-earnings-will-the-company-disclosures-get-any-better-this-quarter
�
1/1/2015
guest Ok that article was the pits. Here is the reality from that same article:
"If you are in compliance with your PPA, you have the option to renew your PPA for up to ten (10) years in two (2) five (5) year renewal periods. We will send you renewal forms three (3) months prior to the expiration of the Term, which forms shall set forth the new Monthly Payments due under the renewal PPA, based on our assessment of the then current fair market value of the System. If you want to renew, complete the renewal forms and return them to us at least one (1) month prior to the end of the PPA."
So they will send you everything and if you make no action then you get auto renewed for a year.
"If you don't send us anything in writing after we send you the renewal forms, then this PPA shall renew for an additional one (1) year term at ten percent (10%) less than the then-current average rate charged by your local utility and shall continue to renew for one (1) year terms at the same rate as your first renewal until (NYSE:I) you give us notice at least thirty (30) days prior to a renewal term that you do not wish to renew; or (ii) we send you a notice terminating the PPA."
What is SolarCity supposed to do if you don't cancel or renew??�
1/1/2015
guest I think a member of this site is inferring that if you don't cancel or renew then SCTY should give them free electricity from the goodness of their hearts, or perhaps come to the person's house and hold their hand while the person signs the renewal form?�
1/1/2015
guest To be fair to electracity's point stripped its attribution of malice to SolarCity, the rates offered at renewal will not be the fully escalated rates, rather they will be low enough to compete with the options of installing a new system or returning to the grid. Thus, to fairly value this optionality, one needs to make assumptions about the price of solar in twenty years. Clearly these renewal terms will take a haircut, but they do not lose value completely. Additionally, SolarCity avoids this optionality with its MyPower loan and knows that is creating more retained value pushing this option. Moreover, over the next 20 years SolarCity has ample opportunity to refinance lease customers onto loans and other plans that lock in more of this renewal value. For these reasons, I am not at all worried about any haircut in renewal terms. It will not be material in 20 years, so I am not fretting about it today.�
1/1/2015
guest From page 10 from the Q2 2015 investor presentation, we see that net retained value stands at $3057M, while the renewal term contributes $941M. So the hair cut I envision would be in the neighborhood of $300M to $600M off this $941M renewal value. Thus, we are talking about a 10% to 20% off the $3B net retained value.
Applying this haircut to the market cap valuation above. Takes $19B down to $15B to $17B, and SolarCity at $5.77B is still sorely undervalued. Even so, much of the exposure to renewal value haircuts will be reduced going forward as MyPower loans become the predominant financing option customers choose. So SolarCity at $17B to $19B market cap still stands in my thinking. And that puts a conservative (15% growth rate) value at $180 per share.�
1/1/2015
guest This is complete non-sense.
941Mil out of 3,057Mil comes from renewal portion. That's less than 1/3rd.
It's good to have a bear in this thread but not someone who makes sh!t up.�
1/1/2015
guest The great thing about the difference between the value of the stock with 90 percent renewals and 0 renewals is you only have to wait one quarter for the numbers to catch up. Next quarter their net retained value without renewals will be about the same as the net retained value with renewals this quarter.
I hope the market catches on to the value laid out in this thread, then my 140 Jan 2017 leaps will be worth something !�
1/1/2015
guest Where the 2/3 value came from was asked and answered in the first quarter earning call.
You are forgetting that SCTY has depreciation expense on the equipment that goes against PPA revenue in the early years. It the later years the install is fully depreciated, and it is PPA revenue with only an occasional repair expense reducing profits. But even with this structure they had to come up with an absurd PPA renewal percentage at twenty years to claim their attractive retained earnings numbers. Smoke and mirrors.
The stock would be at $150 today if SCTY was really creating the value they claim. They do have a nice revenue stream created by people signing too expensive PPA's with too big escalators, which is what gets the stock to 50-60.
Investors impressed with large gross revenue numbers simply need to buy gas stations. You will have huge sales numbers. You won't make any money, of course. But the revenue part of the income statement will look impressive.�
1/1/2015
guest Re-listen to the audio yourself. It's starting at 35:21min mark.
Peter explicitly said "So roughly two third contract and aa, aa, a third renewal".
I listened like 5 times today. Because this is really core to the entire investment thesis.
When Brad Buss said "Correct", multiple people were talking at the same time. Someone said "2/3rd 20years" to which Brad said Correct. He wasn't saying "correct" to Tyler's misconstrued assumption.
I checked two transcripts. Both of them have either incorrect transcription or confusing gibberish. Maybe you are confused by that.
Listen to the audio for yourself.
With this correction, now we all know that electracity too believes SCTY should be trading $150 today!
Load up on that electracity. Maybe it will help...�
1/1/2015
guest It's much better to go with published sources like the investor presentation than CC transcripts. The big numbers are $941M in renewal value out of $3057M net. Also the gross retained value on leases is $1.89/W and of this $0.65/W revenue (my calculation) comes in the renewal term. So the small story about 1/3 of the retained value is in the renewal. This is also confirmed by the big numbers on page 10, $2381M for the lease energy contracts plus $941M for the renewal. So just looking at leases, renewal value is just 28% of the $3322M gross retained value for leases. So whether you look at net over the whole book, $3057M or gross over just leases, $3322M, renewal is less than a third.
As I pointed out in a previous post, I think it reasonable to give the renewal value a haircut, owing to the options imbedded in the contract. But even accounting for the optionality, customer will be willing to pay a fair value rate upto the savings of waiting 10 years to install an even lower cost system. This is a fairly complex financial idea, but the idea is that if solar system continue to decline in price, it is rational to postpone a new installation if the cost of energy you buy in the interim is less than the savings you anticipate by delaying. So SolarCity can quote a renewal rate that is low enough that the customer prefers to renew so that can replace 5 or 10 years latter at a lower cost. The is the option value of renewal. Basically, the value of the customer's payment stream over the first 20 years is $2.49/W and the renewal at fully escalated rates is an extra $0.65/W. Assuming that new residential systems continue to decline 5% per year, I estimate that the value of delaying a new installation by 10 years is $0.20/W present value. I view this as a lower bound on the value of the renewal. It is worth between $0.20 and $0.65 per Watt. Remember that SolarCity also creates value if the customer decides to allow them to install a new system. So SolarCity will want to price the renewal rate only so low that reinstalling is also an attractive option to the customer. So maybe they don't go all the way down to $0.20/W, but just $0.35/W. So the haircut need not be a full $0.45 out of $0.65, or 69%. A 30% to 60% haircut on renewal value seems reasonable to me. And that is what leads to a 10% to 20% haircut on net retained value of $3057.
I would also point out that the PPA lease does have an attractive levelized cost. For the first 20 years the customer makes a payment stream with present value $2.49/W for 26.33 kWh/W. That's a levelized cost of 9.5c/kWh. But if the customer renewal out to year 30 at fully escalated rates, 38.53 kWh/W at $3.14/W, for a levelized 8.1c/kWh. Should SolarCity price this at the $0.20/W value of postponing re-installation, then the levelized price is 7.0c/kWh. So the renewal term is quite advantageous to customers. It drops their levelized cost from 9.5 to something in range of 7.0 to 8.1 cents per kWh. This may seem counterintuitive since the customer is always paying 13 or more cents per kWh. However, the present value of these payments should be discounted to account for the benefit of financing. Properly discounting the customer is paying no more than 8.1c/kWh in present dollars, unless they opt not to renew. Moreover, should the customer ever opt to buy their way out of the PPA lease contract, they do so at the discounted value. Thus, a leasee may never need to pay more than 8.1c/kWh to buy their way out of the contract, and this levelized value declines as fewer years remain on the lease because the escalator, typical 2.2%, is much lower than the discount rate, 6%. So at any moment a lease customer might find they can get better than 6% financing, they are free to do so at less than 8.1c/kWh. For example, if refinancing a mortgage, the leaseholder may do well to buy the system and roll it into their new mortgage. This really is a pretty good solar financing product.�
1/1/2015
guest ... and this clearly means that the arguments presented earlier in this thread (and that one quoted study from some real-estate agent) that houses with leased solar would be worth less are plain wrong.�
1/1/2015
guest Jhm, thanks for the analysis. Just goes to show how undervalued Solarcity is right now.
they currently have a .0056 or .56% default rate and are operating at 4.3-4.5% "discount rate" right now. They are working much better then stated assumptions. Retained value is actually much better then $3.1bln... Not to mention no one is valuing the development company at all...
the policy uncertainty is really the significant weight on the stock price in my opinion. I guessing many investors just can't get a firm grasp on growth velocity past 2015.�
1/1/2015
guest Thanks. What do you mean by a 4.5% discount rate? Are you talking about weighted average cost of capital, basically the cost at which SolarCity borrows? The MyPower loan has an interest rate as low as 4.5%. So if SolarCity is able to borrow at say 4.0%, then they are in a position to earn net interest income on the 0.5% spread. This would be great, but is not necessary. Passing lower interest rates on to customers to accelerate their core business. Of course, lower WACC does make the cash flow a bit faster. This should already be accounted for in the net retained value, which nets out debt.�
1/1/2015
guest
I estimate discount rate on cash flows could be under 5% given the cheap capital locked in with each new ABS,etc, among other indicators. In the conference call, brad buss said there has only been a "handful" of people that have removed systems (out of over 200,000) over the past 9 years. Again, 99.46% have paid their bills on time over the course of 9 years. That's says a lot about how low the discount rate may turn out to be in reality. In the case of renewal at year 20... I feel if they don't renew, they may be more inclined to buy a new system from Solarcity, which ultimately is better then a 10 year renewal in my eyes. Currently, Solarcity is achieving the greatest all in cost within the industry as well as leading the way on fully integrated solar+storage solutions. They are also leading the way in solar finance among other areas of innovation and scale. Of all companies out there today, Solarcity has the highest likelihood of being among the best in class for consumers to choose from when making a solar energy purchase. in my opinion, renewal rates are likely to reflect the 90%-99% range then not.
looking at the numbers, it looks like tesla storage purchases are $1mln a quarter right now. I'm guessing they are still in pilot mode until they start sending orders for Powerwall to tesla. It's been over two months since Powerwall orders started up, so I'm assuming we should see a good jump in recorded purchases on the q3 report. As the press release stated, the will begin Powerwall installs in October, so looking forward to seeing this number. My thoughts are the aggregation capability is really going to a major catalyst when it starts up in California first and then in either Hawaii or NY.
Solar bonds are taking more time to gain traction. Only about $30mln long term bonds sold over the past 6 months, so ABS needs to really pick up the slack until bonds gain more of a track record.
It is amazing gross profits have nearly doubled year over year. You can really see that the substantial investment in sales and marketing is paying off. 400MW of bookings in one quarter should definitely make everyone think twice about how well Solarcity is doing amongst its competitors. Baird stated competitors are unable to find or hire, train, and integrate crews quick enough at multiples less then Solarcity's current installs, how are they going to catch up at 260 and 380MWs plus in just the next two quarters alone? If people are worried about competition they don't understand how significant scale and vertical integration are as competitive advantages.�
1/1/2015
guest Looking at the latest 10-Q, net interest expense for the quarter was $20.5M and total debt $1952M. So the average interest rate is about 4.2%.
4�20,497�1,952,037
=0.0420012531�
1/1/2015
guest Agree with all this! I also believe the Buffalo Factory impact is discounted to 0. If SCTY hits it out of the ballpark on this it will drive their cost per watt way lower than their 2017 target.
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From the Q2 shareholder letter
SolarCity - Events Presentations
Check it out everyone, The New(ish) CEO Brad Buss does a good job explaining the business.
"our Q2 2015
deployments are forecast to generate $196 million, or
$1.14 per watt in Economic Value Creation ($138 million
contracted and $58 million from estimate renewal) for
equity shareholders."
Clearly Your facts and mine are very different electracity.�
1/1/2015
guest Some of the difficulty with the $1.14/W of economic value added is that this is sensitive to seasonality in the cost per Watt and to choices about how much leverage to deploy. So for this first issue any extra penny in the cost per Watt is on less penny of value creation. The second issue is that incremental financing reduces net retained value. Some of the financing is needed for deploying MW that quarter, while other financing is to support expansion for future value creation. I feel that gross retained value may in fact be a better metric for quarterly value creation. Basically GRV gives SolarCity the bulk value which they can retain or use as collateral for financing the growth of the company.�
1/1/2015
guest Log In - The New York Times
bah paywall , google
Obama to Unveil Tougher Climate Plan With His Legacy in Mind
It appears Obama will unveil new climate action on Monday, Gooo ITC extention�
1/1/2015
guest SolarCity, Vivint Solar and Sunrun are the leaders in U.S. residential solar market, report says - Denver Business Journal
Of the 1.2 GW of US residential solar installed last year, 72% was financed by leases and PPAs. Solar loans such as SolarCity's MyPower Loan are trending, and direct ownership may reach 54% by the end of the decade according to GTM Research.�
1/1/2015
guest "Elon Musk�s Most Impressive Company Isn�t Tesla or SpaceX. It�s SolarCity."
SolarCity: The company didnt invent the solar panel, but it invented something even more important.
The article doesn't quite make a strong enough case to support the title, in my opinion. Nevertheless it's a good read. Here is the best part:
"Tesla sells about 12,000 vehicles per quarter around the world. So far this year, SolarCity has been adding about 12,000 customers per month in the U.S." (italics mine)
This made me curious to see which firm is generating more shareholder value.
- Tesla sold 11,500 cars in Q2. With an assumed 15% operating margin (had the company not been investing in growth), it would translate to 172.5Mil shareholder value.
- SolarCity generated 196Mil shareholder value (in terms of retained value) in the same quarter.�
1/1/2015
guest No wonder Arizona utilities want to add more regulation on lease option providers in Arizona... Most of the DG industry are leases! The fact is loans/sales won't reach lease levels for at least a decade in my opinion. Most Americans don't want their credit lines being used for something other then a house or a car. Most Americans don't really get the benefit of the 30% tax credit since most Americans don't itemize that many expenses over a 5 year period to make it worthwhile. However, most Americans like to save money on electricity bill with no responsibility or financial investment. A lower monthly electric bill is the key and leases allow that to happen. Also, the 30% tax credit is actually utilized in the form of cheaper rate from lease option providers that allows them to pay less for electricity on day one.
Leases/ppa will dominate for a much longer time then many think just because that is the preference of the American consumer. Loans only make sense to the average American if they can completely utilize the 30% tax credit in year one, if not the loan costs more in day one monthly costs then lease does specifically relating to my power loan. This is just my opinion which has gained support since leasing only increased when all the "experts" said leases would start to drop in 2014 (which again was the complete opposite.)
Solar To Eat Costs of Net Metering if Utilities Cough Up Data | Jigar Shah | LinkedIn
Read this yesterday... Really frustrating to see the net metering issue get muddied by disingenuous and deceptive utitliy arguments. My opinion is the only way to shut this down is going ballistic with lawsuits on anti trust platform. Supreme Court needs to put an end to this anti American/anti capitalist activity. Enough is enough.
And you can see why some utilities are very frightened when they read information like this every day:
Report: IPPs, DG, and net metering to alter generation landscape in coming years - Power Engineering
Lyndon Rive said there have been 8 independent studies commisioned on cost/benefit of net metering. Each and every study concluded that net metering was a benefit to all rate payers, not a cost shift onto non solar rate payers. Here is a recent example:
Mississippi Public Service Commission Proposes Net Metering Rule Based on Synapse Recommendations | Synapse Energy
so you can see why Arizona has done/is doing stuff like this:
Arizona Net Metering Attacks - Energy and Policy Institute
what do you expect from Arizona officials that rated burning garbage as a renewable energy just to reduce solar energy growth in Maricopa county.
I'm tried when buffet or Koch, and I point out these specific individuals because they are the ones with vast fossil fuel interests and centralized utitliy interests that target DG specifically... say they are for free markets when they themselves are protected by government policies to ensure monopoly powers and guaranteed returns on their investments. They are the biggest corporate welfare recipients in the entire country, not to mention their anti competive, anti capitalistic actions in practice. It is absolutely transparent they are scared of the energy transformation happening because they are no longer able to corner the energy market. They can't patent sunlight so they are forced to actually deal with free market forces. They actually have to deal with competition and innovation-at-all-costs really that drives a truely democratic capitalist society. They are the ones frightened to leave the nappy blanket of government hand-outs behind and require nefarious tactics in a last gasp effort to pull the wool over the public's eyes. The scare tactics of being the wealthy key holders to a scare resource we all need to survive in the modern world are not working anymore. Access to harnessing the sun has changed everything. Welcome to true competition in truely emerging free market/captils tic society fellas. like in the movie trading places I can see them moaning and kicking soon "turn those machines back on!!!" as they themselves are pulled off the energy trading floor of the future...�
1/1/2015
guest Yup, I think the only fair alternative to ner metering is virtual net metering, where anyone has the right to sell surplus power to anyone else using the grid (for a small transmission fee perhaps). With such a set up, community solar would flourish without any special arrangements, just sign up to buy community solar or sell surplus solar back to community. The utilities can set any rate they wish for feed in tariffs, community solar exchanges can set any feed in rates they like, and any other two parties can transact as they like. This is what a free market is supposed to be. We need grid neutrality, not special incentives.
Another cool application of virtual net metering is an entity that is able to generate power in one location and use it elsewhere. For example, a business with a huge distribution center and smaller stores. Might cover the distribution center with solar and send the power to its stores, even if those stores are leased retail spaces barring rooftop installations. Such a configuration allows a business to optimize its solar investments.
I sure wish that certain politicians in both parties could see that what we really need to do to accelerate renewable energy is to deregulate the electricity distribution market with grid neutrality. I believe this would empower everyone to greater energy independence and economic security. It would transition to renewable energy much more quickly than government incentives. Wind, solar and batteries are already cost competitive. What they need is grid neutrality to sell renewable energy to willing customers.�
1/1/2015
guest Benzinga - Actionable Trading Ideas, Real Time News, Financial Insight
Morgan Stanley analyst is optimistic about SolarCity with a $93 PT. Analyst is confident about longterm fundamentals, but cautious in the short term about new entrants.
This view seems consistent with accumulating shares carefully when prices are low, say below $55. Options might not be your best bet. Personally I mostly own shares plus a few LEAPs.
http://www.pv-tech.org/news/rec_solar_almost_sold_out_for_2015
Panel supplier to SolarCity is nearly booked through the end of the year.
This is why Silevo was acquired and Riverbend is getting built quickly.�
1/1/2015
guest First steps taken for a smooth hiring at SolarCity
Hiring at Riverbend has begun and will ramp quickly in 2016 at 200 to 300 new employees per quarter.�
1/1/2015
guest When is Riverbend factory expected to complete?�
1/1/2015
guest I wish I knew. Here's my conjecture. They want to start production soon, perhaps Q1 2016. At full capacity, they'll need 3000, so adding about 300 employees per quarter means 10 quarters of ramp up. This gets us to mid-2018, right along with their million customer goal.
I think this could actually be accelerated a bit. If they've got 24% efficiency 400 watt panel capability, they'll have strong motivation to accelerate. If the supply of Chinese panels becomes tight, as we see with REC, then they'll want to accelerate. On the flip side, if they start up a second factory in 2017, they they may want to moderate the pace at Riverbend. I'd love to see a second factory soon, but I suspect they'll want to pilot at Riverbend before putting a second plant into motion. So developments in Q4 could be crucial. If they can pilot 400 watt panels while the global supply tightens, it will be quite compelling.�
1/1/2015
guest According to this article ( SolarCity leases Larkin District executive office space - Buffalo - Buffalo Business First ) it is late 2016.�
1/1/2015
guest Solarcity: Misunderstood And Undervalued - SolarCity Corp. (NASDAQ:SCTY) | Seeking Alpha
I don't always read articles on SeekingAlpha, but when I do, they're written by Sid Dalal. Nicely done, my friend.�
1/1/2015
guest Thanks!!!
Edit: I'm going to quote you on that - Siddharth Dalal on Twitter:�
1/1/2015
guest The main structure and roof of the 1GW factory in Buffalo is compete. The local community college is now offering classes and aa degrees directly to apply to factory job openings. In addition, reports from buffalo media state job fairs are packed with eager applicants with better then expected turn outs. Overall, looks like the pv factory is making outstanding progress.In Arizona, APS utility plan to raise solar rates was shot down by judge today. Told to wait for next year's rate review. Short term victory there. Buffet in NV pulls another nefarious move. First he says the solar cap won't be hit till early next year to get solar to sign off. Then after they sign off, says oops we magically miscalculated, cap will be hit next month! Then today, he has a state congressperson tell the utility commission to ignore the solar industry complaint and desire to keep solar going until they actually have a new plan for distributed solar! This is beyond lunacy. Oh, buffet also says since they get utitliy level solar for 4 cents, they should only pay 4 cents for distributed solar, and he's giving money to distribute solar by allowing 5.5 cents (which now net metering is 11.5 cents). He continues to say distributed solar is no benefit to the grid. 8 out of 8 COMMISIONED INDEPENDENT REPORTS say distributed solar is a benefit to the grid! As a matter of fact, distributed solar is under paid!!! Roof top solar is subsidizing warren buffet! It's ironic how buffet today, on the same day, had to pay out millions of dollars to local Native American tribe for the health problems developed among their people from a near by coal fired plant. It's truely disgusting.Again, Solarcity and the rest of DG industry need to go full defcon 5 and sue the crap out of buffet. This is clearly anticompetive and nowhere near what federal laws stipulates as legal for emerging competitive power companies within the current monopolist utitliy system. The whole intent is to remove monolpolies if a viable competive market develops. That has occurred, the law of the land has to step in and rule.�
1/1/2015
guest Tomorrow should be a good day on the market for Solarcity:
--- First Solar had a great earnings report, reflects well on the solar industry as a whole, Solarcity should catch a little of that market love as a result.
--- Today NRG, the supposed gorilla sized new competitor to Solarcity, reports DG division not growing as expected. This, again, reflects on Solarcity's competitive advantage, barrier to entry due to their virtical integration, scaling capabilities, and pure DG solar company branding. Clearly, not easy to do as NRG can attest.
--- Tesla reports tomorrow. I'm sure Powerwall will be talked about and we all know if Elon says orders are coming in and are actively producing Powerwall units for installations in October... We all know Solarcity is the vast majority(or all) those installations. Reflects that Solarcity has a stron demand for its solar+storage product and only going to get stronger as Powerwall production scales over the next 6-12 months.... Right on time for the first early Silevo products come on line. Any gigafactory news relating to first energy storage production will also reflect well on Solarcity. Elon is notorious for putting out new info at conference calls so expecting no different tomorrow.
update:
SolarCity could be looking at new Buffalo projects - Buffalo - Buffalo Business First
5 GW factory expansion? Now major stakeholder saying Solarcity already looking to expand...�
1/1/2015
guest When a GAAP loss is totally worth it
So we learned in Q2 that SolarCity lost money yet again. The damage was $0.23 per share or $22.36M to all shareholders. So let's play armchair CFO and see what we might cut to at least break even, after what shareholder wouldn't want to see SolarCity become GAAP profitable.
So what can we cut? Cost of Good Sold? Well, SolarCity has been diligent about squeezing every last peen out of cost per Watt, so we're not likely to see much fat to cut there. Besides the gross margin is over 43%. How about cutting R&D? At $12M it's up 300%! But most of this money is going into advancing Silevo panels and other critical technology. So if you are looking for bright future this is not were you want to cut $22M this is not a smart place to cut. How about G&A? Well this runs the whole comany. At $50.2M, it only up 44% Y/Y over a time that saw gross profit nearly double from $22.9M to $43.3M. So as the business scales, G&A becomes leaner. Cutting G&A in half might breakeven this quarter, but it would collapse the growth potential.
So how about Marketing and Sales? Those guys racked up $113.16M this quarter. If we just tighten out belt 20% on this outrageous spending, we could be profitable. So let's see what that would do. On 189 MW installed, $196M value was created. Perhaps pulling back 20% on sales would have taken away 20% of the value created, or $39.2M. From this perspective that the return on that $22M loss is a gain of $39.2M or 175%. So foregoing an opportunity to make a 175% might not be such a good business call. But actually alot of that installed MW was already booked by sales prior to the quarter. So what did that $113M on marketing and sales really do for us? It booked 395 MW, more than twice what was installed. Maybe we could have gotten by with holding bookings back by 20%. Well, that's 79 MW and at $1.14 economic value per watt, it's worth $90M. That's a 400% return on a $22M cost.
How about we just stop with this little game and recognize that SolarCity is doing an incredible job of creating lasting shareholder value? Sometimes the value of growth is totally worth near term losses. There may come a time when the DevCo does not have so many opportunities ahead of it, but at that point the PowerCo will be a huge cash machine. Profitability will come as growth declines, but until that time, I would not want to slow it down any little bit.�
1/1/2015
guest Jim, Outstanding analysis!! Much appreciated.
I read something equivalent to your phrase "Profitability will come as growth declines" back in early 2013 from a Lyndon interview. This was around the time SCTY went public. It really resonated with me. I have been buying stock ever since and accumulated 6000 shares so far. Sometimes I get frustrated that the market is not seeing the true value (or rate of gain in the value) and not pricing SCTY adequately. But then again, had the market done the right thing since beginning, I wouldn't have been able to afford these many shares. So the market ignorance is a blessing for long-term-buyers.
- - - Updated - - -
This interview from early 2013 is a great read for anyone trying to understand SCTY.
SolarCity CEO talks the future of solar power - Fortune
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Sometimes I feel the market will never fully appreciate this, given so much of trading is done through software and "models". SCTY will not fit any traditional model. One needs to see it for what it is in a very specialized manner. So the stock may not have a strong trajectory up until growth starts slowing (and the profits start showing and growing). Best way forward for me is to keep accumulating, and then there will be a tipping point, and that's it, I will be wealthy forever :tongue:�
1/1/2015
guest honestly, I don't think there is a single person worth their weight that actually thinks Solarcity is a bad business. I think why the stock is so compressed is because of regulatory uncertainty. Net metering is in flux around the country, as is the ITC. So investors have a hard knowing how this will affect long term income. So difficult to go out past one year, I think most are cautious and value near worst case scenarios. I mean the stock was a $52 with $1.2bln in nominal contracts and about 50k customers in 2013 and two years later we're sitting at $59 with $7.7bln and 260k customers. Something's off. That something is the net metering challenges and ITC expiration. Once we get just a couple years of certainty somehow, the stock will explode up. That will create a whole lot of craziness I don't want to experience, but that's what I see in down the line. I've made a big bet myself Solarcity will find a way and DG will prevail in the value of solar debate(net metering value) as well as the ITC. Now the rest of the market has to gain the same confidence and that's where risk get rewarded if invested wisely in these early days.�
1/1/2015
guest Thanks, Benson. That's a nice quote from Lyndon. Elon shares this sort of outlook. I am tempted to use the term "hypergrowth" for a company that creates value so fast that they only way to post a GAAP is to slow down value creation. This is in distinction to mere "growth" that is grows slow enough to be profitable. So a hypergrowth company may grow gross profit year after year in excess of 40%, doubling in 2 years or less. But a profitable growth company may less than 30% per year, taking more than 3 years to double revenue. Fundamental analysis has difficultly valuing any company that grows above its discount rate for many years. So any company growing in excess of about 15% requires that a DCF modeler assume that the growth rate will decline well in the future so as to have a finite terminal value. So there are normal companies that grow less than 15%, and fundamental analysts love them. Growth companies that grow 15% to 35% and growth investors love them. They there are the hypergrowth companies doubling every two years or faster and few analyst know what to make of them. The seem to defy conventional logic. For this sort of enterprise, I think you need to be able to contemplate and model market disruption or new market creation.
Musk apparently has a knack for finding markets that are ripe for disruption. Tesla is disrupting ICE, auto sales, oil, and utilities. SolarCity is disrupting utilities and to some extent banking. PayPal disrupted banking. SpaceX is disrupting the launch industry and telecommunications. All of these industries are huge with strong, mature incumbents. Incumbents are more concerned about preserving status and structural advantages. When these structural advantages suppress innovation and genuine alternatives for consumers. This creates an opportunity for disruption. One has to find a cleaver way to work around the barriers that protect incumbents from competition. Often this means pioneering whole new infrastructures where needed. Otherwise the existing infrastructure tend to preserve the status of incumbents. So the radical question posed is when do we toss aside or subvert existing infrastructure to make way for new approaches that ultimately lead to lower infrastructural costs. For example, distributed solar and batteries undermine the existing heavy grid infrastructure. This infrastructure was needed by large centralized power producers, and so it was built to serve the needs of such incumbents. But distruted solar and batteries needs only light grid connections for back up power and local power sharing. So the threat to the incumbents is first that revenue needed to support heavy grid infrastructure will be insufficient for its upkeep, and second that a heavy grid will not be needed. This puts the burden of the grid back on producers and ultimately pushes many generation assets out of the market. This is truly a disruption and threatens to destroy asset value. However, this reorganization of infrastructure will ultimately lead to a lower cost of energy and energy infrastructure. This kind of transformation is quite disorienting for industry participants, analysts and investors. It should be of no surprise that it is so hard for any of us to make sense of it much less to put a proper value on specific investments. So investors will shy away from SolarCity or even Tesla because they don't understand how this will work out. Their bias is to invest in established business models that make sense to them. What is problematic, however, is that there is little safety in investing in an incumbent in an industry that is ripe for disruption. For example, if you're a utility is it a good investment to build a new gas peaking plant? There are lots of conventional ways utilities make such decisions everyday. But what if Powerpacks can deliver more grid stabilization capacity per dollar than a new gas peaker? If this is so, then by the time your new plant comes online it is obsolete and the assumptions made to justify the project no longer hold. Five years later you wind up shutting down the plant and taking a loss on the capital investment. It is just as risky to invest in a disrupted incumbent as it is to invest in the disruptor. Still investing in one feels safer than the other, it is more comforting, less disorienting. This attraction to comfort and order perpetuates blindness and a lack of response to the challenge of disruption. So incumbents waste precious time and resources doing whatever makes them feel as if they are not subject to disruption. For utilities their emotional response is to use regulatory processes and politics to ward off a sense of disorientation and change. Politics are a waste of time for the utilities. What they need is to throw off regulatory limitations and figure out how to compete economically with DG. Ultimately the economics of DG will improve and the utilities will lose political support. By they time the actually realize they must compete economically, they will have lost so much ground that they will be in a very weak position to compete. For example, once their bond rating is shot by holding too many obsolete assets, they will find it very hard to raise capital. Sadly this is the sort of incumbent response that give the opportunity for hypergrowth to a company like SolarCity. It will take decades to steal market share from such incumbents. As long as blind and crippled incumbents have marketshare to lose, disruptors like SolarCity will continue to grow at abnormal rates. The incumbents that press political advantage the hardest will be the ones that lose the most. So distributed solar has only around 1% of marketshare of electricity. It can grow 32 to 64 fold. Doulbling every couple of years, it can double 5 or 6 more times in 10 to 20 years. So long as SolarCity stays at the top of its game, it can sustain hypergrowth another 10 to 20 years. So try to imagine SolarCity with 10 to 30 million customers. It's hard for any of us to wrap our heads around such a prospect. But we need very different mathematical models than most of us possess to grasp the dynamics of disruption and hypergrowth. Then again there are limits to growth too, and few of us are able to contemplate that as well.�
1/1/2015
guest I think you may be right about the regulatory apprehension that many investors have, and these worries will even grow until the next president is elected. But I think the key is to see that economics, innovation and the will of the people to make energy choices for themselves will all play into changing the politics. People still have this idea that solar energy is dependent on government incentives. But the economics are much more robust. Government incentives are merely a catalyst to speed up the economic process. With the cost of solar declining as fast as it is dropping ITC for 30% to 10% would only slow growth for a year or two. This would shake out weaker players and a top competitor like SolarCity would emerge much stronger. The politics shift when SolarCity has a million customers and millions of voters have solar. The utilities hold ratepayers hostage and try to demonize rooftop solar owners, but eventually voters will see the absurdity of this proposition. Community solar becomes the natural way to assure that everyone has access to the cost savings that solar provides. The problem is not that rooftop solar is raising rates on everyone else; the problem is utilities fighting community solar and other means to sharing solar power via the grid. So utilities can threaten ratepayers with higher rates, but woe to them if they impose those prices. People want access to cheap solar power regardless where they live. So the cry for fairness will be for community solar and virtual net metering. So solar will get cheaper, bigger and the politics will shift. This political games are just about imposing short term set backs. And those political games will sour the electorate against the utilities. I think it may be time for SolarCity to do advocacy advertising to encourage broad political support for rooftop solar.�
1/1/2015
guest Foghat, You make a fair point. As we know in this thread, SolarCity is working on both issues. Here is my take:
1) To deal with ITC reduction, they are doing everything they can to lower their costs to be able to still compete with utility rates. The primary example is the Riverbed factory. I think this is a hurdle SolarCity is well prepared for. Once we are in mid-2017 and SolarCity is still thriving, the market will look past this.
2) To deal with net-metering, they are working with Tesla on battery solutions. But this is a very difficult challenge.
Batteries will not be enough for seasonal changes in electricity consumption (think of east coast). My monthly usage varied between 264kWh/month to 1465kWh/month. Behind-the-meter batteries can only be sustainable/competitive in sunny western/southern states. Success of grid aggregation depends on utilities. We can't rely on them to see hyper-growth. This is a really tough one. Battery prices would have to drop dramatically, and then some, for this to work in east-coast.
But again Lyndon said many times that the market is so big that they can reach their ten year targets focussing on just one state! So overtime market may learn to live with it. And this might very well be a good reason that SCTY will never trade more than 1 or 2 years into the future. We may have to just get used to that. Eventually growth is growth. Longterm investors will see the return anyway.�
1/1/2015
guest SolarCity to acquire ILIOSS, expand to Mexico.�
1/1/2015
guest This is awesome news! Mexico is one of the most exciting solar markets in the world. Not only are utility rates high, but Mexico has a very progressive virtual net-metering law. This will allow SolarCity to use the grid to send power from anywhere to anywhere. So the community solar model opens the way to sell solar to any subscriber. Moreover any excess rooftop solar can be distributed to subscribers. So SolarCity has the potential to realize the full potential of distributed solar.�
1/1/2015
guest This article has bit more details
SolarCity Expands Into Mexico in First International Acquisition - Bloomberg Business
jhm, thanks for the insight. appreciate it.�
1/1/2015
guest SolarCity Breaks Into Mexican Solar Market With Acquisition SCTY - Investors.com
This article is really good. The utilities are not fighting solar as in the US. Solar is not displacing infrastructure. It is adding infrastructure where it needs to be added. And the Mexican economy is growing.
I think this is a huge opportunity to grow like hell. It gets around so much of the policy crap in the US that drags the stock down. In a country with 33 million homes, how long till SolarCity gets its millionth customer?�
1/1/2015
guest
No tariffs on Chinese panels, so significant savings there. Also, Solarcity doesn't have to spend money fighting utitliies on policy, significant savings there. Cheap, quick permitting...This just keeps looking better each time I think about it.
solarcity will place much bigger product orders from all around the world, which will also lower costs for the U.S. market as well, most likely starting in 2016. I think they really are making it clear how they will reach sub $2.50/watt all in costs by the end of next year.
lomit is only on how fast they can train and deploy quality install crews and sales teams down there. If this is California 5 years ago, then we're going to see some significant growth next year and beyond.
Its also very interesting to think we could be sending American manufactured panels to Mexico(and the rest of the world) in the next few years... how times have changed...
... Does anyone know if the free trade agreement with Mexico would allow Chinese panels bought by Mexican solar company to be shiped north tariff free? Just off the top question...�
1/1/2015
guest Elon just said powerwall&powerpack demand is "nutty." $40-50mln in q4. $1bln in 2016. $2-3bln in 2017. Massive growth very quickly.
solarcity spent $1mln last quarter on tesla storage, so if Elon expects $40-50mln in q4, I expect Solarcity is going to receive well over 10k powerwalls for q4. Next year is going to be insane. Solarcity solar+storage combo is going to shock the market very quickly, very soon. Amazing stuff.
update: jb straubel just said he's really surprised by the Powerwall demand. 50/50 in Powerwall powerpack demand.
update: Elon says 100k reservations! So if 50/50 Powerwall/powerpack, then we're looking maybe up to 50k Powerwall reservations for Solarcity... If Solarcity is anywhere near that number, this could be transformational for rooftop solar on so many different levels much faster then I expected. We'll see how well this ramp will go, but I think we're in another production constrained situation for a long while.�
1/1/2015
guest He said not quite 50/50, maybe 70 powerpack.�
1/1/2015
guest Have to respectfully disagree. When the recording comes out, we'll have to confirm.�
1/1/2015
guest Why is scty stock dropping?�
1/1/2015
guest This... is a great question I just saw and was wondering why.�
1/1/2015
guest Maybe pulled down with TSLA?�
1/1/2015
guest sympathy�
1/1/2015
guest I have no idea why the stock is dropping. I thought the conference call was great news for SCTY. I put in a bid for some 50 dollar call Jan/17. ...see what happens. They lost around 20% of value today...and I figure that should pop back relatively quick..at least in next 6 months.�
1/1/2015
guest According to SA it is because of SUNE results -
SCTY, SPWR, CSIQ, others hit hard following SunEdison's earnings - SolarCity Corp. (NASDAQ:SCTY) | Seeking Alpha�
1/1/2015
guest The entire market is on the technical skids right now. Solarcity is fundamentally stronger then it ever has been, so complete non sense and buy time for as per usual on opportune occasions for me. I'm willing to bet this is short covering volume for Solarcity's short interest was around 40%. Bet you we see short interest decline in coming reports.
Power Struggle | Cover Story | Salt Lake City Weekly
the best thing about this article on net metering was the single comment posted:
"Great article. It could have pointed out more clearly, however, that the gap between RMP and Borenstein and the PSC, on the one hand, and the full value of solar, on the other, is a whole lot more than the so-called "externalities." Failing to do this makes it seem like it is a debate that it is not. The studies in other states find value in avoided transmission and distribution energy and capacity (Borenstein incorrectly waves this off by confusing sunk and fixed costs), demand reduction-induced price effect, reduced fuel price volatility risk (which the utility always passes to customers), immunity from drought and ability to generate without water, reduced risk of environmental regulation, and more accurately calculated generation capacity value. The piece did not address the benefit of customers investing their own money (instead of socialized investment cost and profit by the utility), private assumption of operating and insurance risk, and ancillary service benefits that increasingly smart inverters offer. These and other benefits, including local jobs and tax base benefits, system reliability and resiliency improvements, clean air, and a commitment to the future all make up the value of solar. All deserved discussion in this piece. Solar systems can be reliably counted upon to keep on delivering these benefits for at least the 25 years that the cells are warranted - with no rate increase, ever. With a fuller discussion, readers can be counted to discern the real motives of the utility monopolists and their supporters. Simply put, climate changes damages, real as they are, represent only a part of the value of solar the utility wants to appropriate to itself, with the help of the PSC."
It is beyond apparent the utilities are fighting a losing battle here. Every time they say customers will see higher electricity bills, they are threatening to punish anyone that goes solar. This is against the law of the United States of Amercia. This is to the letter and actual "t" of our country's federal anti trust laws. It is plain and simple. The comment posted above clearly shows the truth about roof top solar true value to the grid and must be compensated as such. You may run for awhile buffet and Koch, but You can't hide from the facts.
clean air is an interstate issue. It is not a state issue. The pollution fossil fuel plants emit cross state lines. There is no box that keeps the co2 and pollution only in Oklahoma or Texas or West Virginia. It spreads everywhere. All those states that are suing the clean air act on state rights are flat out 100% going to lose and their residents will suffer for it when federal funds dry up as a result. You want to see your tax base flee to other states as fast as humanly possible? Continue on with those ridiculous lawsuits...
[/COLOR]�
1/1/2015
guest Wow, SunEdison is down 26% today following a substantial earnings miss. SunEdison aspires to be a "supermajor" in the utility space. Acquiring Vivint is a small move into distributed power for them. I wonder if investors may be confused by this turn in strategy. Some investors want to invest in the utility space, while others are more comfortable with distributed energy. If may be hard to mix the two.
Yesterday I sold my position in FirstSolar. They had an earnings beat that drove share prices up 17%. I saw that as a nice point to take my profit and get out of a utility solar player.
I continue to anticipate that the power generation business within the utility space will collapse, and utility solar will be taken down with it. The politics will intensify as we get closer to the breaking point, but the clock is ticking.�
1/1/2015
guest Most of the solarsector is down today, will we see a bounce tomorrow or a slow climb?�
1/1/2015
guest Stocks go down in elevators, go up in escalators.�
1/1/2015
guest Breaking.... New Solarcity market added: Vermont.
now 19 states and counting.
Vermont solar company pounces on error by national rival - VTDigger�
1/1/2015
guest Anyone who could expand a bit further on this line of thought?�
1/1/2015
guest I think he means mass defection from the grid as solar plus storage gets cheaper and off grid is viable.�
1/1/2015
guest Sure, this is something I write quite a bit on around hear. My thesis is a power generation capacity glut. There are three elements to this: battery storage, renewable energy, and distributed energy.
As Musk recently noted, the introduction of cheap battery storage has the potential to make half of the world's power generation capacity obsolete, and this is without consideration of incremental renewable energy. Why is this? The world has about 6 TW of generation capacity mostly fossil fuels, nuclear and hydro. These assets generate about 60 TWh per day and about 54 TWh are consumed each day. Thus the average generator is utilized just 10 hours per day and about 1 hour of output is lost in transmission and distribution. Much of this capacity is used infrequently to provide peak power and to stabilize the grid. With sufficient, cheap battery storage, the most efficient half of generation assets could be utilize 20 or more hours per day m, while batteries handle peaks and valleys of demand. Peaking plants are no longer required, and if storage is cheap enough, they are no longer economical for use. Gas peaking plants have a levelized cost in range of 18 to 23 c/ kWh. Tesla Powerpacks have the potential to bring levelized storage cost into range of 5 to 8 c/kWh. Coupled with baseload or renewable energy below 8 c/kWh, this leads to fully dispatchable power below the cost of gas peaking plants.
Battery storage is considered the missing link for intermittent renewable energy such as wind and solar. These sources have two key economic advantages. They are technologies with the potential to continue decent in price. The price per Watt has declined about 15% per year for about 40 years. Now the cheapest installed levelized cost is 3.9 c/kWh, and this beats the cheapest fossil fuel generation combined cycle natural gas which has levelized cost starting at 6.1 c/kWh. So utility solar has truly become cost competive with natural gas, coal and nuclear. Moreover all solar energy has the potential to continue to decline in price. Price competive solar has efficiency below 20%, but 24% efficiency panel are quickly approaching parity at the panel level. Efficiency can double with advancing technology getting more watts per area and virtually all installation costs, while manufacturing efficiencies continue to drive down costs.Thus, solar could continue to drop below 3 or 2 c/kWh with time. Wind likewise declines in price year over year, but not as quickly as solar. Wind has achieved levelized costs as low as 2.5 c/kWh. Wind reached price parity with thermal energy years before solar so it has a lead in deployment. However, solar is likely to become even cheaper than wind and is much more widely deployable. Hence, solar may ultimately become the dominant source of energy world wide.
The second economic advantage of wind, solar and other renewables is that they have no cost of fuel. Thus, there operational cost is quite near zero. In a competive electricity market, producers bid to produce power at the lowest price. Wind and solar can bid down to zero, while thermal generators generally cannot afford to bid below their cost of fuel. However, it is costly for some generators to ramp down production or bring it back online. Thus, if too much power is supplied to the grid, such a generator may be forced to bid negative prices, actually paying other parties to shut down or accept surplus load. So this is one of the problems with to much solar and wind competing with traditional generators. The simple solution is to introduce more storage into the grid. With sufficient cheap battery storage, their is no problem with over supply. The storage operator will gladly buy load when cheap due to oversupply and use or sell power back at times of peak load. This is what destroys the economics of peaking supply. Batteries enforce a simple arbitrage limit on daily fluctuations in market prices. Specifically, the spread in peak to trough prices will be bound by the marginal cost of storage. So let's suppose battery storage levelized cost has come down to 10 c/kwh and there is plenty of it, then the difference between the highest daily price and lowest is bound by 10 c. So what if their is sufficient solar in the grid and on rooftops that the daily low is about 2 c/kWh? Batteries can provide peak power at 12 c/kWh, which reduces the utilization of all fossil peaking plants and may well price them out of the market.
So we see that batteries and renewables work in tandem. Renewable drive down spot prices at various times of the day, while batteries reduce the variability of prices throughout the day. These two functions put economic pressure on all traditional power generation. Peak power gets priced out, but also baseload loses utilization. You might wonder if intermittent renewables can drive spot prices down to zero, what is there to support prices at all? Well, storage arbitrage also solves that problem. With sufficient storage, the peak price of power minus the cost of storage is a lower bound for spot prices. So with high penetration of solar and wind we can see the market become destabilize, where low prices may go too low, even negative, and more peaking capacity may be needed to stabilized the grid while storage is not available. But as storage is added to the system, the peaks are brought down and the valleys are raised up. Now the combination of solar, wind and batteries can generate power below cost of traditional baseload and make it fully dispatchable, more responsive than peaking power. And over time the cost of wind, solar and batteries will continue to decline. This leave very little leftover demand for traditional power generation. There are still issues around seasonal variation in power supply and demand and issues around emergency back up for extreme events.
Locationization is another critical them. As generation and storage are located closer to use, there become less need for heavy grid infrastructure. The economics of maintaining the grid change. Moreover, power stored and generated locally reduces the need for centralized power generation.
So all these elements come together to undermine the basic economics that built the grid and utility generation in the first place. The issue is not really whether wind, solar and batteries are all we really need in the long run. In the long run we'll figure that out. What is really pressing is how little of traditional generation do we need in the the next ten year. In the last five years the coal industry has lost 75% of its market cap. The US has retired 190 coal plants in the last three years. But natural gas lost 75% of it price in this time too, while wind and solar have grown exponentially. Batteries alone could knock out the economics for half the existing genetaion fleet in two decades, but coupled with solar doubling every couple of years and wind continuing massive growth, the fleet may not have a couple of decades. Let's suppose half of traditional power plants become economically uncompetitive ten years or so. This leads to a massive glut of capacity. This glut undermines the price of power for all producers. The utilities will resist writing down asset, but their effort to do cost recovery from ratepayers will be met with ratepayers defecting to acquire their own cheaper sources of energy, storage and power management. The treat of load defection undermines the whole economic model of the utilities. Legal protection for utility monopolies will lose popular and political support. As politics turns against the utilities, they will have to face the economics. My basic recommendation to the utilities is to get out of the power generation business, become a service provider facilitating the free market exchange of energy and embrace the economics of distributed power generation and storage. Done right the national average retail rate of 12 c/kWh could be cut in half within a decade. Slowing this transition down to avoid asset write-downs will only make the outcome worse for utilities. They risk ruining their credit rating and crippling their ability to raise the capital needed to survive this transition. But few will embrace this opportunity, and they waste time on petty politics when they should be restructuring their business. Players like SolarCity will prey upon utilities most resistant to competing on economics and innovation. This is why SolarCity is able to double year after year. The more cost utilities try to recover on a glut of overvalued generation assets, the more they drive customers into the arms of SolarCity. Essentially the glut has begun, but rather than acknowledging it and dealing with it, the utilities are blaming rooftop solar for their problems. They should stop asking themselves how can we stop distributed energy and start asking how can we create more value with distruted energy.�
1/1/2015
guest Thanks for sharing that JHM. I just might do the same with FSLR...�
1/1/2015
guest On the topic of retiring power plants it's all but a given. Anecdotally I know people who have worked on updating the boilers for coal/gas plants. Many of the coal were retired or switched to gas, but only to make it another 20-30 years. These were plants in states that will receive solar PV last ie Montana, Nebraska, South Dakota, etc. there's no longer enough work to keep them employed as of 2 years ago.
On a related note, http://now.solarcity.com seems like a strong indicator that they already have some storage affecting the numbers. The site is without a doubt accurate, but the GWh is probably not the total aggregate. You can access the page from multiple regions. Everything but the total GWh for the day is in sync. I suspect they are reporting numbers based on regional micro grids.�
1/1/2015
guest Always has been,
and free for the taking;
we're just figuring out how to take it...
for free
20 years >> electrical energy costs will approach free (retail) -�
1/1/2015
guest Sigh. Range bound between $50-$60 continues...�
1/1/2015
guest I wouldn't call this range bound, even though that's technically what it is. I think the market is waiting to see how the hundreds of billions of dollars that have been pledged to Solar, Electric Vehicle, wind, and other clean energy projects will be invested. The U.S. Government has basically officially announced support for Solar City. Also, Elon and his friends have very deep pockets. Let's see what happens. Elon bought $100 million in stock at $50, as did many big funds that tend to buy for the long term.
During the conference call, one of the analysts stated his opinion that the market is not pricing in anything beyond 2017. I think this is correct. I think the market is pricing in a scenario where incentives disappear, which is a bit strange since Solar City would likely be the least effected, because of its allies and partners who would gladly invest money in Solar City projects. A less than 1% delinquency rate is unheard of.
Very confusing that Solar City entering into more states and Mexico is being completely ignored. I think it might be due to investors having trouble visualizig what Solar City will look like in 2020.
SolarCity to Acquire ILIOSS, Expand to Mexico�
1/1/2015
guest One month of profit growing just to be wiped out in two days. This is the second time I thought SCTY would consolidate above $60. Last time was when it was ~$63 back in May. We're down 8% twice in a row with no news directly related to SCTY. Even with most of the solar sector down, SCTY shouldn't be down -16% in two days as the company fundamentally hasn't changed.
It went down an identical 8% yesterday along with TSLA. Coincidence??�
1/1/2015
guest SunEdison continues to slide, and I think that may be spooking investors in SolarCity and any other solar leasing company. See this article, for example:
SunEdisons Losses Become a Red Flag for Investors - NASDAQ.com
It may take the market to see the relevant differences between SolarCity and SunEdison. The biggest I think is that SunEdison had been pursuing a horizontal growth by acquisition strategy and had exposed their productive assets to the market through the TerraForm yieldco spin off. So they may have an overextended and fragile capital structure. By contrast SolarCity generates organic growth and pursues a vertical acquisition strategy aimed at optimizing its value chain. I am glad they have not spun off a yieldco or highly leveraged their book. This puts them in a position to use cash flow from the PowerCo to directly fund the DevCo. If the market beats the crap out of TerraForm, SunEdison may find itself largely cut off from this cash flow.
So we should probably have robust discussion here on the differences and similarities of SunEdison and SolarCity.�
1/1/2015
guest Vermont is expected to be announced on Monday, which is now the 19th state. Mexico market is to be like California growth from 2010 to now soon... Not to mention the massive order on Powerwall + storage package to start being installed in Q4. NY state stakeholder said they are already looking for sites to expand on the 1gw Solarcity factory already... All the $7.7bln in current solar contracts are locked in current net metering compensation schedules for the life of their contracts, so a current 4.9bln market cap is completely nutty.Besides all the possible negative catalysts mentioned in comments, I can only offer that Nevada is ruling on extending the cap next week. Early indicators might suggest they WILL NOT extend the cap and grind the Nevada solar business to a stop. This could create a lot of negative press and so might cause some traders to act accordingly right now. Also, an article came out that 60% of all utilities are looking to revise net metering and that usually means for the worst. This is in addition to the California utilities looking to lower net metering and adding fixed fees.Again, regulatory uncertainty is mounting and that causes many to jump to the sidelines until some stability returns. I'm one to continue to accumulate right now because I'm betting DG wins big time when all is said and done.�
1/1/2015
guest Wow, Elon bought $100M at $50. I did not catch that. What sort of rate of return does it take to get Elon to invest cash.
I wonder if Musk might do this sort of thing with Tesla stock as a potential prelude to a capital raise. In a capital raise with equity, he wants to buy shares to retain his fractional ownership of the company. Buying low could be smart on his part. Serious bear trap potential.�
1/1/2015
guest I think drinkerofkoolaid is referring to late 2013 when they did a raise. Musk bought shares as part of the raise for $46.54. I don't see Musk buying anything new.
- - - Updated - - -
Just briefly glanced over the CC transcript. Lots of talk about 2017 and ITC expiration. Management gave out lots of details. Worth listening to the audio (which I will do shortly).�
1/1/2015
guest Yes, those are the shares I'm referring to. Also, John Fisher, who is on the Board of Directors of Solar City has been buying a lot of shares. All of his sell orders appear to be automatic, and are likely for tax reasons. However, I'm a bit confused by the SEC filings. How did he go from holding 7,159,762 shares, to holding 293,963? Is this a glitch? Did he transfer the shares to his fund?
If any bank, company, state, or other entity says it is either loaning Solar City a few billion dollars, or is providing Solar City with a $5 -$10 billion credit line, the stock will double or triple in a week. $5 billion is a very small market cap, when you realize the long term potential for Solar City, and the amount of money that is about to be invested in and made available to companies such as Solar City. Impact investors alone could easily cause Solar City to double.�
1/1/2015
guest i think we should start a sunedison thread in these forums thats alongside the SCTY one.�
1/1/2015
guest What SolarCity Will Do for Mexico : Greentech Media
Another good article on SolarCity's prospects in Mexico. Author seems to down play residential, but elsewhere SolarCity has been affirmative about this segment. I also see community solar as a huge play here. The basic problem with residential is that the first 100 kWh or so are set at a really low rate. Essentially this is subsidized power for low use residents. The rates go up with usage tiers. So high use residents are the market for residential storage. But let's face it a home that only uses 200 kWh per month is not going to be a prime installation site. This is where community solar becomes much more interesting. SolarCity can use virtual net metering to take surplus power elsewhere and sell like 100 kWh at say 13 c/kWh to a home the buys the first 100 from the grid at 11 c/kWh but would otherwise pay 21+ c/kWh for anything above that. So these are small sales, but virtual net metering reduces this to signing up subscribers and minimal account maintenance. Another thing to consider is that the exist grid rate plan may be inhibiting residents from using more energy. This is good from a conservation point of view, but 100 kWh per month is really quite small energy use. By comparison the average US home uses 10 times as much. Even 200 kWh per month support lights, refrigerators, and consumer devices, but not air conditioning. So community solar at say 15 c/kWh could become the price point where middle class residents can finally get A/C. Electric vehicles also become an option when lower priced surplus per is brought to market. So we might view electricity sales in Mexico as largely demand constrained. Bringing lower cost electricity to market will increase consumption and substantially improve quality of life. By contrast in the US market, residents pretty much use as much electricity as they like, but will switch to solar to save money on the energy they consume. In Mexico, we may see that consumers sign up for solar not so much to save money, but to be able to consume more energy.
An interesting adjunct business for SolarCity to consider would be to install A/C along with solar. Clearly the installation skills of SolarCity could be brought to bear on squeezing the cost out of installing A/C while the marketing and financial resources can package this into a fully financed deal. A Solar A/C Lease that cools your home and saves money on your power bill could be quite a compelling offer.�
1/1/2015
guest Can anyone explain what this SEC Filing means?
John Fisher, who is on the Board of Directors of Solar City, and is one of the largest shareholders, has been buying a lot of shares. I think this means he recently transferred almost all of his shares to his funds. What are some reasons he might do this?
How many shares does he own?
One of the only explanations I can think of is if the entities, that he just happens to be a part of, have been secretly accumulating a lot of shares. They might not need to disclose the amount of shares they own or have exposure to. It look like the number of shares directly owned by all of the funds he is a part of is between 10 and 15 million. Is this correct?
NASDAQ | SEC Filing�
1/1/2015
guest If i just went all in every time it hit 60 and sold every time it hit 50 I would be doing much better than I am, I still believe in 8 months all these waaaay out of the money leaps will be worth something but right now it does look bleak when looking at the stock chart.
The next two quarters will be too big to ignore and volume manufacturing out of the Buffalo plant much earlier than expected should do wanders for the stock as well.�
1/1/2015
guest My fingers are itching, might buy. After all a 50% loss in a month is an overreaction.�
1/1/2015
guest If you're looking for good entry point, next week might be it. Nevada is looking to literally shut down all installs next week with a decision to keep the cap as is without changing it -- against all DG solar appeals to extend it. The original cap will be hit this month, so all sales will come to a grinding halt until new cap is decided and implemented. Buffet has planned this so that it will literally force the commission to take their added fee and net metering cut to keep DG install business in business. This is the final nail in the coffin which would force mass exodus of the install business. There are way too many opportunities elsewhere for those employees so I don't think they are going to wait around. Make no mistake, lawsuits will fly. But still going to hit he market hard if it happens. If they do up the cap so the DG business can keep going until they figure things out in December/January, then stock will have a small spike up.
I think the decision will come down this Wednesday.�
1/1/2015
guest
Interesting, I doubt you will see a time to buy too much lower than where it is. I guess it could fall to 48 but It has held for quite awhile above that level and the fundamentals are so strong right now I think were near the low. Arizona is a large market though, Not sure how that would effect the stock if installs there come to a halt.
Thanks for keeping us up to date Foghat.�
1/1/2015
guest http://in.reuters.com/article/2015/01/25/bangladesh-solar-idINKBN0KY0O220150125
3.5 million homes in Bangladesh running on DG solar in 2014. Expect 6 million DG homes by 2017. This small nation (in size not people)has the most solar homes in the world. They have already cut $180mln per year in national kerosine cost(primary fuel to run the home).
bangladesh is the post card from the future. Solarcity has taken notice ref the same kerosine market in their Tanzanian company market (and Kenya as well). They are also exploring Bitcoin-like payment systems (mpesa) to do pay as you use model. 98% of the Kenyan population now have cell phones(that need to be charge); as well as primarily use digital currency(mpesa & Bitcoin) as means of money payment within their countries. Cell phones are a key surprise in this throughout the entire developing world. If you can now picture all those cell phones needing to be charged with a high percentage of those homes not having electricity, you can see the scope of this. India has nearly 1 billion cell phones in operation but 300 million people without electricity at their homes... With solar being cheaper per month then the cost of kerosine and charging your phone with a third party, it becomes even more interesting.
As JB Straubel once said, we have to start thinking much bigger here...�
1/1/2015
guest I love seeing this kind of development. Imagine the return on investment in replacing kerosene lighting with efficient LED lights, solar panels and batteries. I would expect at least a 20% return. This adds wealth, not just energy. 3.5 M families saving $180 M in kerosene each year already frees up over $50 per year per family. This will free up discretionary income which will further energize these local economies.
I would love to see Tesla Energy design a product specifically for this sort of market. I would call it the Powerpod. Here's how it works homes would buy a Powerpod base with an inverter in it and stack 1 to 10 battery modules on it. Each module would be portable, weigh about 5 pounds, hold 600 Wh of energy, and be capable of 1.2 kW output. Families would be able to buy or rent models as their needs change. Portability adds value because it facilitates power sharing. Invidivuals can take their modules to a neighbor's home or local business for recharging. A local business could install lots of solar for charging rental modules. The price of single discharge rental could cover the cost of energy and the module. An enterprising business could even offer a delivery service for fully charged modules. As an economy develops around Powerpods, families and businesses can progressively add solar panels and connect into microgrids. Additionally Powerpod modules can be designed for use in vehicles, power tools and other devices. At first the portability of Powerpods is important, but as more solar and microgrid resources come into an area, they become more stationary in their use. As users max out their 10 module stack (6 kWh), they can upgrade to Powerwalls. With a healthy market for secondhand Powerpods, there should be no problem selling pods off when upgrading. So as a transitional product, Powerpods should be well used over its lifecycle.�
1/1/2015
guest So how big could this Powerpod market be. We begin with 3.5 M homes with solar, and suppose each needs a base and 2 module. Another 1.5M homes lack solar, but also want a base plus about 2 modules to rent or own. Suppose we price bases at $100 and modules at $150 for 600 Wh. Thus, 5 million bases and 10 million modules are about $2B in sales and 6 GWh in storage. I reckon that this is nontrivial, and the Powerpod systems would be attractive in many more markets than just Bangladesh. Perhaps the global market is 10 times this size, $20B and 60 GWh. Now we're at Gigafactory scale.�
1/1/2015
guest interesting concept... I think the solar home systems in Bangladesh include a battery already. Wonder if tesla powerpod could be cost competitive with such a small system requirement?
solarcity already is invested in a company that does pay-as-you-go solar. They install he solar and battery. The customer prepays for the amount of energy they want to buywith a digital currency transfer. Then turns the system on with a text message code they put into the home system. The interesting part is Solarcity could get paid instantaneously around the world without currency exchanges not going through any banking system. this is why I say this could be very significant when we're talking about 100's of millions of these small transactions are happening and coming into Solarcity daily via Bitcoin tokens. Read Tanzanians could be paying over $25/month for solar package, so expand that to 300 million in the same boat right now globally and we're looking at potential $7billion/month just in cell phone users that have no electricity at home that could benefit from these small units right now. And with the rise of digital currencies in these countries, those payments go directly into Solarcity's bank account from a cell phone in potentially re middle of nowhere near a bank. (Many pay rolls are done in digital currency now in Kenya; people feel it's safer then carrying around cash on pay day and/or having to walk many miles to cash a check. Just look at their phone from safety of home and see tokens deposited in digital wallet.)
also, I been thinking about Tesla's "100,000 reservations" for tesla energy. I'm going out on a limb that there aren't that many utilizes worldwide, so a vast majority of those reservations are for powerwall. I know that more capacity is being bought by utitlies, but the volume of customers is from powerwall. Like 98k or more in my opinion. From comments here on tesla motors and from scanning social media, most if not all reservations passed/passing through Solarcity sales teams first. As such, I feel Solarcity is going to have a massive solar+storage roll out. First ramp with be in q4, but 2016 is going to really do damage to the market. Like I've said before, these numbers will create an aggregation capable Solarcity in a matter of months from now. That when it gets really interesting with whole sale energy sales under purpa which buffet has already tried to change in anticipation of this happening. With buffet spending $32billion on a company that makes utitlity scale power generators(among other things) I can see his concern if aggregation of DG could cut the use of utility scale peakers that use these utility scale gas turbine generators. It sure would not be good for his recent billions invested in NV Energy which coincidentally is pushing through the most anti- DG policies in American history(yes, worse then Arizona) as I write this.�
1/1/2015
guest What is the name of this company SolarCity is invested in?
Regarding batteries and NV, I think that accumulating customers with batteries gives SolarCity a big chip. They can show that halting net metering won't stop the advance of solar. Moreover, if batteries are aggregated, it can be used to hurt the utility. If the rate plan is flat and not accepting net metering, then charge batteries when the spot market is at its highest to the day. This forces the utility to sell retail power at a loss. This is essentially a form of economic protest only to be used if the utility is unwilling to cut a reasonable deal. Aggregated batteries can be used in a way that creates value for which the the utility ought to rightly compensate or to destroy value. Utilities have been using their scale and status to bully DG. So it is only fitting for DG to return the favor.�
1/1/2015
guest Off-Grid Electric : https://www.greentechmedia.com/articles/read/solarcity-leads-7m-round-in-off-grid-solar-firm�
1/1/2015
guest Halting net metering would be a very dumb idea, and might even be illegal.
I think this is what Lyndon meant when he said "customers removing themselves from the grid is a bad policy outcome". If Net Metering caps the ability of customers to sell energy to the grid, it would probably result in higher energy costs for non-solar customers, and solar customers and companies. However, Tesla Powerwall could make any damage caused by a reduction in net metering insignificant, and would make a mess of the grid.
Why can't the United States implement policies such as those that are about to be introduced in China? It would make a lot of sense if the Federal government introduced certain policies that steered the private sector towards an outcome that will be beneficial for everyone, including the utilities.If the utilities don't adapt, millions of people, and perhaps the United States economy will suffer.
Obama is trying to do this by offering incentives to states that comply with or surpass the federal "guidelines", but the outcome is going to be a bit of a mess for certain states that refuse to understand the actions required to ensure a positive outcome for people in all states.
As more people use Solar Panels, rates will decline for everyone. Anyone arguing that rates are increasing in the short term, is missing the point that in the long term, they will be significantly lower, because of the additional power being fed into the grid, the reduced cost of obtaining the power, and the increased supply, along wit h increased efficiency of systems.
Utilities Wage Campaign Against Rooftop Solar
China is investing hundreds of billions in clean energy production, and in its agricultural sector. The United States is barely investing a fraction of this amount, and its Agricultural sector has a number of big problems :crying:
Let's pray the Banks and Corporations, that have hundreds of billions of dollars, committing hundreds of billions of dollars to funding for clean energy projects is a sign that they realize the opportunity posed by the lack of government action, and are prepared to act, SOON.
Renewable-Energy Investments At $175 Billion So Far This Year As China Solar Spending Soars�
1/1/2015
guest Thanks! This article mentions that 1.4B people are without access to modern energy services. This could be as much as 350M households. In my previous post, I looked at 3.5 M household in Bangladesh with off-grid solar. From there I speculated that the global market may be 10X. But that's just 35 M families. So I'm still off by an order of 10. Thus, 60 GWh annual capacity would take ten years to get 600 GWh of storage to this market. Moreover, this is only about 2 kWh storage per family without grid access. So this is still pretty meager provision of energy. Where the combination of solar, batteries, and lighting begins to deliver a 20% return for these families, it stimulates growth in local economies. Families will want and be able to demand additional solar panels and batteries. So this market could sustain double digit growth for decades past the initial tipping point. Musk figures that about 200 TWh of storage is needed to virtually eliminate fossil fuels. In a world with 8 B people and 2B households, this is 25 kWh per person or 100 kWh per household. Making sure that the poorest 1.4B persons have at least 0.5 kWh per person is a very modest provision, but the economic growth rate of doing this could be on order of 20%. So the boost to all economies qould be unprecedented. Conversely, the cost of not doing so means ongoing use of fossil fuels and climate change with attendant dislocation of populations, wars and famine.�
1/1/2015
guest The boom in wind energy couldn't be coming at a better time - The Washington Post
Wind is now at 66 GW in US as the price continues to come down. Utility wind PPA is now at 2.35 c/kWh. Distributed wind hits 1 GW.
I wonder is SolarCity has any interest in distributed wind. Particularly if they can gain ground in commercial solar, then distributed wind would be a nice adjunct. They could round out the package for better 24 hour power generation and increase the value of adding batteries to the package.�
1/1/2015
guest terawatthours consumed yearly last 10 years of wind from BP statistical review of world energy. NOTE:
doubling every 2 years appx
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 14.3 18.0 26.9 34.8 55.9 74.6 95.6 121.4 142.2 169.5 183.6 �
1/1/2015
guest Nice data. I notice that in the last 4 years it has doubled. It seems the frequency of doubling has been slowing down. This is also what I expect for utility solar. So new wind and solar are both much cheaper than new CCNG. But the problem is that the utilities need to shut down existing capacity to make room for new capacity. For the next few years this allows NG to command 2 to 5 c/kWh premium over wind and solar. Also gas is still needed for peak power. But as stationary storage is added, the premium for dispatchability will decline. So we may see faster retirement rates of fossil plants, and installation of wind can accelerate again. If distributed wind were stronger, perhaps this would push utilities to accelerate their wind acquisition. Without this competition utilities can run the clock down on wind even though it is incredibly cheap.�
1/1/2015
guest
Just hit a low of $48.75 today.�
1/1/2015
guest Solar stocks keep going down.
Today:
Solarcity down 4,65%
First solar down 3,81%
Sunedison down 14,37%�
1/1/2015
guest Yep, pretty suprising were here, if I was not losing shares to margin calls I would be scooping up 100 strike price 2017 leaps.
I think it was Foghat who mentioned up thread that solar city has an investor day this week but I can not seem to find it now. Anyone have details on when that is�
1/1/2015
guest @jhm
Belated thanks for your post #1856 ~four days ago. It was very generous of you.�
1/1/2015
guest
Guess I was wrong again on solar city lol, We are now below 48! Pretty crazy, I am either very wrong or this is a very good opportunity to buy. I am actually about to head out to try and make some sales so I can pick up some more leaps and or keep my account above a level where it all gets liquidated ! hah. GL all Longs
https://plus.google.com/+solarcity/posts/er5DTW3miYA
Here is a post by solar city claiming 1.3 billion people without power and some details how they are installing a solar system for every 1 MW installed.
SolarCity lighting African schools with solar — free of charge - San Francisco Chronicle
and a very cool , feel good article about what Solar City is doing to help better the world! Worth noting they are installing a battery pack with each system that can store 4 hours of electricity. These articles are helpful to read when my account is looking so pitiful !�
1/1/2015
guest Yeah, it went down to a low of $46.15 so far today. About ~22% in the past week ever since TSLA's ER, but down on no apparent bad news (or any news). This is the fifth day downwards, so I'm hoping we finally see a bounce to the green by closing, especially when you look at the Bollinger Band (BB), as today's low is way below the BB low of $49.15�
1/1/2015
guest Thank you, It was a good opportunity to consolidate the argument.
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I bought more shares below $47. Now the stock is moving into the green. I wonder if somebody realized that this stock is way over sold.
The devaluing of the Chinese Yuan has been dragging down the whole market, but for SolarCity this should reduce the cost of panels they source from China. So it helps the company, even if it frightens investors.�
1/1/2015
guest I find this comment disturbing:
this is for the article posted here: New York Governor Takes Part In Topping Off Ceremony For SolarCity Gigafactory | CleanTechnica�
1/1/2015
guest that piece was pretty positive, Just finished listening to the audio there, mostly a lot of politicians talking about what a good job they are doing but It was great to hear that the CEO of Silevo said this was the fastest construction project he had ever seen !
Why does that comment worry you? Or is it relative to another negative commenter?
edit: Ahh yes just read the comments, sounds like another hit piece might be on the way. Not to worried as people have been wrong and yelling about it for a long time. Although I never enjoy bad press.�
1/1/2015
guest
Interesting that Marion mentions going with "wee" solarhome for the install. Solarhome spams any and all articles with Solarcity mentioned in it. They attempt to misguide and mislead about Solarcity in order to generate leads and sales. I think a few teslamotors forum members have "outted" solarhome employees/tactics in this thread somewhere. Zachary saying he has something that will support solarhome is clearly publishing something of suspicious validity.
the stock drop is related to what is happening with buffet/nv energy in Nevada and Koch/Aps utitlity in Arizona today. This is full on war against distributed solar right now. State sponsored for profit monopoly vs. competitve market distributed solar... For retail energy sales.
oklahoma proposes to reduce net metering, but only has 240 net metering residents. Not to mention a nat gas fracking boom that has contributed to more then 800 3.0 earthquakes last year (more then all recorded earthquakes in the history of Oklahoma combined) causing $billions in damages to residents and businesses.
Michigan wants to erode net metering, but only .0015% of energy sales come from net metering customers. It's funny how oil drilling in Michigan has boomed in recent years, especially when you don't need a single permit to build an oil derick on your propty, but have to wait months to turn on a roof top system.
Clearly not an issue of solar not paying their fair share, but rather about stifling completion for retail electricity market.�
1/1/2015
guest Solaredge sales to Solarcity equate to 20% of ALL solaredge sales. Solareedge just reported they are introducing a new 3rd generation inverter that will cut a 100kw job from 5 inverters to 3 inverters. They expect this to cut costs in a significant way. Solarcity recently activated a $1bln dollar fund for commercial installs. I conclude this 3rd generation inverter will be used and will significantly reduce install times and costs.
solaredge also said they have a 4th generation inverter focused on the residential market starting in 2016. Solarcity is ramping up energy storage + solar product at the same time, with Elon saying he expects a ten fold increase in sales to occur in 2016, this inverter is set to also significantly reduce install costs at scale Solarcity is aiming for. If Solarcity only aims for 60% compounding in 2016 were looking at close to 1.5-1.6GW of installs requiring many, many inverters. maybe this is one reason Solarcity is quite confident about reaching 2.50/watt all in cost.�
1/1/2015
guest This is insightful. How and where can we follow developments in this space? Conventional news wires don't show much.�
1/1/2015
guest This is what the other Gigafactory looks like - Fortune
�
1/1/2015
guest Foghat, I'm glad you're following SolerEdge, too.
I just listened to their fiscal Q4 2015 conference call. So here are my highlights.
They have had an amazing quarter and year. FY revenue is up 144% over prior year, and gross margin is at 28.7%. EPS is $1.09, so the SP has shot upto $32. (I regret that I own but 100 shares!)
The Tesla-ready inverters will come on market calendar Q4 this year. This is right in line with Powerwalls hitting the market as well. SolarEdge seems quite proud of their partnership with Tesla. I love this for the Tesla ecosystem.
They have been using a contract manufacturer in Hungary and have successfully built out a fully automated line. They are excited about developing automated lines in different regions.
They are building their own factory in Mexico. This will use automated lines. It will reduce shipping costs to North America.
Finally, they have brought commercial inverters, 25 to 33 kW range to market. They have had great success with residential segments, and now this will expand their reach into the commercial segment.
So all these points are good news for SolarCity. The Tesla-ready inverters will support both grid-tied and backup solar applications. The fab in Mexico should reduce transport costs for SolarCity and may coordinate well with expansion into Mexico.
SolarEdge is growing faster than the industry and faster than even SolarCity. Thus, rolling out automated lines needs to be aggressive, far beyond the Mexico plant. I have a hunch that Tesla's Gigafactory or SolarCity's Riverbend (or thereabouts) could become a host to a few automated lines. This connects with Musk's factory-as-a-product view. SolarEdge can satisfy customers by setting up dedicated lines with its customers. So this is my speculative prediction, and you've heard it here first.
Finally, SolarEdge's advances in commercial scale inverters could support SolarCity's efforts to grow in that segment. I'm very excited to see strong technological leadership here. SolarEdge is clearly on the distributed side of the solar industry. They will help close the price gap with utility solar.�
1/1/2015
guest Though not much of a price change, After Hours trading is over 500,000 shares, Seems like a lot to me!�
1/1/2015
guest So what happened to SEDG an hour ago to make the price drop back down on high volume?�
1/1/2015
guest I wish I knew. I searched Google news, but did not find anything.�
1/1/2015
guest SolarEdge now down 7.4% post-earnings; downgrade, target hikes arrive - SolarEdge Technologies (NASDAQ:SEDG) | Seeking Alpha
This has some information on SolarEdge, but none of it explains the severity of pullback.
Honestly, I'd like to see Tesla acquire SolarEdge to round out Tesla Energy. Short of that I'd like to see both Tesla and SolarCity each do manufacturing line JVs with SolarEdge. Given Tesla's secondary today, I am tempted to fantasize that something like this may be in the works. The market cap on SolarEdge is just $1B. So with $500M cash in hand, Tesla could make a solid offer of cash and stock. So if the stock price on SolarEdge should crash, I am not worried. It just makes for an easier acquisition.�
1/1/2015
guest NV Energy: We Support Solar, No Solar Jobs Will Be Lost | Nevada Public Radio
2 audio interviews on this page. Both fascinating. Sunrun representative eviscerates the NV energy rep. It is painfully clear buffets position is about to get blown out of the water. If not by the PUC, under federal law of the Sherman act. It will happen.
I can't believe NV energy argues whole sale utiltiy solar is the same as retail roof top solar, so they should pay he same price for net metering. Anyone with a pea brain can see right through that fallacy. There is a whole lot more in the interviews. At one point the nv energy rep says he's just a little old engineer and can't argue as well as the sunrun rep. That says it all....�
1/1/2015
guest Hah I listened to one interview and missed that line about being an old engineer lol. It was crazy hearing him say they were pro solar though! He also said neither NV energy or Berkshire Hathaway was motivated by profit ....�
1/1/2015
guest
Listen to the second audio interview down the page... It doesn't get any better then that.
my goodness ... Nevada state assemblywoman Kirkpatrick sounds like a babbling drunk arguing with Lyndon rive in this following video of nv energy bill covering net metering(scrub to 36:40 minutes from the end of the video):
05/20/15 - Assembly Commerce and Labor (1258) - Room 4100 - May 20th, 2015
Im serious... You tell me if you think she's sober... If so, she doesn't make a lick of sense and is exceedingly hostile(as is the other assemblywoman that attacks and then cuts off Lyndon Rive). She/they are an absolutely is a disgrace to the state of Nevada if this is the way she/they goes about deciding the development of energy policy, complete embarrassment. Especially when she starts talking about selling a pallet of croissants... My mind is thoroughly blown.
This entire thing needs to be settled once and for all on the federal level with serious intent and consideration. Sanity needs to come to the rescue.�
1/1/2015
guest The U.S. Military is the single biggest consumer of fossil fuels on the planet. They are quickly leading the renewable transformation of their energy production and consumption infrastructure... And it has more to do with improving the tactical/operational capabanilites then anything else.An army lives and dies on its feet. They are mobile. It's ability to set up command operations quickly and efficiency is the difference between winning and losing, especially in assymetrical warfare. (Ie Iraq and Afghanistan)Moble Micro grids are an absolute tactics/operational advantage over the enemy combatant. To set up mobile pv and storage systems with a forward operating base would reduce the need for long logistical tails for energy production as well as reduce heat, noise, and physical signature.In addition, electric vehicles also provide significant tactical/operational advantages such as reduced signatures, reduced supply tail and sustained reliability and endurance in a high op tempo environment.Both micro grid and electric vehicle capabilities save billions in costs which adds to the ability to equip and train a combat ready force in the most effective manner.To say it another way, the United States military is alligned with the mission and goals of both Tesla Motors and Solarcity. And when this is the case, the tranfromation to a sustainable consumption and production economy is undeniable and all those that refuse to adapt will be left by the way side like many antiquated business models in our nation's past.�
1/1/2015
guest Current stock price revolves mostly around the Nevada decision right now. That "tariff" decision is scheduled to come next week.Distributed solar is most likely going to hit the cap next week so it will be a significant advantage to Solarcity and the rest going into this "tariff" decision.The reason it's advantage is because of the lack of time to fully digest the 500 page NV Energy tariff doc submitted two weeks ago. It is not in the best interest of anyone to fire-hose through a decision when they can just continue current net metering policy under the new "tariff" label. This will give the PUC to go through the required due diligence to come up with a renewed net metering structure on January 1st. Expert has already gone on the record showing a non effect on costs over the next three months of new net metering even if it hits 50MW over that time frame, which would be a significantly aggressive accomplishment if achieve by DG installers.Based on Sunrun's Bryan Miller's comments, it appears the PUC is seriously considering continuing the current net metering regime until the December 31st decision deadline(if they don't decide sooner).This effective extension of current net metering under the interim "tariff" label will be a huge win for Solarcity and the rest. We should see a nice jump in the stock next week after the decision comes down. Then, as the process unfolds for the new rate, the stock should continue to move up if DG solar benefits are determined to be greater then the costs. The Nevada PUC commissioned a year long study on net metering and in 2013 officially determined net metered DG was a BENEFIT to all rate payers. Hard to dismiss actual data if you're NV Energy and especially the PUC that came this conclusion 2 years ago already.�
1/1/2015
guest Thinking just a little bit more about a possible SolarEdge and SolarCity JV, I wonder if it makes any sense to pre-install power optimizers on panels. Suppose there was a JV at the Riverbend plant so that inverters and power optimizers were built right next to the solar panels. Perhaps there is some way to pre-install the optimizers at the plant to reduce installation labor on the roof. I suspect there would still be a need to be able to replace optimizers on a different schedule than the panels, so you don't want these to be too tightly integrated. Just thinking out loud.
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Let's keep in mind that Powerwalls are a policy hedge against things like the loss of net metering. Tesla will start deleveries in Q4. While the supply of Powerwalls are limited, I think SolarCity should make strategic use of them in areas where net metering is denied. This deprives the utility of the benefits of net metering while SolarCity is able to continue to build its customer base. Moreover, Nevada has a lot of people dwelling in pretty remote areas. Many of these would probably put a high premium on nearly off grid selfsufficiency, and just imagine how much the utilities have had to spend to get power lines to these remote spots. So Powerwall could really be a game changer.
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And imagine the optics of NV Energy fighting Powerwall batteries built in Sparks, NV.�
1/1/2015
guest
Elon already hinted that he's going to co-locate energy storage lines in buffalo at either the 1GW factory or at the future 5GW factory. From the comments of solarEdge CEO, he is also indicating co-locating production lines. However, there maybe a Mexcio factory where by which it is totally possible Solarcity co-locates module lines. I think the concept of "co location" has been a central theme of the Nevada gigafactory and Elon is very deep in the details of how to reproduce the "gigafactory as product" product across all his endeavors including Solarcity.
As far as the powerwall hedge... Net metering is not going away in
Nevada. In fact, the current sb 374 bill was passed to permanentlay lift the cap on net metering, to create unlimited net metering. So, no it is a matter of determining the benefit and cost of net metering on the grid. If it is a cost then net metering will return less per kWh to solar owners. If it is a benefit, the return per kWh will remain the same or even INCREASE, which would be a total back fire/blow back on NV Energy tactics. The only reference the Nevada PUC has is the study that proved net metering a benefit to all customers, so it is already an uphill battle for NV Energy. so, powerwall won't really be a hedge if PUC does its due dilligance.
However, powerwall is about the next generation grid structure. It is much bigger then net metering debate. The powerwall + pv product is far more valuable to every single rate payer, including all utilties. It is undeniable the impact of aggregation on reducing costs to retail customers as well as reducing significant costs while increasing reliability to the grid infrastructure. Bottomline, Solarcity powerwall+pv product is only the beginning to the inevitable development of a new grid that will ether include current utitlities or not. Nevada could be one of the first to adopt this structure successfully and see consumer retail rates decline in a meaningful for the first time in history.�
1/1/2015
guest CPUC Thought Leaders Series
This was yesterday. There is supposed to be a video webcast on the website, but the link isn't working.
August 13th, 2015, 2 p.m. � 4 p.m.: A panel discussion of the options for a 21st century electric sector. The Advanced Energy Economy Institute (AEEI) convened its industry members to produce a position paper outlining a broad vision for California�s future electric system, which will be released on August 11th. On August 13th several of the paper�s key working group members will participate in a panel discussion to examine how stakeholders in California can move forward in a more integrated fashion to achieve some of the industry�s objectives as well as the state�s important energy and environmental policy objectives.
- WHERE: CPUC Auditorium, 505 Van Ness Ave., San Francisco; also available in real-time and archived via video webcast.
- WHO:
- Peter Rive, Founder, Chief Technology Officer, SolarCity
- Tom Starrs, Vice President, Market Strategy and Policy, SunPower
- Ted Ko, Director of Policy, Stem
- Dave O�Brien, Director of Regulatory Strategy and Compliance, Bridge Energy
- Jeff Lo, Vice President of Business Development, Gridco Systems
- Elisabeth Brinton, Vice President, Corporate Strategy Officer, Pacific Gas and Electric Company
- Introduction by Steve Chadima, Senior Vice President, Communications & Director of California Initiatives, Advanced Energy Economy
- Moderated by Tony Brunello, President and Founder, More than Smart
�
1/1/2015
guest Thanks, Foghat. If Powerwall is not needed as a hedge, that's a good thing. So if I understand you correctly, the SB 374 bill keeps net metering with the provision that it be adjusted for the net benefit on the grid as determined by some third party, right? If so, then solar owners stand actually to be even more highly compensated then under current net metering, if the third party determines there is a net benefit. That would be totally awesome and could strike fear in the hearts of other utilities trying to kill net metering.
Given the romoteness of much of the state, once you get out of Las Vegas and Reno, I would think that distributed solar creates a lot of value by reducing the T&D burden. I think we should drill into this. I've heard that it costs about 0.5 c/kWh/100 miles to transmit power. So outside of the urban areas we are talking several cents per kWh to transmit power from generation to remote community. So distributed solar in those can avoid these operating costs. The fixed costs for these power lines have got to be enormous for serving small communities with say fewer than 100 residents.
So the net benefit to the grid may also open up ways for SolarCity to develop microgrids. These remote communities may be better served at lower cost to the grid using microgrids. Maintain a small power line from grid to microgrid sufficient to supply average daily power needs. Then anchor the microgrid with a few Powerpacks to handle peak power draws. And finally generate as much local power as is cost effective. Thus, the community could manage in island mode, and it could also manage stricky supplied from the grid. But the upshot for the utility is minimizing the cost of the powerline, especially maintenance costs and redundancy for reliability.
So back to politics, if net metering gets adjusted for net benefits to the grid, what do you do with potential benefits to the grid? That is is SolarCity can show an even greater benefit to the grid by means of microgrid services, can they actually provide those services and get properly compensated for it. If not, you run into a legal problem. That is, the utility is depriving solar owners the net benefits they would otherwise get, if the utility were to make certain infrastructure changes. So is the utility is refusing to make upgrades comparable to what SolarCity can provide, then they could be sued for depriving solar owners net benefits. The natural way out of this sort of lawsuit is to contract with SolarCity to provide these services or to make those investment themselves. So this kind of legislation could open up some unexpected challenges. If the utility operates the grid in such a manner that it destroys the net benefits that would otherwise accrue to distributed solar, what recourse is there? It seems that the situation would invite lawsuits, if remedies are not clearly spelled out.�
1/1/2015
guest Jhm,
absolutely on the micro grid and other applications Solarcity can provide. In light of the current multi day power outage in Henderson right now(100+ degree temps), solar and powerwall are becoming even more important and inevitable as a viable option for Nevada residents.
Solar Panel Antitrust Case May Test Monopolization Law - Law360
solarcity's SRP lawsuit is now being discussed as a significant challenger to utility monopoly law. This, again, will set a nationwide precident for all future utiltiy challenges against DG solar and net metering. Solarcity will whack them all in one legal punch. If it works, major boost to stock as well as other DG's stocks.�
1/1/2015
guest I've been using the term "JV", but "co-location" is probably a better term. Where did you get this hint that Musk wants to co-locate some battery production with SolarCity? I did not catch that, but it makes sense. I do think SolarCity could look at Mexico for their next plant. They are already entering that market.�
1/1/2015
guest Why not Europe? In 2012 Silevo was expecting a trifecta: "Looking further ahead, Beitel said that a manufacturing base in Eastern Europe, Asia and the US were within its plans." http://www.pv-tech.org/editors_blog/is_silevo_the_next_sunpower
Also, if that article is to be believed they'd be knocking down 24% efficiency this year and looking beyond. Tied together with the existing capacity in China they could theoretically be at 200MW capacity. Ironically, not far from the existing deal struck as part of the acquisition.�
1/1/2015
guest Not so-related to SCTY, but this kind of initiative could help promote solar: Google Green Blog: Project Sunroof: mapping the planets solar energy potential, one rooftop at a time
That that this might soon be an Alphabet product, not a Google one.
Update: for some reason, Solarcity isn't listed as a provider in the list of local installers (bottom of page).�
1/1/2015
guest This is a nice marketing concept, and I'm sure SolarCity will pay Google to be listed with it. But installers and researchers have been using satellite images to map rooftop and other solar opportunities. So this is not really anything innovative on that side, but it is innovative as a marketing platform.�
1/1/2015
guest SolarCity's Gigafactory in Buffalo Will Come Online Just as a Key Subsidy for Rooftop Solar Is Cut | MIT Technology Review
It's quite disturbing that a prestigious university such as MIT is blatantly doing the bidding of the Kochs, however they did accept a 100M donation from David Koch so makes a lot of sense. This is the second pointedly negative anti-distributed solar article to come out of MIT in the past few months.
The bottomline on the article:
They say net metering is a "subsidy" that shifts cost onto non-solar customers; and, DG/solarcity will fall if ITC taken away in 2017.
They say if we were to continue to subsidize solar, it should be UTILITY level solar, not roof top solar because it's more expensive and again causes a cost shift.
I guess it's not journalistic and/or scientific enough to actually mention that 8 COMMISSIONED INDEPENDENT STUDIES of net metering (the only actual independent studies done on net metering in the nation) conclude it is a net benefit for utilities and not a cost on non-solar customers. I guess they don't count transmission and distribution among many other costs that utility level solar has to add to it before it reaches the end user, where roof top is already at the end user level. That would mean MIT would actually be an engineering school that uses scientific method or actual journalism to evaluate what roof top solar is and how it impacts our energy infrastructure.... but again, hard to do that when your hand is out for "donations" from a guy that has significant interests in keeping distributed solar from growing as it is and actually being a market driven industry that competes for the retail electricity customer dollar.
Also, the state of new york IS NOT subsidizing the Riverbend factory. Solarcity could have gone ANYWHERE. They would have brought thousands of jobs where ever they landed with the factory. EVERY state knows this. They are competing to GROW NEW JOBS in their states and solarcity was a big, big catch. New York negotiated an INVESTMENT with solarcity, to bring those solarcity jobs to the state. Solarcity liked the terms and negotiated a deal with New York. It absolutely shows the bias and lack of real analysis when such an idea is spread in an "MIT technology review." Yet isn't using a veneer of perceived credibility(as in using MIT's highly regarded reputation) a central tenant in the workings of a confidence/con game?
Throughout America's history, we've dealt with the affects of monopolist markets and time and time again we've broken them up to ensure competition is able participate. I feel the end result in Solarcity's anti-trust case against SRP in Arizona where the Kochs are extremely active in their anti-solar/anti-competion campaign will bear this out. I feel it will be the precedent that will set the tone for the rest of the anti-rooftop solar utility actively around the country. Enough is enough with these type of spin articles and nefarious tactics at the expense of a much better energy infrastructure.�
1/1/2015
guest The interest rate for Solar City Bonds has been declining. This is a good thing.�
1/1/2015
guest 5 Things Southern Cos Management Wants You to Know - NASDAQ.com
Well, it's good to keep tabs on what the competition is doing. Southern Company has closed down about 60% of their coal plants. In recent, CC they report that sales and profit are up 3%. The seem pretty pleased about that. Consumption of coal is down, natural gas is up. They are attempting to acquire through ownership and PPAs 3.2 GW of solar by end of 2016, also the end of 30% ITC. Georgia Power, a subsidiary, is forming a business unit to install and lease rooftop solar. They have ambition to install "thousands of panels," which sounds like hundreds of kW to me. So their strategy seems to be to transition to renewables via natural gas. I suppose if they and other utilities can grab enough solar before ITC step down, they may be in a position to drive down the cost of natural gas. Its hard to imagine new natural gas plants being a safe bet at this point, but if natural gas can be squeezed low enough perhaps utilities can make it work. I do get the impression that Southern Company will only be adding renewables and nuclear going forward. Perhaps I'm not reading this carefully, but that would be a positive development.
I do see Georgia Power's attempt to do rooftop leasing as rather lame. I am a Georgia Power ratepayer, and I would never trust them to install solar on my home. For years, Southern Company lobbied hard to keep laws on the books that blocked companies like SolarCity from offering solar with financing in this state. They are monopolist bullies. Now that the state legislature has changes the laws so that non-utility installers can offer financing, they think they can pull off a solar leasing company of their own. Really, I suspect the effort is merely to lock customers into longterm contracts and keep them from doing business with the likes of SolarCity and Sunrun. So I don't buy their sincerity regarding rooftop solar.
If they can keep rates down with a combination of wind, solar, and natural gas, I guess that would be a good thing.�
1/1/2015
guest With SCTY near its low point of support (around $47), is it fair to say it will climb again as we go through the end of this year?
The company only seems to grow and grow, as far as I can see, and they business model seems solid. Surely it's only a matter of time before investors realise SCTY should cost more than it does?�
1/1/2015
guest The record number of shorts would argue against that line of thought but I think this is set up to be one of the great investment opportunities in Life. If Solar City executes over the next 6 months there should be fireworks.�
1/1/2015
guest The market does not seem to understand net retained value. The market cap of $5B on $3.1B retained value is a ratio of 1.66. This seems really too low for a company that is likely to grow retained value by 80% or more for the next couple of years. It's as if the market expects the DevCo to stop creating economic value in 2017. SolarCity should be trading at a high multiple of retained value, but even at a fixed multiple like 1.66 the stock price should grow by 80% or so over the next 12 months. So clearly the market does not know what sort of multiple to go with. Any fixed multiple would at some time connect stock price with growth in the business, which would make for a truly explosive stock. But clearly the market is not looking at SolarCity in this way. I consider SolarCity to be both a growth and value stock, which only can happen when a stock is deeply misunderstood at a fundamental level.�
1/1/2015
guest Jhm,
The market doesn't like revenue uncertainty. That's really what's happening here. Look at the history of the stock drop. Most of what we're seeing is a result of net metering/charge changes and cap's on how much net metering can happen. Think about it, if Arizona utiltiy can shut down the entire market there with a charge or change to net metering, how easy would that be across the entire country? The roof top market is vast only if caps are lifted and stability of charges/net metering occurs. We should be looking at the caps of each state and calculate the actual market size. For example, at current growth rates, California could hit its cap in about 1.5 years... If there is not a policy in place before that, the roof top industry will grind to a stop. Looks at what NV Engery is doing right now if you don't think the cap is an significant influence on the roof top industry market uncertainty. Solarcity may have 40m residential roof tops in their addressable market, but with caps, net metering uncertainties as well as added charge uncertainty, that market is actually only a few million.
The Bottomline is Solarcity and roof top solar need to have legal actions step in and provide the competitive certainty they require against a non legal monopoly abuse of power and position. Until then, Solarcity is significantly undervalued. Significantly. No question about it. But there needs to be some legal intervention to allow the stock to rise to actual value.�
1/1/2015
guest Interesting, didn't know about this. What do you guys think? Seems like a good plan.....
SolarCity Has a New Plan to Make Distributed Energy an Integral Part of the Grid : Greentech Media�
1/1/2015
guest
It's all about that aggregation. Here is a website Solarcity just put up about it. "Grid Engineering" page:
Grid Resiliency – Distributed Energy Resources| SolarCity
"With the increasingly widespread deployment of distributed energy resources (DERs), the operational characteristics of theelectric distribution grid are evolving. Many utilities worried about the real and perceived impacts of DERs on the grid arespecifying equipment upgrades to mitigate their concerns. However, these mitigation requirements are often based onoutdated standards created for traditional distributed generators (i.e. rotating machines) or made without regard to theadvanced capabilities of modern DERs, which can often preempt the concerns underlying the proposed mitigations. Theresult is that utilities are requiring overly conservative, often unnecessary and ultimately costly upgrades as a condition of DER interconnection. A reexamination of these traditional approaches is needed. "
It's going to be hard for utilities to argue against the value of roof top solar to ALL RATE PAYERS once this information becomes wide spread and evaluated by commissions and stake holders. Net metering is going to change to reflect the ACTUAL VALUE roof top solar provides, and that means more for each kWh produced, not less.
At the end of the day, after all these battles with certain utilities have been fought, the facts are facts, the numbers are real, appropriate compensation for roof top solar will happen regardless of the rhetoric spewed. The evidence is just overwhelming and indisputable and can't be undone.�
1/1/2015
guest
nice.�
1/1/2015
guest http://investors.solaredge.com/phoenix.zhtml?c=253935&p=irol-eventDetails&EventId=5199605
If you're interested in SolarEdge, I would recommend this Web cast from Canaccord. Explains both technology and growth strategy. Very nice overview.
Note that SolarEdge has an headquarter in Fremont, CA. They are not interested in any exclusive partnership with Tesla or any other company.
Regarding technology, there is a good description of their strategy. Traditionally inverters have done two functions, optimize DC power and invert DC to AC. String inverters put multiple panels on a single inverter but where there is variation in power from panel to panel, the string voltage drops to the lowest and power is lost elsewhere in the string. Microinverters get around this by having one small inverter per panel, but this is costly and and a critical component in the inverter ages more rapidly when installed outside with the panel. So SolarEdge breaks down the inverter into two components. There is the power optimizer which is mounted on the back of each panel and can be monitored separately remotely for performance diagnostics. Then multiple power optimizers feed into centralized inverters. These inverters are shielded from the environment for longer life and are more easily replaced after 15 years. These inverters are simplified in that they do not need to perform the power optimization function. So both optimizers and inverters are simplified and reduced to minimal size and cost. The architecture is able to realize the benefits module level optimization of Microinverters with the cost and longevity of centralized inverters with string inverters. They claim to have the lowest LCOE (lifetime) cost in the business.
Moreover, this technology is scalable and the are working on next generation larger inverters for commercial and utility applications. They point out that there is not yet a truly major player in the commercial installation space. They seem to have hopes for SunEdison, but of course I'd like to see SolarCity get deeper into this segment.
In terms of co-located manufacturing with SolarCity, it seems desirable to install power optimizers directly into panels at the factory. The inverters could be manufactured elsewhere, but the optimizers may well benefit from co-location.�
1/1/2015
guest Sorry for the noob question, but what does the acronym DG stand for in this forum?�
1/1/2015
guest I believe DG stands for Distributed Generation�
1/1/2015
guest Distributed generation. Also DER is distributed energy resources.�
1/1/2015
guest There is no truly major player in the commercial installation space in the past. Solar city was the largest installer but It sounds like they are about to become as dominant in the commercial sector as they have been in the residential! I hope the q3 and q4 numbers show some large commercial installations.
I am expecting both of them to break Solar City records on commercial installation and for q4 to really go nuts.�
1/1/2015
guest Possible to see a good day for Scty tomorrow. Arizona commission pushed Aps rate raising decision to the hearing process, which is estimated to last until as far out as May 2016 as of right now. The big ticket item will be a value of roof top solar, cost and benefits on the grid analysis. Sounds like if the analysis is done by an independent third party, solar industry is confident they will find roof top solar a benefit to te grid and not a cost shift in any meaningful way. Arizona utitlity's entire reason for a rate increase is based on a cost shift by solar; however, if roof top solar is determined to be a benefit to the grid, then the entire Arizona utiltiy arguement for a rate increase is blown away.Overall, solar installs will continue in APS service territory as they did yesterday and look to continue as such through the end of the year. Solarcity will continue to operated at full steam ahead. Worst case scenario avoided. Market ought to respond in kind.�
1/1/2015
guest Ra be pleased. Otherwise, some smiting would be in order.�
1/1/2015
guest God-parity
Why will be the end of centralised generation : Renew Economy
When rooftop solar becomes less than the T&D cost of the grid, Ra will be pleased. This is dubbed, "God-parity." We've been discussing it quite a bit here. Nationally, T&D is about 5c/kWh. So rooftop has a way to go, but is is coming. Not mentioned by this article is that the battery cost of storage also is headed below that threshold. When that happens, the grid becomes an expensive form of storage, think net metering as a way to use the grid to store energy for later consumption. This is the folly of utilities fighting net metering.�
1/1/2015
guest This is great news, So it does not matter that they are about to hit the net metering cap? I was a little concerned if Arizona shut down solar as well.�
1/1/2015
guest Foghat, you seem to have the right idea as to why SCTY has been suppressed for this long. It has puzzled me quite a bit. The regulatory uncertainty is a sure risk, especially net-metering battles. You are very right that we are looking at the addressable market the wrong way. The addressable market is capped out at where net-metering caps are. Behind the meter generation+storage is really long ways away from being economically compelling for vast majority of the market. Solar aggregation is really a slow process in my view as that involves utilities. I hope to see some positive news from Arizona but market seems to be seeing the opposite.
Worst case scenario, what's the end game here? SCTY gets locked out gradually as net-metering caps are met in various states. Maybe SCTY can keep going to more states and more countries. Or maybe SCTY can get into utility solar projects. What about commercial/industrial applications. Is net-metering that crucial there? In other words, is there sizeable addressable market behind-the-meter there?
Sure in 2030 (or whatever year) net-metering won't matter. Panels + Batteries will be so efficient and so cheap that utilities will no longer be needed for a sizable addressable market. But until then what's the game?
What's each of your worst case scenarios? Would love to hear your opinions.�
1/1/2015
guest
Well, the key with net metering debate is a value of solar study by an independent organization. It is clear utilties are not liking this idea because the 8 independent commissioned studies out there now show the benefits outweigh the costs to all rate payers on the grid. In light of this independent evidence, utilties can not claim solar users shift costs onto non solar customers.
right now, many utilties are saying there is a cost shift without any sort of objective study on the value of solar. It's like they are saying that it is a cost, so everyone has to believe it as fact. So, inherently, utilties are starting from a weak position. it is a matter of getting more support for DG benefits from more and more studies to use as a baseline to judge what "cost shifts" are happening. Again, the entire foundation of utitlies arguement is around net metering cost shifting to non solar. If that turns out to be not the case, then utitlies will lose their entire ability to arbitrarily raise new charges, or reduce net metering rates.
Arizona APS, as far as I know, is NOT a capped net metering program, so Solarcity could turn as many rooftops solar as physically possible between now and the end of the hearing process, which last into 2016. Then, after the net metering benefits study concludes net benefits, we could see another boom to finish out the ITC into 2017. Let's not forget, the ITC could be extended again or end up being greater then 10% so that would be a massive boon. 2016 is going to be a wild year, my opinion is it will end up very positive for Solarcity.
I think aggregation is going to be a reality sooner then you might think. It clearly is dependent on tesla energy production ramp. If tesla can pump out a lot of batteries next year, and Elon has already indicated they potentially are looking at $500mln in 2016 sales, then Solarcity will easily install well over 10k solar+storage systems. In california right now they are discussing how to integrate these assets into the grid, ref: Solarcity white paper on their gridx website. From that white paper, Solarcity has already gamed all the questions utitlities will raise about costs. Solarcity has also outlined all the mitigations to those costs. also, they will be working under PURPA, not net metering with solar + storage so they bypass the net metering issues.
My feeling is that Solarcity is well ahead of the game here and will implement solar+storage next year in large numbers, which will override many of the net metering/cap delays utilties want to make happen. Specifically in California they are already working to implement this new DG program and its my belief california will go the DG priority order idea route. Along with New York, and possibly Hawaii, there will be overwhelming evidence for this new energy structure for the rest of the country to follow.
the Massachusetts cap is being doubled, the New Jersey cap is also being raised, and New York is sure to follow since they are already booked to hit the cap in many utiltiy territories already. So, the cap issue seems to be being address by various states already.
I feel the rest of this year will be volatile and 2016 will be no different, but as the evidence rolls in on the value of solar as well as Solarcity's plan being worked on in.california a good year and half ahead of the california cap being hit, we might really see a strong response on the market.
For me, I continue to accumulate shares at these prices as much as possible. Believe me, I've had opportunities to put my money elsewhere and make more over the last year or so, but I'm making the bet this works out over the next 2 years in a really big way... And continue for literally decades to come. I'm obviously in the long game here.�
1/1/2015
guest I think the big factor driving down solar right now is the crash in oil prices. Oil is down about 3% today hitting 42$/bbl, while solar ETF TAN is down 4%. TAN is exposed to the global solar market, so regulatory issues in certain US states should not weigh in too heavily.
I've been working on a theory about what is happening in oil, but am not prepared to elaborate it at this time. Let me give you a sketch. Fracking natural gas has driven the price of natural gas down about 90%. Both natural gas and coal have come down about 75% in the last five years, but the decent of coal started just four years ago. I believe that the decline of natural gas has put economic pressure on coal. There has been a lag in switching due to the time it takes to replace coal plants with natural gas plants. But as this has kicked in the price of natural gas has stabilized while coal has fallen. Just before old began to fall natural gas began to tumble again along with coal. So while the substitution of coal was supporting natural gas prices, the competition between natural gas and oil products was held at bay. Now the natural gas is falling again, it is displacing demand for oil. This is why oil is crashing, and I believe oil may need to fall to about 25$/bbl to reach parity with natural gas and stop the substitution.
But here's the really funny thing, why are both natural gas and coal prices falling? If it was just a matter of coal reaching parity, then the falling would have stopped over a year ago. It very well may be that wind and solar are continuing to erode demand for both natural gas and coal. With the cost of solar continuing to fall there may never be floor for natural gas, coal or oil. All these fuels will jokey with each other for share in an ever shrinking market. So the question for the solar investor is whether fuel prices can fall fast enough to slow solar. I do not believe this is possible, but I suspect that many investors do believe this. And so solar stocks will decline as oil plummets.�
1/1/2015
guest SB374 Net Metering Cap
NV energy net metering cap will be hit in a couple of days(maybe sooner)... Just when the Nevada commission meets to workshop the interim tariff. That meeting on Friday will be high drama because if they dont come to a agreement on an interim net metering/tariff plan the entire industry comes to a grinding halt that day. No one will be able to sell a single system. All sales operations will halt in the entire state. Solarcity Addressable market in Nevada goes to ZERO. Massive implications on Friday.
The best case scenario is that that they continue current net metering under the interim tariff decided on Friday. This interim tariff would last up to the start of 2016.
again, if they extend the current net metering under the interim tariff structure, the stock will see a big boost this coming Monday. If not, will continue to see these bottom feeder stock prices.
possible that they hit the cap tomorrow even... In that case, this could be new lows for Scty this week since possible many days of no sales ahead which could translate into reduced bookings going into q3 report and lower revenue and install potentially in q4. And this is just if they continue the net metering in the interim... If they decide to tack on fees and reduce net metering it could be far worse. Again, this is if Solarcity hasn't already adjusted sales mix to other states in anticipation of a potential worst case scenario.�
1/1/2015
guest Does Scty break out sales by state anywhere? I am curious what percentage of their sales come from Nevada.�
1/1/2015
guest the guy who does the daily aggregation of articles for ASPO (assoc study of peak oil, ex CIA analyst tom whipple, has link to intriguing articlethat posits that oil companies have been divesting of oil fields and essentially 'renting" as they are rapidly declining assets
A Must Read: Guest Post by Ian Walker | Sifferkoll®
"....If you had been taking any notice you would have seen Big Oil have been selling of theirOil Fields and getting out of the oil field asset ownership market since September 2011.Is what I am writing true?
Why would they believe the Fossil Fuel Age has ended?
It is basic due diligence to find out what the big players are doing. So do a Google search for any oil company name and the phrase �Oil field� and the words divest or sell. You will see evidence like the following: SHELL
Shell has been on a massive divestment strategy on its oil field assets, from Africa to the Far East since September 2011, though as it was already tracking the Black Swan...." and on. (it does go into LENR speculation but the divestiture seems real)(LENR low energy nuclesr reactors) and this is why prices are crashing�
1/1/2015
guest Some nice news from New York:
BUFFALO, N.Y. -- SolarCity's facility in Buffalo is expected to create about 3,000 jobs, but Wednesday, Senator Charles Schumer said there's potential for even more. He was in town talking about solar energy, and more specifically, a way to help companies better use a solar tax credit they already qualify for.
Schumer said currently, solar energy accounts for less than one percent of all U.S. electricity production.
"Our country has set a goal of 28 percent of our energy coming from renewable sources, solar, wind and others by 2030, so we have a long way to go, but that means more jobs, and more solar panels right here," said Schumer, D-New York.
Schumer said an important change needs to be made to the 30 percent federal solar investment tax credit; to incentivize businesses to start solar energy projects.
"The problem is, you can't take the credit til the deal is finished, so if it's a three-year project and I'm putting solar panels on my property, I've got to wait the three years."
Schumer is instead calling for the solar credit to follow the same rule as the wind credit, which would make it available to businesses and developers when their project begins.
Another problem is the tax credit is scheduled to expire at the end of next year, so Schumer wants to see it renewed for as long as possible, to benefit companies like SolarCity.
"We're always preparing as a company for the eventuality that the tax credit were to drop down or go away, but if folks want to see the jobs continue, the expansion and lowering of costs that come with scale, this is the most important policy for the entire solar industry," said Scott Hennessey, Regulatory Counsel and Federal Policy Director for SolarCity.
Schumer said he's going to use all his clout in congress to make this happen.
"This will help secure the domestic market that the panels from this plant will serve," said Hennessey.�
1/1/2015
guest Interesting. Looks like building that plant in Buffalo might end up being an important political card on SCTY's hand, possibly more important than its pure economic implications.�
1/1/2015
guest The divestiture idea seems credible, but the LENR thesis is too far into conspiracy theory for my taste. It is simply irrelevant if some new energy source could emerge and fully power the earth by 2045 because this is the same timeline in which solar and wind can do the same thing, and these technologies are already having a direct economic impact.
Furthermore, the economics currently at play are sufficient to motivate astute investors to divest from oil. Consider that natural gas has entered a period of rapid price decline from mid-2008 through 2011. While oil and coal recovered from the oil crisis in 2008, natural gas continued to decline. During the recovery from 2009 to 2011 oil & gas and coal industry rebounded coming to a bubble in mid-2011. At that point in time, coal went into perpetual decline as coal sunk toward parity with natural gas. But also at that point oil & gas began to recover and climb. The important thing hear is that big oil got to witness what was happening to coal. The glut of natural gas was undercutting the price of coal. At this point an astute oil investor could read the writing on the wall. Oil would enjoy a few more years good prices while coal was gutted, but after after that transition, natural gas would continue to fall and undermine the price of oil. To be clear, in 2011 the price of oil was about 4 times higher than the price of natural gas on a per unit of energy basis. That kind of premium cannot last for ever.
Now we have to wonder why would the oil & gas industry rush headlong into a natural gas glut. Was there a deliberate aim to create a natural gas glut or did it just happen as the result of competitive forces? I don't think we need to invent some secret energy technology here. Rather, the threat of solar and wind was quite real. All sorts of alternative energy investments were flourishing through the energy crisis of 2008. We were in the midst of an oil war while the high price of all energy sources was throwing the global economy into a massive recession. We simply could not afford for energy to get so expensive that it destroyed productivity. So it is plausible to me that creating a natural gas glut could have been a strategic move to put the breaks on renewable energy. Specifically solar had been declining in cost per Watt by about 15% per year. So it was just a matter of time before the electrical market would be breached. This prospect would undermine the economics of conserving reserves holding out for a high price. In 2008 it could have been surmised that natural gas had only about 15 years left in the electrical market. Rather that watch untapped reserves lose value in the face of solar, the gas industry may have decided that they must bring as much reserves to market as possible within the time of economic relevance. If natural gas could undercut coal, it would serve two purposes. First it would bring those reserves to market. Second it might just slow down the advance of solar and wind. So this is the economics of divestment and it really requires no conspiracy to explain the phenomenon.
So the gas industry began to flood the market in 2008. In the US the oil industry begins ro frack like there's no tommorow. The coal industry gets undercut and enters perpetual decline in 2011. In 2014, the Saudis stop supporting the price of oil, and the economics of divestment are in full swing. Refiners will keep the price of gasoline and diesel high for as long as they can. Utilities will keep the retail price of electricity high as long as they can. But plug in vehicles and rooftop solar are really the only foil to their plan.
So the economics of divestment are upon us. The fossil industries are just trying to slow the pace of transition, but this is how we know we are winning. We don't need to get neutralized by conspiracy theory. The truth is out there with plenty of sunlight shining on it.�
1/1/2015
guest Oil and parity with natural gas
Today WTI crude oil closed at $40.70/bbl and natural gas at $2.71/MBtu.
So what price of oil would be a parity with natural gas per unit of energy? Well, the energy in a barrel of crude, the Barrel of Oil Equivalent (BOE), is 5.8 MBtu. Thus natural gas is $15.72/BOE = 5.8 MBtu/BOE � $2.71/MBtu.
So let's jus round this up and say that for about $16 of natural gas you can get the same amount of energy in one barrel of oil for about $40. Oil is trading at 2.5 times the price of natural gas per unit of energy, and this is not even considering the refining costs and additional energy needed to make usable fuels out of crude. Crude would need to drop another 60% to reach parity with natural gas. Differences in the distribution and refining costs may preserve some premium of oil over gas, but clearly there are opportunities to save money by switching from using oil based technologies to natural gas or electricity based technologies. Thus, substitution will continue to drive down demand for oil.�
1/1/2015
guest Rough day for the sector. CSIQ beat estimates but got hammered -20% off weak guidance. Like most shoppers I love a good discount & accumulated a little more today.
Patience is a prerequisite for owning SCTY. Great story, love the long view.
Re: Buffalo story upthread - Chuck Schumer may not be everyone's cup of tea, but by category definition the senior Senator from NY carries clout. He bikes around Brooklyn virtually every weekend; you can expect him to be a champion of alternative energy & sustainable transport�
1/1/2015
guest @JHM
I agree. I apologize for being remiss in not saying stop reading when you hit the line about LENR. the data for oil field divestiture seemed OK. something is going on.
you can look at the data on the ?exponential? growth of wind and solar in the last decade where you need semilog paper to graph a straight line. (I have been a firm beliverer in PV since way back in time and the "Douglas-Martin Sunscreens" and have had PV on my roof since 1999, and beklieve with my money
- - - Updated - - -
@JHM, et. al. have you read the paper, "the economics of load defection" by RMI http://www.rmi.org/electricity_load_defection (free download) nice study on PV and batteries ala SCTY (apologize if previously mentioned)�
1/1/2015
guest This is it?
Edit: this is a serious question. I appreciate jhm's posts immensely.�
1/1/2015
guest "We know we're winning"
Precisely. All the age-old alliances are breaking down in front of our eyes and the rats are scurrying purely in self-interest. OPEC is unhinged, we're barely talking to the Saudis. Once the world has had ample time to educate itself on all the options and the implications of those options, it's over.
The next great piece of entertainment will be watching the monied interests fight over financing distributed renewables before the traditional capitalist model breaks down. If there's no energy source to hoard, how am I going to hoard at all? BUY! BUY! BUY!�
1/1/2015
guest Those are important comparisons to remember, Jim, but it's also critical to keep in mind where substitutions can be made. There are in North America, for example, very few electrical generating stations that haven't switched to nat gas from diesel or other crude derivatives {am excepting the many thousands of 3-50kW generators we still have scattered throughout Alaska - am listening to my neighbor's as I type this....
So where is substitution still possible?
*Fuel oil for space heating does remain important in some parts of the continent: northeast US, a little of eastern Canada, Alaska again. The construction of gas pipelines, from arterial down to home delivery, is however far more difficult (read: expensive) in long-developed regions than it has been where tens of millions of homes have been erected in the vast subdivisions of the post WWII era. That expense is an ever-present significant barrier to entry for the competing product.
*The revolution to turn esp. the US trucking industry to LNG definitely is one area where substitution could play a role; the most formidable player, however, Boone Pickens's Clean Energy Inc. (CLNE), has gotten almost nowhere in well over a decade of trying.�
1/1/2015
guest Yes, this is the basic theory. I'm still working out details.
My analysis suffers from the fact that I was using ETFs as a convenient way to prices. Unfortunately, UNG and USO are subject to contango, where futures prices tend to be at a premium to expected spot price. So these EFTs lose value more quickly than spot prices. So natural gas prices in 2015/7 fell to 2.84 from 4.63 five years earlier, a decline of 39%, while UNG fell to 13.04 from 51.024, a decline of 74%. Sellers of future obtaining an annual yeild of about 19% over the five years. Some of this yeild may be justified as storage costs, but I also suspect that this yield has also helped finance gas development and production.
This sort of contango also impacts USO and crude. By any metric however natural gas and oil have been falling, so the qualitative argument I have made is still intact. The basic idea is that if you are sitting on 50 years worth of reserves and a technology comes along that can make these reserves worthless in 20 to 30 years, you start drilling like there's no tommorow.�
1/1/2015
guest Foghat, any news in AZ and NV?
Looks like we are getting into trouble in CA as well:
SolarCity CEO Lyndon Rive Makes the Case to Continue Net Metering in California : Greentech Media�
1/1/2015
guest bah! a second faster than me SBenson!�
1/1/2015
guest
Its funny when watching the NV legislature video (in may) over the Nevada cap issue, the key proponent of the bill said they picked dec 31 date because the rooftop solar people they would hit the cap BY September and NV Energy said solar would hit the cap by March 2016. She she split the difference and chose dec 31. It is mind boggling how incompetent they are in Nevada. They just decided to split the difference instead of hearing the reasons why solar said BY September they will hit the cap(which has clearly happened). More deviously, NV energy said March 2016, when clearly that was massively way off. That's the fundamental problem of one company controlling the energy business of a state. They can say and do whatever they want and no one can challenge the validity, now they've purposely put local jobs at stake for their unlawful gain. The cap is now set to be hit on Saturday, which I'm betting it will be hit Friday or maybe even today. They are supposed to come up with an interim solution on Friday, so will be a very significant decision in a very real immediate way with significant consequences literally the moment the decision happens. If they continue with the current net metering rate, then solar sales continues as normal right away. If not, immediate layoffs will happen on Friday... You just can't support a sales infrastructure for current growth rates with no sales happening anymore, so the lay offs will come rapid fire. This entire conflict and crisis was manfuctured and supported by the NV legislature and including the Governor for not stepping A LONG time ago. This has antitrust written all over it. Not just that, it also has interstate commerce written all over it. The state of Nevada could see federal funds being frozen and or discontinued as a result in my opinion.
Arizona is now going to start its hearing process. Two of the new commissioners were given $3mln by the utiltiy for their campaigns for election... How perverse is that the utitlity can fund campaigns of the very people that are "elected" to oversee their conduct and protect consumers? Low and behold, both these commissioners voted against the solar supported and logical decision to conduct any rate changes for solar under.... Wait for it... The upcoming rate case review! Arizona has anti trust written all over it just for this reason alone. Ironic that ARizona is supposedly about free markets and free people, but yet is bought and does the bidding of unfree market monopoly that cares only for a few not Arizona's rate payer.
We we ought to see how APS plays this "hearing process." If rooftop solar is able to have an independent study conducted to evaluate the cost/benefit then they will surely win the net metering debate. If the utiltiy is able to control the cost/benefit study then it's a forgone conclusion, solar will be shutdown in he state. TEP has already started intimidating their rate base by sending out messages saying if you go solar, you may not be grandfathered and have to pay the new solar rates of you do(which is absolutely false and untrue). The commission just slapped them on her wrist and said don't do that... This is a clear breach of consumer rights and should have been fined and ordered to message all rate payers on what thy did. But yet nothing. This clearly a hostile environment condoned by he commission, legislature, and governor. Again, antitrust and commerce clause written all over it.�
1/1/2015
guest This is all true, but in a near zero sum game a few points of net substitution and really move prices. Certainly distribution costs drive a lot of local costs and lock out some opportunities for substitution. It is curious, however, for remote communities where natural gas may be too expensive to import, distributed solar may have an advantage. So in communities where alot of diesel is used for generation, oil competes more directly with solar than with natural gas.
I'd also point out that natural gas and oil both compete as feedstock for chemical manufactures. So the energy value is close to the availability of hydrocarbons.In the extreme, gasoline and diesel can be made from natural gas. So with a lot of chemical processing, natural gas can compete in the transportation fuel markets. It comes down to the prices of the feedstock and the cost of processing. The point here is that natural gas compete in many different markets, and there are many different tipping points where substitution starts to make sense. So while the vast majority of demand may be locked into one source or another, substitution happens at the margins, and this is where the price is set. This is why, for example, the price for gasoline remains high relative to crude. Gasoline demand is pretty locked in, far from the marginal demand that is driving down the price of oil.�
1/1/2015
guest Bottomline, Nevada hitting the cap tomorrow is adding to the immediate downward pressure on Scty right now. I expect Friday will be no different. If they continue the current net metering system in the interim between Friday and dec 31st, the stock will rebound somewhat next week, in my opinion.
California is a different animal. They have litterally the strongest renewable mandate(next to Hawaii) in he country. They will not get there without a strong rooftop industry. Given the year+ of lead time to hitting the caps, Solarcity has a pathway to compel the california commission that the rooftop solar(and battery storage) is the fastest, most cost effective preferred way to to get to those 2030 renewable goals. It has the duel benefit of being better for the environment, way over extended water supply and the consumers wallet. Good for sustainability and for the California economy. With the growth happening right now coupled with the comprehensive white paper on a DG priority for the California energy delivery structure added to the highly pro sustainable political landscape... California looks to be a massive win for rooftop solar in the next rate case/design discussion with the commission. Of course, the California utitlies are going to attempt what is going on in Arizona and Nevada, but in the end the roof top solar industry will end up on top, in my opinion.�
1/1/2015
guest great article looking at SolarCity bonds vs other financing mechanisms
Of Solar Bond-age — Medium�
1/1/2015
guest Great discussion about the rate decisions coming down above, I really appreciate the in depth analysis.
Do people here think that at some point SUNE becomes a buy at this super heavy discount, and if so, how low do people think?
I'm probably going to be loading up on more scty this Friday, assuming a small pop next week, and the low price of SUNE has my attention as well.�
1/1/2015
guest Foghat, Everything you have written is very informational. I agree with your sentiment. But in reality SCTY looks to be in big trouble at least in AZ and NV and will be in trouble in more states.
Look at this way - EVERYBODY knows prohibiting manufacturers from directly selling cars to consumers is just not fair or right. But these laws protecting the dealers still exist. If anything they were strengthened as Tesla became popular. We cannot take any victory for guarantee based on "rightness". To make matters worse SolarCity just doesn't have the mass appeal that Tesla has, to encourage people to fight on their behalf. We are ultimately at the mercy of the regulators/commissioners, legislature and the governors.
My big hope is that Management will find ways around this one way or the other or look for opportunities elsewhere. At this point investment in SCTY is really just a vote of confidence in management (not necessarily tied to a specific business model).
As you can tell, I am pretty down on SCTY right now. But I'm going to just sit in for a few years and re-assess.
That's what I did with JASO. Everybody here knew since two years ago that it is very much undervalued. But unfortunately it stayed undervalued all along and is undervalued even now. After a point I had to give up and get out... I have two more years for SCTY. End of 2017 is make or break.�
1/1/2015
guest Hey, foghat, I just want to say thanks for keeping use posted on the regulatory matters. I still think the longterm, free market solution is virtual net metering. When neighbors can sell surplus power to one another that will crack open a much larger market than solar is currently confined to even if their were no limits to net metering. Virtual net metering allows people who do not have roofs for solar, such as renters and highrise dwellers, to become customers of distributed solar. Community solar can happen even without ground mounted solar gardens. Virtual net metering allows a free market to price distributed solar. We don't need PUCs and politicians to set prices for anything.�
1/1/2015
guest One thing that SolarCity has that a lot of people underestimate is a very large workforce and they are a huge job creator in a lot of communities.
In the case of Nevada if this law passes there will be 6000 people that will lose jobs and be on unemployment in the state. That is equivalent to the entire job growth they experienced in 2014 At some point this has to play in decisions on the political level.
Who knows how this will end up who knows how to swallow and up but I think by 2017 you will be very happy with your Solar City stock!
I agree that nothing is a given though and I'm a little bit worried to see the California utilities proposing to end net metering since it is such a large market for them it would be catastrophic in a way we have not seen.
Sorry about your JASO holdings.�
1/1/2015
guest Hmm, 6000 jobs. Isn't that close to the number of jobs the Gigafactory will bring to Nevada?�
1/1/2015
guest Trying to figure out how options work to see how they can be integrated into my SCTY purchase on this dip. Waaaaaaaaaay too much info to absorb for me to be even remotely proficient relative to the field.
I don't know how you folks deal with these ups and downs every day. Thinking I'll just buy as much stock as is remotely rational and sit on it forever.�
1/1/2015
guest SB374 Net Metering Cap
well, the NV Energy cap is now hit as of 8pm this evening. All sales of any rooftop solar are now halted in the state of Nevada.
Commission has a massive decision tomorrow and has to do it expeditiously as potential lay offs/transfer announcements could start happening within next 24 hours. Solarcity employs 1400 people in Nevada.�
1/1/2015
guest Next best thing you can do if you want more leverage is to get some LEAP calls. Just need to figure out what strike price suits you best.�
1/1/2015
guest Your move is the much safer bet! The longer you go the safer the bet should be. I think the 2017 options with a strike price of 80 or under are very safe but I am a big SCTY bull. The options are more volatile but we are at the bottom of a channel that has held for 2 years as Solar City continues to build value.�
1/1/2015
guest I'm curious to know if the Beyond Coal campaign will continue beyond coal.
If it does, when will it change its focus, and for what: pro-renewable, pro-distributed, anti-centralized, anti-oil, anti-natgas...?
Edit: @admins, feel free to move this post to the Alt Energy thread. It's a reply to the latest net metering comments in this convo, though.�
1/1/2015
guest I would love to see Beyond Coal take up grid neutrality / virtual net metering / distributed energy. The basic opportunity is to free up the market economics fkr distributed solar and batteries to drive fossil generation out of business. Beyond Coal has been successful in closing down coal plants largely because the economic case for coal has become so miserable. This has led to a lot of substitution of natural gas for coal. This is at best a halfway solution. They need to work on undermining the economics of natural gas. In the long run this will happen as batteries and solar continue to come down in price. So the question for advocacy groups is to understand all the points of resistance that slow down this transition and work to eliminate those points of resisance.
So right now net metering caps are emerging as a point of resistance. Gas peaker plants could be pushed to virtual closure with more distributed solar and batteries. I would argue however that net metering as it stands is too confining for rooftop solar. It limits rooftop solar only to onsite self-consumption for those homes and businesses that can physically install solar. This is way too confining. This is why we need to shift focus to virtual net metering so that roofs that have capacity for more than just self-consumption can be utilized for community solar. Moreover community solar subscribers could also be points of distributed batteries. They buy surplus solar power from neighbors and provide storage services that the whole solar community values. With virtual net metering so many of the aggregated grid services SolarCity would like utilities to pay them for becomes services that solar community subscribers are quite willing to lay for. So virtual net metering would be the most comprehensive regulatory opening I can think of. Net metering, in my opinion, is not worth fighting for, unless it opens the door to virtual net metering as a concession.�
1/1/2015
guest @JHMa clarification. is virtual net metering the same or similar to Virtual power plants (VPP) where groups of local batteries are aggregatee into small to large power plants, avoiding some of the T&D (transmissions and Distribution) costs and losses�
1/1/2015
guest Yuck SCTY below 45, this is ugly. Lets hope Nevada does not shut down solar while we are already at these bottom of the barrel prices.�
1/1/2015
guest From my limited self-education that seemed like the best plan as well. Buy whatever amount of stock I can reasonably afford then dump some extra into Jan17 calls at an aggressive strike price around $100. I don't wanna get too fancy and make typical mistakes, but I don't want to miss an obvious standard strategy that people learn in week two of options trading.
Thanks for the input folks! [fingers crossed]�
1/1/2015
guest From this article: NV Energy: Rooftop solar cap will be hit Saturday - Las Vegas Sun News
WHAT HAPPENS TODAY
Expert witnesses championing the solar industry and the power company will offer evidence to the PUC.
The solar industry hopes that once the cap is maxed, the industry won�t halt and new customers won�t be charged what it calls exorbitant fees. NV Energy wants to create a new price structure for new customers who want to participate after the cap is hit.
NV Energy proposed a plan that would halve the credit it pays to customers for the rooftop solar energy they provide to the grid. It also proposed a new demand charge and a user fee.
WHAT HITTING THE CAP MEANS FOR CONSUMERS
For the 9,171 net metering customers hooked up to NV Energy, the end of the cap could mean little. But it�s a big deal for customers who want to buy or lease solar panels in the coming days. Once the cap is reached, NV Energy will no longer send its employees to tie rooftop solar installations into the grid. The PUC could also vote to impose the pricing model proposed by NV Energy or it could craft a solution of its own.
WHAT COMES AFTER THE CAP
Whatever the PUC decides on Wednesday is only an interim solution.
NV Energy and the solar industry made a gentlemen�s agreement (and a law) during the session in which they agreed to lift the cap entirely in return for a new price structure. Neither side expected the cap to be hit so soon � prompting the current dilemma.
The PUC is tasked with coming up with a permanent solution by December to end the cap battle.
WHAT THE ATTORNEY GENERAL JUST DID
Late Thursday, the attorney general�s Bureau of Consumer Protection � which represents ratepayers in PUC cases � requested that the commission not agree to NV Energy�s new fees as an interim solution. �Notably, just last year (NV Energy) testified in support � that the current rate design was reasonable,� the bureau wrote in the filing.
NV Energy said on Thursday that rooftop solar customers cost it money, which it is forced to pass on to nonsolar consumers � around $8 to $12 million in expenses for every 3,000 new rooftop solar customers.�
1/1/2015
guest SCTY down ~10% today on 10 million share volume (5x average) to a low of $42.18 so far but SCTY is way oversold. New 52-week low and down 30% since August 5th (two weeks ago, the day after TSLA's ER).
Seems like oil and China is to blame again, causing a lot of stop limits triggered around the $48 mark (has been a great support line for the past year).�
1/1/2015
guest Itching to buy more. Given that the (bad) news hasn't hit the major news-wires yet, I wonder if the stock will fall even further. Confused between waiting and buying.
- - - Updated - - -
Foghat, any stats as to % of SolarCity business exposed to Neveda (and Arizona)?
IIRC they got into NV installation business recently while many of the risks were known publicly. So one would think SolarCity is well prepared for any circumstances (even if it means swiftly moving people without much costs/losses during the transition).�
1/1/2015
guest I give up with SCTY. Pulled the trigger on some calls in the morning (although if I had been around I would probably have moved my buy limits lower)... Already down 15% on them. sigh. Ok I'm selling all of my holdings on the next bounce back to ~$55 and then saying adios to this stock. It might seem like a no brainer in 2020 or 2025, but I don't have the patience to wait that long. I would rather take that money and throw it in TSLA.�
1/1/2015
guest The NV cap is 235MWs. To give perspective, California's cap is something above 9,000MWs. Massachusetts is going to be 1,600MWs, so NV is actually a small % of business. Now, what most people don't realize, the Nevada legislature just passed a bill that lifts the net metering cap completely. That means no cap now. If solar wins a continuation of the same net metering rate in the interim today(or very very soon), then all sales teams are a go to sell in unlimited fashion. Then, when the commission agrees on the new rate, Solarcity could expand dramatically in Nevada because the cap is gone and there are a lot bare roofs around the state. I think they will continue the same net metering rate in the interim, which puts all the pressure on the commission to come up with a long term rate between the interim rate decision and December 31st. Actually hitting the cap now, puts tremendous pressure on the commission to continue the same net metering rate since they can't come up with an appropriate judgement right now with so much at stake.Again, we could see a significant expansion during the interim up to the final rate decision NLT December 31st. Since the only reference to the cost/benefit of DG was an independent study conducted by the NV PUC concluded net metering is a net benefit to all rate payers, it will be difficult for the NV commission to judge otherwise against their own independent study... No matter what the utility says about its non independently verified aversions and claims. Therefore, in the absence of a new independent net metering study, I feel we may see a DG friendly rate revision by Dec 31st. By which, a long term net metering rate with go active. This will then really open up the expansion of Solarcity Nevada sales and we then can truly breakdown an addressable market over a magnitude greater then the current 235MW capped market. Potentially a massive reversal to what we are seeing today and thus a tailwind to he stock price momentum higher. I personally have picked up more this morning on my perceived great opportunity that's materialized during this down swing.
update:
We can't forget the gigafactory will require a lot of solar. I willing to estimate 100MWs+ so nearly 50% of the just hit cap right there... Another reason to understand why there is no new cap potentially. I think this is more evidence Solarcity is going to make a big expansion into Nevada soon, especially if the net metering rates are maintained at near current rates going into 2016. Gigafactory might also take all 2016 silevo ramping production and potentially some of 2017 production and that is in bulk single customer shipment which are a significant cost savings to Solarcity. This also applies to the production on Solarcity's new ZS peak zep products as well. Therefore, Nevada is priming up to really expand Solarcity sales next year and gives weight to a 1.6GWs+ 2016 yearly guidance.�
1/1/2015
guest Jim Chanos just came onto CNBC and said he is now shorting the stock.
(That caused the drop at 12:25 EST, though it has been recovering nicely from there since...)
It's a bit weird to be shorting it at the $45 level... it would be something else if it was $80 and you said you were shorting it!�
1/1/2015
guest Well, I just now bought more to add to my substantial holding.�
1/1/2015
guest Thanks Foghat. I picked up another slice of shares at 41.50.�
1/1/2015
guest Not the same thing. The difference between net metering and virtual net metering is that in the former surplus solar power is sold to the utility, but in the latter, surplus solar is sold to any other buyer using utility owned power lines. So ordinary net metering forces the utility to be a buyer, but in virtual net metering it is up to the seller to find a willing buyer at whatever price buyer and seller agree to. It may be reasonable for the utility to receive some compensation for use of the distribution network.
Community solar is a form of net metering. Here there are community owned solar resources the send power to subscribers via the grid. The local utility is neither a buy or seller, but merely a grid access provider.
Virtual net metering can go even further. Suppose you have a big southfacing solar installation, I have a westfacing installation, and our neighbor has a Powerpack. In the morning you feed us power to use. Midday our neighbor is charging up the Powerpack. In the late afternoon, my panels feed power to the others, and after sunset we are all drawing power from our neighbor's Powerpack. Between the three systems we can come pretty close to covering our 24 hour power needs. We can share or trade this power as needed, and pay only a small amount to the local utility for use of grid and backup power.
This concept is really a virtual microgrid. A microgrid would generally include its own power lines, but in this virtual form it is merely renting powerlines. So aggregation services aimed at balancing the supply and demand can happen within the virtual microgrid. With enough storage the net flow between the virtual microgrid and the macrogrid can be as smooth and rate sensitive as the utility is willing to pay for. So grid seizes happen within the virtual microgrid and between it and the macrogrid.
So once we obtain virtual net metering, all these other things start to become possible. The exciting thing about SolarCity entering Mexico is that Mexico has a federal virtual net metering law that appears flexible enough to support all this.�
1/1/2015
guest
I'm some random dude who talks about stocks on a news channel, and I just declared I am long the stock. Shares should rise 5% in the next minute.�
1/1/2015
guest
Ha ha, that guy is putting up a smokescreen. He says solar leases are a liability and nothing but a second mortgage basically another subprime mortgage bubble. However, Solarcity's average customer credit score is over 720. 99.5% of all payments are paid and collected, not delinquent, and we're talking over 9 years of solar contracting now. They received an A rating on their latest payment backed ABS bonds... You can't really believe he sees subprime loan bubble here. I think he might be seeing an entry point more then anything and using whatever chance he can to suppress it further.
Solarcity booked a record shattering 395MWs in Q2. Judging from the Solarcity now website and comparing the numbers, it appears Solarcity may match that and surpass 395MWs in bookings for Q3. Bottom line, the real world people out there are buying/leasing solar in record numbers.
If anyone thinks otherwise, they are not evaluating the stock potential properly. This isn't about the consumer choosing solar or anything about what that hedge fund guy stated today.
It's all about the net metering rates and or any other fees utilities try to tack on. It's about caps and what happens after, which again, then circles back around net metering and any other fees utitlies tack on. The short term investment potential big swings are substantially a function of any policy changes over time. It is all about the addressable market according to caps and net metering changes and demand charges/fees. Consumers choosing solar is not an issue to the stock. If all caps were lifted and net metering remained the same, solar would go beyond 100% compounded right now. However, that isn't currently the case. As caps and rooftop solar policy challenges get peeled away, the greater the acceleration of growth and thus stock momentum. The ITC is actually a low priority problem compared to the challenges big utilities resistence to rooftop. And that resistence really boils to the wealthiest group of people on the entire planet: Koch bros and warren buffet. Koch bros heavily influenced the Arizona commission election and over all process of regulation of its owned utitlies. They have significant interests in the developing gas/coal fired centralized generation utilities around the country, they have many front groups with extensive media campaigns to disparage solar in all their territories. Koch gave over 100m dollars to MIT and now we're seeing pointedly negative articles about roof top solar coming out of the seemingly distinguished university. Warren buffet owns vastly more coal/gas interests then anything solar. He just bought a gas turbine company for over $20billion. If you don't think he's put most of his chips behind a multi decade future in centralized utility power generation, then you have serious analytical issues. So for me, as I accumulate, I focus on the policy issues (and cap capacity) as entry points to my long time accumulation strategy. For others, this point of view might also be useful for shorting, or short long positions or anything in between. Also help snuff out the noise created by hedge fund people like this guy today.�
1/1/2015
guest Just bought even more at $41.60. It's in my Sep Ira account so I have lots of time on my side.�
1/1/2015
guest So nice to log in here and see that even Tesla fans are moving away from SCTY and solar in general. Delicious buying opportunity!
How much time does it take for this selloff to affect the price of long term options? I want to load up on aggressive Jan'17 calls, but want to time it right.�
1/1/2015
guest The bid/ask moves in tandum with the share price... So the question is how much longer do you think the stock will keep going down...�
1/1/2015
guest NV Energy says cap on net metering reached | Las Vegas Review-Journal
Tough to see scty going up until they make a decision on the interim rate in Nevada. Right now, looks like an interim rate won't be decide today after the workshop, but sometime next week, I've read potentially next Wednesday. That means 6 days of no solar sales whatsoever in Nevada. 6 days of sales employees being paid, but producing no new contracts. I'm not sure how much future revenue that equates to state wide. This is an interesting void time.�
1/1/2015
guest Wow, did you see the comments. NV Energy is seen as the big bully here. This is very good for raising awareness of solar. The PR value of this kind of thing is huge.
BTW I think your strategy of using policy crises to acquire shares is pretty insightful. If you know the moments that are most opportune for shorts, you also know the smartest time to buy.
So the market cap is now just below $4B while the net retained value is just above $3B. This is a 1.33 ratio. A huge value, even if they never install another system in NV, but of course they will.�
1/1/2015
guest Is SCTY really so dependent on Nevada politics? Or is this being seen as a test case for how the rest of the US will handle net metering?�
1/1/2015
guest This Mexico tidbit is very interesting, I didn't know they had such supportive legislation in place. I spent so many years checking the daily solar updates from Germany to see what the future might hold for the US, now I'll keep an eye on Mexico as well.
Do you think installers like SolarCity will jump into the microgrid install world 5-10 years down the road? It's pretty clear that lucrative(overpriced) lease agreements get tossed out the window once true grid parity is attained and a full residential install becomes reasonably priced. So moving on to microgrid installs is the natural move, right? How cool would it be to call up SolarCity and have them install a 20 home solar/battery microgrid for you entire neighborhood? I live in a rowhouse block in Philly and could easily imagine 80% of my block being up for a tied-in system if the financing were easy.
Thanks for all these write ups, the future of the grid is so far from our current reality that I struggle to picture it. My big concern is how we could possibly "pay only a small amount to the local utility for use of grid and backup power" once we erode their entire profit-base and allow them to fold under their crushing debt load. I guess we can sit back and watch how Germany handles it. Eon simply woke up one day, tried to carve off all production and become solely a grid operator. Would be nice to see in the US, but I'm not holding my breath.
Eon may not even be allowed to exit the production world if the German gov't has it's way. Imagine that, one of the largest utilities in the world is being forced to keep its power plants! That is what the future looks like.�
1/1/2015
guest A little reminder,
Solarcity literally employs 113k people right now. 13k employees, 100k solar ambassadors(referral fees; some ambassadors have 100+ referrals pending).
Egyptian Sun God Ra Shines as SolarCity Pitchman in Arnold Campaign | Adweek
They have received over 30mln YouTube hits for their Ra "infinite power of the sun" campaign.
They are extremely popular and wildly growing on a grassroot level through to corporate level. Rated by multiple media as a top place to work and among the top 20 places to work by Glassdoor with the highest better business bureau rating achievable.
Measure like for like comparisons with NV Energy, APS, or any big utitliy and you will see a massive disparity in consumer/employee satisfaction and interests.
This not even considering the innovations and future applications of the Solarcity tech compared to traditional big utitliy such as the Kochs and Buffet support.
there is a significant incongruence here. I think the final step in full on tipping point tsunami is getting over the single greatest weapon monopoly utitlies use to scare/hold us all hostage with: " if you do this, rates will increase for all rate payers." This is the favorite scare tactic every single legal monopoly utitlies pulls out when facing a commission. They always pull out the " rates will go up" line.
When commissions finally don't fall for this, DG solar will punch through without a limit in sight, near infinite market place globally.�
1/1/2015
guest To be very honest, if we are directly comparing Market Cap with net-retained-value, we should look at a few more numbers.
I'd subtract the 796Bil convertible debt off of the retained value (or add to the market cap - same thing).
I'd also entirely write-off the Lease Renewal portion - 941mil. That revenue is no guarantee.
Think about it this way. Before SolarCity existed, nobody ever took all the potential future revenues of utilities and said this is the net-retained-value of utilities, even though the future revenues are effectively guaranteed. We are only doing that with SolarCity because the future revenue is "contracted" which the consumer is absolutely on the hook for. It's a legal paper that can be sold/traded/mortgaged like a security. The un-contracted amount is just a hope that consumers will renew. That hope cannot be sold/traded/mortgaged. It's not a security. We really shouldn't look at it for valuation purposes.
Thus we have a net-net-retained-value of $1.32Bil vs a market-cap of about $4Bil.
The stock is still very cheap for the rate-of-growth and the potential (whatever happens in NV,AZ). No doubt about it.�
1/1/2015
guest check out Solarcity's white paper on their "grid engineering" website. It explains how utitlies only need to change how they earn their profit. Instead of just cost plus, they can earn off of buying grid services (DG solar+storage) reducing the need for investing in new plants and unnecessary grid upgrades.
its is litterally possible right now to start this as Solarcity starts expanding solar+storage an an exponential rate over the next 6 months.�
1/1/2015
guest So Ra is holding reading lamps. Does that mean what I think it means?�
1/1/2015
guest well, the other reality is the discount rate closer to 4% then the assumed 6%. At 4%, I think net retained value(non renewal) is at $3.8bln.
And as Jhm has pointed out, the development company alone is worth significantly more the current market cap.
I I think the real issue is Solarcity is a completely different energy company then many investors have ever seen before. As we see with the hedge fund short seller, they are significant trouble with how to see it or preceive what to compare it to. Initially, this era up a volatile market as those with the old money begin to crack under the new market resist and resist. I feel it's going to be a rough ride as that transfer of establish wealth begins to change hands over the course of time toward this new energy infrastructure. But, as the dust settles, those that invested right will see big returns on their solar bets. We really are in a new era of energy, and I'm not talking about the American natural gas boom either.
update:
i just heard the hedge fund guy's CNBC interview. He says that he's sees leases going underwater because of people will be paying more for that energy then they could if they basically went back to straight utitliy. First off, he made absolutely no sense and I can tell he's been reading the gossip site Blog comments on SeekingAlpha. If he would've done any research whatsoever he would have seen solar prices have dropped massively over the past five years in lock step with Solarcity growth in customers at 98% compounded year over year. Shouldn't be he opposite if lease customers are locked into such high per KWh rates? Here's another little know fact, solar leases are grandfather when new policies begin, specifically in California and Arizona, those leases that were grandfathered before recent fees changes are actually worth more then the latest lease sale agreements with the cheaper solar costs associated with them. How is this possible when mr hedge fund predict the opposite. I could go on forever with this guy. I'm not even going to get in the debt argument...
its also telling how they put the CNBC lacky that's invested in sunpower to further down talk Solarcity... No one questioned this position one bit. That network is a total joke anyway with how they pump and dump where ever the wind blows...�
1/1/2015
guest Lyndon Rive is calling into CNBC right now with a rebuttal.�
1/1/2015
guest Go Lyndon! He straightened things out, as far as a CEO (who obviously has a bias) can. I hope the stock climbs on Monday as a result of this.�
1/1/2015
guest http://www.cnbc.com/2015/08/21/chanos-is-shorting-elon-musk.html
Here's the CNBC interview.�
1/1/2015
guest What he said is complete nonsensical bat ****. He got his entire theory ass backwards.
His thesis is:
- SolarCity leases panels to homeowners (yes, panels)
- Homeowners see lower priced panels after sometime (as panel prices continue to decrease)
- They go return the panels to SolarCity and get new ones for cheaper
Jeez, where do we even begin with this guy.
SolarCity doesn't lease "panels". They sell electricity at a pre-set price, which happens to be lower than utility price.
People can't just somehow return the "panels" and get new ones installed. And somehow installing these "panels" is free of cost in his bizarre world.
And it's a "contract". People don't just walk away from a "contract" when they find something cheaper.
How many people walk away from their rental leases as soon as they find a cheaper option on craigslist??
He got everything wrong, about debt, cashflow, everything. He is a finance guy, not a business-model guy.
In any case, thanks to Chanos. I got some shares on the cheap.
And either him or one of his peeps continue to pay me interest as I loan my shares out to short. Well, thanks for the dividend guys.�
1/1/2015
guest Yes, it is remarkable how Chanos seems to pick up on the same distortions that Electracity was pushing here (and on SeekingAlpha as Rogier). We hashed that out here, but as FUD goes its pretty good at exploiting easy misconceptions and emotional buttons. Calling SolarCity as "subprime lender" is extremely loaded language calling into question ethics as sound business practices. You will recall that Electracity's campaign here was mostly about impuning the character of SolarCity as some sort of malicious player that was simply entrapping stupid homeowners in schemes designed to extract wealth. This kind of character assassination is for pressing emotional buttons, to make it much harder to do a fair appraisal of the actual business model and practices. That is why we could never get anywher with electracity. He was not interested in a fair minded examination of the business; he simply wanted to press his slander so as to subvert fair analysis. So Chanos is channeling that sort of voice to create irrational disgust and fear in the market.
One thing I find completely problematic about this tact against solar installers is that it completely ignores the fact that utilities operate as local monopolies. Apart from rooftop solar, a utility can get away with forcing captive customers to pay 16 c/kWh plus other monthly fees and raise them 3% every year. There is actually very little any individual "ratepayer" can do about it. You either pay it or go without. This is an extraordinarily coercive and potentially abusive business model that can only exist because the government protects these monoplies from direct competition. So to malign SolarCity for offering families and business to lock in 13c/kWh, no fees, 2% escalator for 30 years is to let the utilities off for forcing much worse terms. Utilities are bullies here.
The question about renewal terms is whether utilities will still be playing thebsame old game 20 years from now or lose their monopolist power. If they lose their monopoly, then SolarCity will have been substantially advantaged in the process. So under this scenario SolarCity is worth much more than current valuations. However, if there is not a restructuring of the utilities in the next 20 years, then customers will be quite happy to renew their leases. So I think the renewal value is essentially a hedge against the status quo.�
1/1/2015
guest I like this Chanos guy. The subprime analogy does seem false, but he does get the liability most solarcity customers create by attaching an expensive solar contract to their house.
I didn't see anyone mentioning Brad Buss CFO selling 10,000 @ 48 a couple days ago. While that is not a lot of money for him, it probably contributed to the drop.�
1/1/2015
guest Warren Buffet's Utility Will Make Nevadan's Pay More | The Daily Caller
Wow, it's really making sense now with NV Energy and Buffet. They are creating a short fall in energy in order to get a massive new nat gas plant built. They are refusing to buy an already existing plant at lower cost in order to charge rate payers for higher cost new plant. Buffet just did aquire nat gas turbine company for over $20bln so makes sense to do this. (He owns rail company that transports gas/coal/etc. around the country as well.)
If Rooftop solar booms across the state and when solar+storage starts accelerating the advent of aggregation grid services, the requirement of new gas fire plants, peaked or otherwise, will be less necessary over the next 5-10 years. This is absolutely the opposite of Buffett and his investors interests.
roof top solar also puts pressure on buffet's utilities credit ratings. Since they have a guaranteed captive rate base within the legal monopoly system, they get the lowest cost capital on the planet(which is another subsidy in my mind of utility monopoly). If rooftop solar eats into that guaranteed rate base concept, more risk is attached to the big utitliy and thus upward pressure on interest rates. Buffet does not like added risk. Rooftop solar instantly adds risk to his credit ratings.�
1/1/2015
guest Nevada reaches cap on net metering; solar fight continues - FOX5 Vegas - KVVU
this video pretty much says it all. I hate to say it, but roof top solar is done in Nevada. The NV Energy proposal is bad, but the actual PUCN staff proposal is even worse. It's as if their own independent NEM study doesn't exist. This is really bad stuff in Nevada.
I'm expecting a lot of lay off announcements from many rooftop solar companies late next week, save only some very slim chance of a reversal of PUCN sentiment between now and Wednesday.
Mind you, Nevada was only a 235MW capped market, but it had potential to be a multi 1000MW market if rooftop had its chance.
The disgusting thing about this is rooftop customers have to be connected to the grid. Even if they wanted, they couldn't remove themselves, so they have to take whatever they get from NV Energy. Secondly, NV Energy made over $719mln in profit last year, up 27% over 2013. They made more profit then then entire Las Vegas Strip! How it is that they say solar is shifting costs and causing NV energy to raise rates is beyond laughable. Extortion actually comes to mind.
im wondering how the tesla gigafactory renewable plan is going to pencil out now? Buffet is also owns electric vehicle manufacturer, BYD... Could he trying to make problems for Tesla here as well? Governor Sandoval is going to have to step up here if he intends to be around much longer.�
1/1/2015
guest On the above articles, there are comments sections that any of you can make your points on.�
1/1/2015
guest I saw an article that mentioned Solar City has around 1100 employees in Nevada. While not game changing It would be a huge disappointment for them to shut down solar in the state. 2 of their operations centers are also there.
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I did not like to see Brad selling those shares but was glad to hear Lyndon confirm the business is running ahead full steam in all areas�
1/1/2015
guest I'm pretty sure that 1100 includes the call-center/administrative-office in Las Vegas.
Actually SolarCity started installing panels in Nevada only recently in May 2014 - here is the launch blog post.
I vividly remember that around the time, some controversy was already going on against residential solar. Some analyst or reporter asked Lyndon if going into Nevada makes sense for which he said, yes there is risk but the economics are still compelling. Will dig up the stuff when I get a chance.
I would be very surprised if SolarCity will be waiting for a last minute decision to figure out contingency plans. There would be a plan A, plan B, plan C and a plan D.
It's a loss. But I bet it is not monumental. The stock-price way overreacted. I voted with my wallet on Friday and I stand by my decision.�
1/1/2015
guest Wow, this really posses me off. A 10% guaranteed rate of return is outrageous. A 10 year Treasury has a risk free yeild of about 2.1% A government guaranteed rate of return is a virtual license to issue US Treasuries, tax the people, and pocket the difference.
You can also see a significant difference in how utilities and ratepayers value investments in solar differently. A ratepayer is happy to finance rooftop solar at 4% to 6% financing just to get some relief from inflation. But utilities expect to get a 10% rate of return, if not, they raise rates. So SolarCity is really giving ratepayers much better financing, 4.5% to 6%, while the utilities are making investment decisions for the ratepayer at 10% financing.
No wonder the utilities don't want any competition from solar installers. It cuts into their racket.�
1/1/2015
guest I think SolarCity should continue to install systems in Nevada. They need to frame a marketing campaign around holding the NV Energy monopoly in check. NV will raise rates. Even if net metering has a low feed in tariff, ratepayers will want to protect themselves against an aggressive monopolist. It's time to fan the flames of revolution. Remember that people are willing to spend an extra $1000 or so for backup generators so that they don't feel helpless when the utility fails them. There are plenty of redblooded Nevadans who are ready to give Warren Buffet the middle finger. It's not about saving a couple of bucks, it's about economic liberty.
BTW, demand charges could backfire on NV Energy. Demand charges create an opportunity for Powerwalls to perform peak shaving, which creates much more value than rate arbitrage. Specifically you want the demand charges to be high for this to work. Suppose the demand charge is $8/peakKW/month. A Powerwall can shave 3 kW off the peak, or $24/month, $3000 in 125 months on a battery that can last 180 months. In combination with solar, smart A/C and other household demand management, 5kW or more could be shaved. So long as the combination of demand charges and power rates are set fairly, demand charges create battery arbitrage opportunities. There are limits to how far NV Energy can push rates. Once they exceed the cost of solar and batteries combined, they will face mass defections. In the short run we can hope that NV and the PUC are dumb enough to push through a rate plan that batteries can arb.
By my calculations, I think that SolarCity can add a 7kWh Powerpack to a 6 kW system by adding 0.7 to 1.6 c/kWh to a PPA starting at 13 c/kWh with a 2.2% escalator. The range here depends on whether 1500 or 1400 production hours are expected per years, respectively. For Nevada, I rather suspect that 1500 is more likely. But let's just assumed the customer is offered 13 c/kWh base or 14 c/kWh with Powerwall. The Powerwall option is attractive because in minimizes use of net metering, cuts demand chages, and provides back up. So if NV Energy is aggressive about raising rates 14c/kWh plus 2.2% escalator is not a bad deal at all.�
1/1/2015
guest I am sure this would/will change but I believe the current law in NV prevents any defections. And I believe in the NV energy plan in some instances people would actually have to pay extra each month if they install solar. I doubt people will pay out of pocket to put solar up if it will actually raise their electric bill. That being said I can not believe these laws will stand if NV energy continues down this war path.�
1/1/2015
guest A clarification and comment (if discussed before apologies, there are 200 pages) There is a difference between �grid defection� and �Load defection� grid defection pretty much means a monster PV array to cover maximum usage (and possibly low use generator) and cutting the connection. Load defection seems to mean gradually to radically lowering the amount of electricity purchased. I doubt it is illegal (yet) to lower the amount purchased from a utility so if you generate say 90% of your electricity, storing some of it in batteries (excess) and having what is essentially a �thin client� grid connection with a not quite islanded �micro grid� or a group of folks with a �mini-micro grid�, all with batteries forming a small virtual power plant (VPP). I presently have no problem with nominal grid connection fee. The lines need maintaining. (own SCTY,TSLA, small PV array since 1999) my net metering up till a year ago consisted of my non-racheting meter running backwards)
I would also point out (again) the last 6 years of PV (photovoltaic) consumption in the US and Mexico and Canada. This is in �Terawatt hours. Note the more than doubling every year in the last 4 in the US and also the potential in Mexico and Canada.
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2009
2010
2011
2012
2013
2014
US
0.9
1.2
1.8
4.4
9.1
18.5
Mexico
^
^
^
0.1
0.1
0.1
Canada
0.1
0.1
0.3
0.3
0.5
0.7
I found Rogier's articles on seeking alpha to be moderately incomprehensible. He seems to be a European who is pushing the "Passiv Haus" standard where buildings use 90% less energy by design. where we differ is I am and have been a firm believer in PV since the early 1960's, when they were too damn expensive except for satelites. there are off gridders who have been using then for over 40 years and they just work. they seem to be in the log phase growth curve, finally. (also a shout out for the upcoming movie, "The Martian" and what it will spawn)�
1/1/2015
guest Obama coming to Las Vegas for Clean Energy Summit | Las Vegas Review-Journal
President Obama and Senator Reid will both be at the Clean Energy Summit in Las Vegas tomorrow. In the midst of this rooftop solar crisis in Nevada, this could get very interesting. I imagine a lot of roof top workers will be there to protest all that is happening. A lot of sales reps probably since they are selling not a single thing right now.�
1/1/2015
guest
Geez! The comments at the bottom of the article are, well......nasty stuff! If I ever think to move to Nevada, shoot me, please.�
1/1/2015
guest
This is also interesting:
Other summit speakers will include Energy Secretary Ernest Moniz; Diarmuid O'Connell, vice president of business development at Tesla Motors; and John Podesta, a former counselor to Obama.�
1/1/2015
guest National Clean Energy Summit Tackles Net Metering Debate | Nevada Public Radio
Republican Argument : Clean Energy will hurt oil companies and will convince more people towards the agenda of convincing more people to use Solar. Obama wants oil jobs to disappear. Oh, and climate change isn't a problem, let alone something worth mentioning so why is Obama wasting time and money on an issue that we don't have all the facts on?
Democrat Argument : It is essential that we use more Solar Power, Wind Power, and other methods that will address climate change. Clean Air and a reduction in asthma and cancer deaths is a good thing. Solar jobs are rapidly increasing and pay more than oil jobs. Subsidizing something (oil) that is bad for us (the world) does not make sense. Rather than expecting an omnipotent being to jump in and force us to stop this madness, let's get with reality and do something good for the economy, the air, and the world. Okay?
Footnote: Anyone who thinks we shouldn't reduce the amount of chemicals we are releasing into the atmosphere, or who believes these chemicals are harmless should be forced to spend one day inside of a room (without windows or ventilation) that replicates the air quality of the most polluted cities in the world.�
1/1/2015
guest NV Energy fights to keep rooftop solar from cutting into its profit - Monday, May 25, 2015 | 2:01 a.m. - Las Vegas Sun
i keep hearing the press say "no one expected to reach the cap this early." That's a bunch of baloney. Check all the records, the solar industry said the would hit it by summer as the article states. This article states by summer and the legislative video I posted earlier said by September. NV Energy said March 2016 was when the cap was to be hit. The solar industry was spot on in their estimates, NV Energy was grossly wrong on their estimates.
Nevada legislature clearly sided with NV Energy and completely disregarded the solar industry. Not only that, the legislature has allowed NV energy to blatantly lie about their numbers and estimates and then set up the most bias PUC in the nation to have free reign over cutting net metering by potentially 80% while adding unprecedented demand charges never assessed on home solar in utility history. Even governor Sandoval, the person that appoints the commission says he has no control over the PUC, that he's completely hands off on their decisions. This is a massive sham job and it's all on record too, which is absolutely brazen and pretty stupid. This will all come back to haunt them sooner or later.�
1/1/2015
guest Here's what they've got going on in Australia.
RottnestWindTurbine on Twitter:�
1/1/2015
guest Amazing rally going on today from that gut-wrenching low. $34 up to $41 in one hour.�
1/1/2015
guest I'm happy to say that after sitting on the sidelines for way too long I'm back in today as a SCTY stock holder for a substantial amount at $37.�
1/1/2015
guest Who's Warren Buffet?�
1/1/2015
guest Very nice catch! Best of luck.�
1/1/2015
guest Congrats, you'll do well!�
1/1/2015
guest Hmmm, obviously something special is going on with SCTY today. it started off down 8% or worse, and unlike most stocks, it's now up 9%, a shift of +17%.
The fact that it has been a punching bag of late may have caused investors to realise it would be a good place to be.�
1/1/2015
guest 
Sometimes it is better to be lucky than smart.�
1/1/2015
guest
Take that, Chanos!�
1/1/2015
guest http://m.elpasoinc.com/news/local_news/article_2412c276-4a73-11e5-ba6a-678bceca28b1.html?mode=jqm
Ha, I think the Army in El Paso is going to develop a micro grid... Solarcity has a huge opportunity here and I think there is a good chance they are working it. Local utility not happy.
update:
just caught this:
http://files.shareholder.com/downloads/AMDA-14LQRE/3333718417x0x846955/C84A2F59-8F5F-45C4-B0D7-C04501B4290C/SCTY_Storage_Product_and_Opportunity_Overview_-_Aug_2015.pdf
solarcity recently added this to its investor brief. I think we'll start hearing a lot about Solarcity solar+ storage combo in all its various forms more often soon...�
1/1/2015
guest I was trying to buy into SCTY this morning, but couldn't log in to my trading account! Then I missed the drop! Now of course I can login...
I guess I am going to continue to put cash into my trading account and setup limit buys to catch any ridiculous falling behavior in TSLA or SCTY.�
1/1/2015
guest If you've bought in at around $35 today, you're up +30% at $46.�
1/1/2015
guest I'm up 32.02% from my purchase earlier today, to be precise. Man, this wasn't meant to be a day trade, but now I'm thinking I should probably trim my position.�
1/1/2015
guest I too feel like a trading genius. As usual it's just luck though. However give yourself credit for recognizing a bargain when you see one. Did that purchase take your average price up or down? Or did you not hold a position before?�
1/1/2015
guest
Small position at $39 for me, first time in SCTY. Liking it so far :biggrin:�
1/1/2015
guest It brought my average down. I was a shareholder early on, but sold out some time ago. I've only started to get back in over the past few weeks.�
1/1/2015
guest Quoting myself...
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And then...
lol�
1/1/2015
guest I bought a bunch this morning. I had been severely in the red on a few thousand shares at $57 average, bought myself down to $51 average. So, I'm not as happy as Johan, but I am pretty damn happy!!
Does this Chandos guy have a TV show or anything? If anyone hears him eat crow, please post it here.�
1/1/2015
guest So when I saw Ra holding reading lamps, I immediately suspected this was to announce integrated solar+battery systems. Even the infinite power of the Sun is not enough for you to read at night, unless you've got batteries.�
1/1/2015
guest This is excellent. We need to dig into this doc from SolarCity.
Note the new product PowerHub. This seems to take SolarCity and possibly Tesla into very new territory. It is a modular combined solar+battery system for remote power production that costs less than.diesel!
* 30 / 60 kW max output
* 66 / 99 kWh daily solar production
* 32 / 64 kWh battery storage
* High reliability with built-in redundancy
* Less than 2 hours to assemble
* Scalable
* Provides shade!
This is what you need in a remote village, farm, mining site, etc. It looks pretty rugged and mobile. It may even be suitable for a construction site.
The denominations of batteries 32 or 64 kWh suguests to me that Tesla is coming out with a new product. These are not combinations 7 or 10 kWh Powerwalls. So this could be very exciting for Tesla investors, too.�
1/1/2015
guest Sec of energy just said $1bln now just opened to DG right now. President will make a PACE announcement at the conference at 5PM. This is massive for Solarcity, since PACE is the vehicle for commercial expansion in a very significant way.
Only issue this week is the Nevada PUC anti DG decision on Wednesday. If bad as expected, lay offs will be announced and headlines will continue misinformation of DG problems.
However, the PACE changes will really pick up things in the national commercial market space almost immediately, which could counter any near term Nevada market close down.�
1/1/2015
guest Here's more on the PowerHub:
http://www.solarcity.com/sites/default/files/sc-powerhub-download.pdf
Exciting stuff!
"SolarCity PowerHub is powered entirely by solar and batteries. The solar modules produce energy during the day, storing the excess energy in the batteries. In the evening, batteries discharge to provide energy to the site. The inverters provide a 120V/240V output to a site electrical panel or to standard electrical outlets. The system design includes five individual sub-systems connected by a single bus, where each sub-system is equipped with solar modules, battery storage and an inverter. The design architecture provides redundancy to ensure continuous operation through any single-mode failures."
What are those Tesla branded battery boxes inside??? Doesn't quite look like PowerWalls to me:
Apparently there will be two versions: PowerHub 30 and PowerHub 60. Last page of the pdf I linked is specs!�
1/1/2015
guest beyond a shadow of a doubt, military will buy into this with both hands. This is a no brainer for energy security and cut reliance on civilian energy infrastructure for optimal control of power needs as well as reduces exposure to possible infrastructure attacks, and this is world wide.
update:
Obama Saves Solar Stocks
i think the pace announcement is more a residential focus, which actually could be interesting to expanding the DG market... Not clear on the specifics yet...�
1/1/2015
guest Wow, this thing looks built with military and humanitarian missions in mind. It can be delivered by plane, truck, or ship. I hope SolarCity retains a fleet of these for disaster response missions. It's the right thing to do, but just imagine the PR value of dispatching these things to the next disaster CNN streams around the clock. Imagine how these could have helped Haiti recover both initially and longer term.
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I suspect that SolarEdge is in on this too. Many of the SolarEdge leaders come from an IDF military background. I believe specifically they were involved in intelligence and know first hand the issues of setting up communications equipment within a combat environment.
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Foghat, I think PowerHub is also in line with your speculation that Fort Bliss may be a site for a microgrid. It makes good sense that a military base would want to use PowerHubs at home so that they get deep experience with the system. So at home they provide energy and training, but if needed they can be called upon for other military missions.�
1/1/2015
guest Just heard the net metering debate and an interesting perspective was brought up:
The "conservative" perspective for pro net metering: "I am forced to be on the grid. Utitlies are storing my power that I own and must give it back to me when I need it. The utitlies take my power that they didn't invest one cent in and are selling it to my neighbor as if they did make and moved it to their house from far off locations through the extensive transmission and distribution system. The transmission and distribution system has been paid for many times over already, so any fees we pay for the grid are for future services of which my solar system is one... I've already paid for that upgrade in investing in my solar system. All and every charge I pay must be available to me to see in its entirety because I don't believe you the utility are giving the true picture of costs. I have no duty to stay on the grid, I have no obligation to pay an "exit" fee, I will leave the grid if I want to when the the time comes. Do mess with my freedom to do that if you want to benefit from my solar I store with you. Not in your best interest to lie cheat and steel from to do it."
I think the conservative point of view is very concerned with being forced to be connected to the grid as this net metering go more mainstream. It is becoming more apparent utitlies are going to make this "exit" payment a big issue which will be a death knell across all party lines.
the truth net metering isn't a political issue. That's the smokescreen. The real issue is big utitlies are 100% focused on a natural gas future. They all have the 30 year plans in action, and solar is a "compliance" energy in mind(sound familiar?). DG and aggregation of distributed solar+solar is the complete opposite of that vision. Net metering is clearly a monopoly abuse of power issue. Again, that's the real issue here. Look at the plans for buffet with his new gas fired generation manufacturer purchase. Coal is out because it makes more financial sense to go natural gas, not because of the environmental concerns(again another smokescreen). Buffet already has the infrastructure to transition near seemlessly to nat gas utitliy structure... from rail lines to end generation... He owns and controls it. He promotes (and owns electric manufacturer BYD) electric vehicles because that will put transportation industry on his grid, which translates into massive amounts of revenues generated. The coal fired plants closing down in rapid succession is not about clean air, it's about dollars and sense and buffet is right there leading the charge. TEP just closed down a coal fired plant 2 years ahead of time because they are making way for massive nat gas plant (that all rate payers will have to pay for), not because they are being environmental stewards.
To me, there is clearly two business camps clearly forming: sustainable energy tech vs. nat gas tech. Sillicon valley vs. buffet/Koch& investors. New money vs. old. Future vs. incumbent. When one side starts to delay rather then compete, you know which one is going to win in the end...�
1/1/2015
guest Thank you for the lengthy post. When you say "one side starts to delay" which side are you speaking of?�
1/1/2015
guest Elon just bought 123k shares of SCTY... Oh my...
http://files.shareholder.com/downloads/AMDA-14LQRE/3333718417x0xS1408356%2D15%2D72/1408356/filing.pdf�
1/1/2015
guest The nat gas/utilities; by putting up different artificial hurdles to those wanting to go solar.�
1/1/2015
guest Thanks Johan, I was reading a different meaning into it. You have good english skills!
About Elon's purchase, he must had seen my post that I was buying and it gave him the confidence to join in!�
1/1/2015
guest He got it at a good price, $40.49/share. Way to go, Elon!
Actually he bought them in a price range from $34.82 to 45.35 on the open market. So he definitely helped support the price. Take that, Chanos!�
1/1/2015
guest Thanks
Yeah investing isn't that hard after all. Do what Elon does and it should work out pretty well.
The post by Foghat on how it shows a lot of weakness when one side in these types of conflicts, typically the old and established side, tries to take advantage of their power position to delay inevitable change makes me think of the classic Ghandi quote: "First they laugh at you (some places the quote is ignore you), then they fight you, then you win".�
1/1/2015
guest The really funny thing about utilities stalling for natural gas is that the down fall could be much worse with delay. They will go on sinking more capital into plants that will never pay for themselves, meanwhile solar and battery tech and pricing just keeps getting better. While battery and solar are not cheap enough to make off grid economical, utilities have many positive opportunities to create incentives for customers to stay with them and generate mutually beneficial services. But once solar+battery is cheap enough to pay exit fees to leave, customers will exit with a vengence. Abusing solar customers today sets a bad precedent for retaining customers 10 years from now. The utilities are creating their own death spiral.�
1/1/2015
guest Look at the strong interest in fuel cells as well... Buffet's endgame is natural gas for his utility grid system... Every big moves he's making is going in that direction.
He wants everything centralized power. He can control centralized solar and wind because they are just another plant in his mind... Really more of a compliance in my eyes because nat gas will be the base line load as well primary peaker for the grid infrastructure. Still, he has complete control at the utiltiy level solar/wind so he's good with it. But not the case with DG and micro grids.
he loves electric cars. He loves fuel cell electric cars even better. Electric vehicles bring cars onto his grid so he sees massive $$ with supporting and promoting electric cars. He says Tesla is not a threat because he only profits from tesla bringing cars into his grid. The more demand, the more nat gas generators needed to be developed to expand capacity. It's why he is a big supporter of electric charging stations incentives as well.
massive untapped nat gas field near Israel and around the world(also notably in northern Russia now). So, buffers investments in nat gas generator tech will also be procured world wide and at 800mln a pop to develop the capacity, there's tremendous interest in tapping nat gas all over the world for decades to come. And all buffet has to do is switch from coal to nat gas since he has all the required infrastructure in place(vertically integrated ownership top to bottom).
Bottomline, viva la natural gas, down with distributed solar and storage. I think as we move forward, we need to take note of buffet's strategy and understand what his future moves will be. It's not a mystery, it's just being one step ahead on where he's going and how he's going to get there.
he has expressed a disinterest in selling domestic oil as for the reason of limiting oil investment and further guiding policy toward nat gas. He always brings up how precious domestic oil is that it would be like "shipping off the top soil of Iowa" if we were to export it. He's saying let's not develop oil in the United States because nat gas is the future we need all investment going that direction... My direction.�
1/1/2015
guest Buffet has also recently bought auto dealerships and a really fine whale harpoon maker.�
1/1/2015
guest Hawaii Governor David Ige Drops Bomb: No LNG On His Watch | CleanTechnica
Buffet et al not happy with Hawaii. Score one for Elon/Lyndon et al. I do remember Lyndon saying Hawaii is going to be a postcard from the future to the rest of the country, so maybe he knows something we don't.�
1/1/2015
guest President Obama: New clean energy plan would boost solar - Fortune
�
1/1/2015
guest Very interesting. LNG would only slow the transition to renewables. The infrastructure would be very expensive and not needed within ten years. The state needs to break up the distribution monopoly, and let residents share power on virtual microgrids.�
1/1/2015
guest Got to love Elon backing SCTY in times of need. Also of note, his purchase most likely comes from borrowed money (ie., his personal line of credit).�
1/1/2015
guest I'd imagine Elon got some pleasure making a fool of Chandos.�
1/1/2015
guest Its looking stormy in shortsville. Elon has a lot of places to park that cash. Among his other reasons I bet he thinks SCTY is way undervalued hah. I wonder how much of the buying today was done by people who knew Elon had bought today.�
1/1/2015
guest I've got to say, this is one of the most baller things I've ever seen. Elon basically woke up this morning, saw that one of his companies was selling at deep discount and decided to drop five million dollars on stock before the rest of California even had breakfast.
I must admit I got a little spooked today and had begun planning an exit strategy for my modest SCTY holdings. But after seeing this move from Elon I am feeling downright inspired. My SCTY stock is now parked in this account for good alongside TSLA. Jim Chanos can pry these shares from my cold, dead hands.�
1/1/2015
guest Looking a bit more over the PowerHub fact sheet here are some thoughts:
First, look at the specs:
Apparently the 30kWh unit will have a max output from the battery (evening) of 9.6 kW while the large 60kWh unit will have maximum battery output of 19.2 kW. That's a little more than double for the larger unit. These numbers should tell us a bit about the battery configuration, if we can gather more data (i.e. what types of cells with what voltage and capacity, how many in serial and/or parallell to make up that capacity and output combo).
"Storage capacity" is interesting because the 30 unit has "25-35 kWh" and the 60 unit has "50-70 kWh". I don't quite get why they list it like this, while for example Tesla will say that the 85kWh car has 85kWh (not 77-87 kWh for example). The footnote reads: "Extended storage capacity available for limited time periods" - I guess this means they will allow you to use an abnormally large voltage span for "limited periods" but not in the long run, since this will cause faster degradation. What does the "BOL" acronym mean?
Also I'm wondering whether there are some type of thermal management, and if so is this just fans or could it be a liquid cooling system? I suppose these units will be in rough conditions including high temperatures often.
The panels will be Silevo panels - i.e. SCTY is moving forward fast with inhouse manufacturing, taking a page from Elon's vertical integration playbook.
Looking at this picture of the internals, we don't know if it's the 30 or 60 unit we're looking it, but I count 5 Tesla-branded battery boxes. Likely not 7kWh nor 10kWh PowerWalls.
�
1/1/2015
guest BOL is likely the opposite of EOL (beginning of life)�
1/1/2015
guest Thanks, good catch.
One more interesting thing from the fact sheet:
"10-year warranty on modules and electronics. Battery warranty is 10 years or 18MWh of discharge throughput."
18MWh on a 30 pack, assuming actual capacity (BOL) at 30kWh means 600 deep cycles (100-0% SOC). This could indicate that they haven't put a lot of thermal management in place?�
1/1/2015
guest Totally wild guess:
Could it be they put five 7-kWh units in the smaller container but rate them for 6 kWh due to harsh environment expected? It would really only take a minute change in one line of code, I imagine, to make that 30 kWh.
But really, no idea at all.�
1/1/2015
guest Johan, thanks for getting us to look at the specs more closely.
I think storage comes down to 5 7kWh Powerwalls. So that gives a max storage of 35kWh. But in ordinary circumstances you'd want to keep the state of charge between 20% and 90% (just like your Model S). So this ordinary usage is 70% of max, 25kWh per day.
What puzzles me is why they have two sizes. If you simply string together twould 30kW units you get all the capacity electrical and physical of one 60kW unit plus and extra 33 kWh/day of solar energy production. Note that the shipping container for one has 20 feet length and the other 40 feet of length. The extra 33 kWh/day of solar panels is really not that expensive. I figure it is about 4.2kW of modules, and at even at $0.75/W, that's an incremental coat of $3150. Given that each Powerwall will have a cost of $3000, skimping on $3150 in panels does not make sense to me. Also it seems the logistics of smaller units may be easier to handle than bigger ones. So I don't understand why someone would prefer buying one larger unit to two smaller units.�
1/1/2015
guest Obama evokes Tesla, Nest, and solar roofs to praise energy revolution - Fortune
Wow, Obama slams the energy incumbent for standing in the way. He compares this energy transformation to the transition from telegraphs to smart phones in one decade. That is harsh, I love it.�
1/1/2015
guest Here's an excerpts of Obama's speech. He's reading the teleprompter the whole time except for 25 seconds at 5:40 when he goes off-script to denounce the fossil fuel industry that uses regulation to fight renewable energy.�
1/1/2015
guest Too many nuggets in this video of the President praising solar power installs, battery storage, electric cars, basically everything Elon Musk has done in this country, He just didn't name him. He does call out the people that are fighting the new energy revolution. Worth watching.
https://www.youtube.com/watch?v=3kagnRMXtLg�
1/1/2015
guest I guess a 60 unit will use a bit less materials in total, fewer plugs, fewer alternators/inverters (however beefier) than 2x30 units. But the savings would be minimal compared to the advantage. If you really need the peak kW output of the 60 unit though it might not be easy to just hook up 2x30 units and achieve the same output. (kind if like how you can't just plug in to 2x120V outlets and charge twice as fast. Most stuff ran off these will likely be AC, at least until dedicated devices accepting DC input become more common.)�
1/1/2015
guest Citigroup published their Energy Darwinism II report, in preparation for the COP21 meeting in December.
The chapter "Implications" on p. 82 talks about stranded assets.
They talk a lot about storage as the "one potential game changer for the industry". Alas the wrong kind of storage: carbon capture and storage.
There's only a brief mention of energy storage (page 68).
IMO, jhm made a much better analysis of the (negative) impact of storage on the fossil fuel industry (coal, oil and gas) and their soon-to-be stranded assets.�
1/1/2015
guest Really impressed that the President outlined an energy future vision that was basically DG Solar, Wind + Batteries. Utilities trying to stop renewables / DG through legislation were described as "rent seeking". Pretty strong words. Especially as considering what the Nevada (host of the conference) utility is doing. Seemed like a warning.�
1/1/2015
guest Susan from Advanced Micro Grid at the clean energy summit yesterday (scrub to 1:32:40 of "session two" video):
10MW of firm disbatchable electricity from energy storage in a group 26 of hybrid electric buildings in south Orange County where the grid is vulnerable. Serves the function of a utility peaker plant. This is where it gets really really interesting. PJM spent $2bln on a peaker plant that has been used 13 times since 2009, which averages out to $25,000 per Mwh for demand response product. SCE spent $200mln in 2013, at $18,000 per Mwh for demand response.
What is the cost for $10/kW month for aggregated distributed Solarcity solar+ Powerwall storage compared to the PJM plant and SCE plant demand response?
There is no way on this earth distributed solar+storage in aggregation for demand response can be denied at these cost savings. This is going to be massive starting in 2016.�
1/1/2015
guest Just a thought on Musk buying shares yesterday. He started buying shares at $34.85. At that price the market cap is $3.4B. As of last quarter, net retained value was at just under $3.1B. I would expect the NRV was over $3.5B as of yesterday. Is it possible that Musk connects these two things? Could he have a plan to buy shares whenever the market cap falls below NRV?
It seems plausible to me that Musk would want to defend the share price from a hostile takeover. NRV becomes a critical threshold because a predatory investor could dismantle the business and sell off the book of business to a yieldco for something in the neighborhood of the NRV. I don't think we're anywhere near that sort of risk, but Musk may be motivated to preempt any such risk by defending the share price when the market cap gets too close to NRV.
It's a theory. Any suggestions?�
1/1/2015
guest I think that risk is somewhat reduced with Musk holding about 25 percent of the company and another 25 percent + of the shares sold short. If someone began to aquire shares with the intent of a hostile takeover it would cause shares to go sky high.
That being said I could see him adding shares any time its below the NRV because it's such a good deal at those prices.�
1/1/2015
guest More than worth watching, it's wonderful!�
1/1/2015
guest Foghat, I think you are touching on the nerve spot for the whole utility scheme. Remember the whole 10% guaranteed return on investment. The whole point of spending $2B on a peak plant that gets used twice a year is to allow the utility raise rates. That $2B "investment" lifted the utility profit cap $200M per year. So the problem with aggregated storage is that it blows the whistle on this whole scam. Of course, $10/kW per month to behind-the-meter battery owners would save ratepayers tons of money. That's exactly the problem with it for the utilities. This would put an end to the utility scam and financially destroy players sitting on bogus investments like that.
I think the POTUS did send a warning to the rent seekers. Utilities will need to show how their investments actually reduce rates for ratepayer in a day went so many new schemes could reduce rates much further.�
1/1/2015
guest SolarCity Corp (SCTY) Stock: Why Baird Sees 60% Upside
solarcity must have had an analyst meeting. Two key bits:
***The recent ABS was oversubscribed and had no pricing pressure. SUNE had all kinds of lack of demand issues for its yeildco spin off recently causing to lower ipo price. Not even close to the success of what Solarcity is doing with ABS, and these facts prove it. Solarcity is expected to continue with ABS very soon and often, so bodes well for continued low cost capital to keep up with current compounding growth.
***the 100MW silevo pilot plant in fremont will be operational by end of this year, which will begin output at 3X more then silevo's current Chinese pv plant. This is a welcome surprise since it will increase product while serving as a warm up to what is required to getting the buffalo factory up and running full 1GW capacity by start of 2017. Very encouraged by this news as it demonstrates how Solarcity will efficiently scale to meet its goals on time. I also see this as a potential boost in cost savings if that 100MW of product is reached within the 2016 timeframe. I wonder if this additional product is calculated into the $2.50/watt all in cost figure by 2017 ITC expiration?�
1/1/2015
guest Can someone tell me why long call options for 2017 would be priced higher now than at this time last week? $70 calls for Jan'17 look to be $.60 more expensive now. I know I'm a beginner, but what gives?
All I feel qualified and comfortable doing as of now is buying shares, which is fine, but I'm looking for a good way to aggressively bet SCTY if I think they'll be at $150+ by then.�
1/1/2015
guest I was thinking that, as a prelude, the takeover investor would first short the stock down to a miserable price, drive out any hope that shareholders may have of seeing a recovery, wait for the other shorts to walk away, and then put up the buyout offer. So defending the stock against Icahn when he's shorting it avoids Musk having to take a much larger stake to defend the company later. So this is just an ounce of prevention.
OTOH, this could simply be the price at which Musk would love to acquire shares. Elsewhere I have dubbed the Musk Rate of Return as the return Musk must expect before investing his own money. I believe the MRR is 50%, his favorite growth rate. So I can imaging Musk doing a little mental math with his broker like this: NRV is $3.1B. It should grow are 50% per year for the next 10 years. So that puts SolarCity worth at least $180 MC or $1800/share in 2025. Yeah, sure, so if you see the MC drop below NRV, pick up an extra $5M for me.
- - - Updated - - -
It could be that you're not the only one thinking the stock will move up soon. Or it could just be an increase in implied volatility regardless of direction.
If Musk really has set a floor say at $35/share relative to NRV, then in 5 quarters this is about $72/share.�
1/1/2015
guest We can only speculate as to Elon's reasoning behind what triggers his large buys. Anyway you want to spin it he's achieving to things simultaneously as he buys on dips like yesterday: he makes a great investment for himself while at the same time defending the company against attempts by large players to drive it further down thereby setting the stage for attempting a hostile takeover.
We shouldn't get too paranoid but seriously think first of the spot on analysis by jhm and Foghat on how all these huge investments in Nat. Gas. peaker plants are likely to fall apart like a house of cards in just a few years time. Then think of the fact the we know for sure that some players with substantial financial muscle are invested in these schemes and utilities (Buffet for sure, many large funds including Chandos', Icahn?) and there's your plot...�
1/1/2015
guest Can one have a TSLAgasam an a SCTYgasam simultaneously?�
1/1/2015
guest I'm really sad about Buffet.....I have some Berkshire B stock and I need it to do well for at least a few more years because it will hopefully help with a nice down payment on the Model 3. So it's hard for me to be mad at him, hahaha, although I understand why.....and will be after I take my money out of his company.�
1/1/2015
guest Oops, I was.mixing up Chanos and Icahn, wasn't I. So Chanos shorts, and Icahn potentially steps in as an activist investor. An activist like Icahn could push SolarCity to spin off the PowerCo as a yieldco. This would be well short of a take over, but I don't think Musk would take kindly to such activism.
At any rate, Musk made a smart buy and defended the stock. I'm happy on both counts.
- - - Updated - - -
This suggests another way to influence Buffet. Perhaps you can send a message to Berkshire investor relations expressing your dissatisfaction with the energy posture. Not sure it would do anything, but they need to know there is serious disapproval among investors.
Buffet is playing a dangerous political game. He is betting against technologies and business models he does not understand, and that alone should worry him. If there is some sort of political move to deregulated the power distribution business, this could end quite badly for Berkshire investors.
All the best with however you play this.�
1/1/2015
guest Idaho regulators reduce PURPA contracts from 20 to 2 years | Utility Dive
buffet at it again in Idaho now... He's essentially just cut renewable investment in the state now. He's clearly not happy with renewables that he can't control entering his utitlity's market space. This has been his new trend and he's doing it with a lot of force now. Wasn't like this a couple of years ago. We are witnessing a significant shift in aggressiveness of his posture.
I only expect it to increase from now on. Buffet is making this very clear. I know why he loves regulation... Because he can control and manipulate it to his advantage. Just another example of the downside to legal monopoly utility.�
1/1/2015
guest These are both great points.
I like that the asset backed security was over subscribed. I'm not sure I would trust the equity markets to put a proper value on a yieldco. The bond market tends to be much more rigorous mathematically in pricing. Moreover, with Obama's promise of loan guarantees, the next time SolarCity issues an ABS it may well come with a federal guarantee. With this, the bond market may view it as the same risk of a Mortgage Backed Security. (I should ask some of my colleagues who value MBSs how much of a difference this could make.) It may well be that the mortgage GSEs Fannie Mae and Freddie Mac could get involved. The upshot here is that SolarCity and other solar financiers could provide financing at mortgage rates, under 4%.
I am also very enthusiastic about Riverbend coming online. I think it could be a big boost to the stock, but more importantly it will be great for the business.
I continue to suspect that Silevo has a 400W panel. I've been looking at the PowerHub specs trying to figure this out. For some reason, SolarCity is not being explicit about the peak watt rating of the panels. I figure that the smaller array has 50 panels (standard 65 in. by 39 in.). At 24.5% efficiency these panels would have 400W. So the whole array would be 20kW. At 3.3 kWh / kW per day, this yeilds 66 kWh / day under modest insolation assumptions. I could be wrong here, they may be assuming more sunlight than I am and lower watts per panel. But I hold out hope for 400W panels.
If Silevo is ready to mass produce 400W panels, this will be a big deal. I think only SunPower may be a competitor at this high efficiency end of the market.
PowerHub is a good illustration of how critical high efficiency panels can be. Using just moderate efficiency 320W panels in the PowerHub configuration would only generate about 53 kWh per day, 25% less power. This increases the total weight and volume per MW that must be handled in a critical mission. This logistical burden undermine the tactical value of such an energy system in say a military application. At 10,773 pounds for nominal 30 kW output, this is 360lb/kW. Using lower efficiency 320 panels would just increase the weight per kW perhaps by as much as 33%. So wherever logistics may be a critical factor, efficiency matters. I'm looking forward to SolarCity showing off what PowerHub can do. I think there's much more to it than just throwing a few panels on a shipping container.�
1/1/2015
guest Mayor Bowser Announces New Solar Financing Program for DC Businesses | mayormb
i think we're going to see PR on Solarcity pace commercial program to Washington, DC soon...
Jhm, I feel being oversubscribed will also put downward pressure on the rates for the next ABS as well. We could see the first sub 4 paper in short order.
silevo pilot factory is in Fremont, literally down the street from the Tesla NUMMI plant. This is the first time I've heard the pilot plant in Fremont pumping out 100MW a year. That's about 134MWs of product from both the China plant and the pilot plant even before the buffalo plant has reached full 2017 production rate. I'm wondering if Tesla is going to get this pilot product for the gigafactory starting next year. I do remember tesla leasing the building right next door to this pilot plant. Could they be developing a co-located battery production line as a pilot for the Gigafactroy and thus developing the Gigafactroy-as-product design?�
1/1/2015
guest I'm not sure how this impacts distributed solar. The sillinesshere is that the utilities have a compliance need for these contracts. By reducing the length of these contracts they will have a harder time finding willing parties. So the rates they pay will be closer to spot market prices. So the utility is just asking to drive up their compliance costs. Of course, they will pass this coat on to their ratepayers. But it seems this would only drive up grid defection, and in Idaho, I do mean grid defection. Out in the mountains, you and your neighbor can set up a PowerHub and do just fine without the grid. The utility can just eat the cost of powerlines through rough terrain that go unused. Buffet is looking more like a buffoon every day. The fact is, eventually Buffet will have to fight against gird defections. He will need to lower rate. The guaranteed rate of return only works if off-gridding is more expensive. So when Buffet has to compete on price, he will need cheap renewables, but for mere two-year contracts developers will not give him the best terms. He could be in a situation where SolarCity will give better terms to commercial clients than utility-scale developers will offer the utility. Seriously, a two-year PPA just does not work. It seems developers would need to ask for a lot of money down, which does not get refunded at the end of two years. I suspect that developers in Idaho will either leave the state or focus on commercial and industrial customers. When Buffet must compete on rates, I don't see how this could possibly end well for him.�
1/1/2015
guest Agree with that. Further (although it will take some years) Yieldcos are doomed as they are valued as if power costs will be underpinned by current fossil fuel rates and Solar will approach that asymptotically. The opposite is true, Solar-Storage will blow through that floor and asymptotically approach zero cost (20 year time frame). Long before that happens however, the market will enlighten itself to that fact, and Yieldco values will collapse. It's my belief that Yieldco is a reverse bond depreciating investment and Solar-Storage will eat it one freely distributed photon at a time...
P.S. Also, agree SunPower best competitor. Efficiency.�
1/1/2015
guest http://pucweb1.state.nv.us/PDF/AXImages/Agendas/17-15/6059.pdf
well, well... Looks like the draft interim net metering proposal before the NV public utiltiy commission WILL continue net metering as is, which is exactly what Solarcity wants.
If the commission accepts this draft then no jobs will be lost and NO CAP on net metering customers in the interim between now and December 31st when they must have a permanent net metering rate (and any other charges).
if this draft goes through you better believe Buffet is going to ratchet up the pressure to get his rate pushed through ASAP. Each day Solarcity( and the rest) are selling massive number of leases/ppa/loans the more and more difficult it becomes to maintain anti-DG momentum.
this could reflect well on the market tomorrow. Not sure of the likelihood of he draft becoming the interim rate, but this does give big boost of hope things may not turn out as grime as once thought...
if this goes through, the Dg market is 1000's of MWs instead of the 235MW just last week... At least for the next four months that is... Crazy times�
1/1/2015
guest Thanks for pointing that out. For some reason the Fremont plant did not register in my mind. I thought they were just in China until Riverbend. I guess for logistics Fremont is super. Perhaps it is even better for manufacturing R&D, keeping most of the talent close in hand.
Co-location makes sense for an integrated product. So I'm not sure if there is an advantage to having panels and batteries built side-by-side. Howerver, Silevo panels and SolarEdge power optimizer could co-locates, and Tesla Powerwalls and SolarEdge inverters might integrate and benefit from co-location. Yet there is something attractive about a huge campus where all this stuff is happening.
Ok, so here's my fantasy business strategy. Somewhere in Nevada Tesla, SolarCity, Panasonic and SolarEdge build up a fleet of military grade PowerHubs. At first, nobody pays attention. Later they say these are just there for disaster response deployments. FEMA and the Red Cross get a few, and it all seems legit. Several GW are amassed. Then when the utilities least expect it, the deployment begins. The Hubs can be located anywhere, for any length of time, rented off-grid power for just 10 c/kWh. Mass defections ensue. People just leave the grid and use the Hubs until permanent installations are complete. The Hubs descend like locust striping ratepayers from the utilities, overwhelming the utilities capacity to cope with change. One by one the utilities go bankrupt. The Hubs pick up the powerlines. Microgrids multiply and interconnect. Piece by piece they integrate the remnants of broken utilities. The Hubs become stronger. And in the end no one seems to care that fossil fuels were just left in the ground. They're having way too much fun in their self-driving solar homes that drift to whatever natural scenery suits their fancy for the day. Once they left the grid, they kept going.�
1/1/2015
guest Poetically delicious!�
1/1/2015
guest how about next to a factory, cough Fremont, that would use the energy when not deployed elsewhere�
1/1/2015
guest
This ^^ +1000 , BTW Foghat, Like your music as well!�
1/1/2015
guest Ah, yes, the surplus energy feeds the robots that build the Hubs. This is all behind-the-meter, so the utilities never see it coming.�
1/1/2015
guest Analyst says Chanos is lying about SCTY http://finance.yahoo.com/news/chanos-isn-t-telling-the-truth-about-solarcity-s-numbers--analyst-131055907.html�
1/1/2015
guest Reviewing the NV interim net metering draft, it is clear rooftop solar stakeholders have a very strong legal case in such situations. Clear Supreme Court prescident in maintaining status quo while due process unfolds. I think today's decision will also be prescident for solar caps in specific and will be a deterrent to future utitlity tactics during cap maxing situations around the country.
What is interesting is now discovery will be able to happen which will shed light on the actual costs the utitlies are purporting as well as discovery for the benefits of roof top solar to the grid. They are nearly a dozen such studies, 8 independent studies done on net metering that reflect an overwhelming majority conclusion that net metering is a worth more then the average retail rate in the county. However, there is no such study from an individual utility that shows the breakdown of those costs that will increase rate payer rates.
As these times bring uncertainty(which reflect in the stock price), they also open the door for further evidence to support the benefit and force utilities to open their books in a more transparent and public way for all to examine and reach longer term conclusions on grid connected rooftop solar. This process of conducting hearing and having discovery will get to the root of the net metering issue and enable greater certainty as to how future disputes will be framed. Arizona is also going through a discovery process right now as well. I feel NV and Arizona hearing processes will send the message to the rest of the country and limit future utitlies ability to delay DG growth.
NV PUC will decide on the draft today, so I feel as I said before, this may become a note worthy win for rooftop solar that creates a successful strategy for net metering policy disputes around the country... and should reflect in the market.
if the draft is accepted:
***interim rate stays the same
***all interim rate payers are grandfathered for life of contract
***no cap on installs
This would be a resounding win, a big improvement on previous policy for the next four months. Solarcity could really set high install expectations when their hands aren't tied.�
1/1/2015
guest It looks like the shorts are back at it. The price is now under $41. They may be testing Musk's resolve to defend the price. I am contemplating at what price I will buy more and might set up a limit order.�
1/1/2015
guest I'm gonna abandon my dream of leveraging long calls and just buy this stock. At $40 it's an absolute steal, might as well invest the natural way.
5 years from now I can easily envision myself coordinating a microgrid install with SolarCity on behalf of my entire square block. $$$$$�
1/1/2015
guest
This is is a shake out. Someone is pushing this down to get hands to fold. They will run out of gas when the decision comes down in NV PUC.
Before the shut down the Solarcity now site, I was tracking another record breaking booking quarter trending above 400MW (which then depends on net cancelations). Given the rush to beat the cap, I feel NV had a nice bump that will add into the new interim rate sales that again should be high volume to get it while they can before any changes on January 1st.
There is national legislation to extend the ITC as well as to streamline permitting process. With the president now keenly aware of rooftop solar situation, I think he will be tracking those states that are clearly making the wrong moves. In addition, the federal case involving Solarcity(which has lasted now four years because of federal foot dragging) will be resolved mid 2016. Also, the SRP anti trust case will see movement in the next few months which is another prescident setting event that has significant ramifications. There actually going to be A LOT of major policy/legal catalysts happening over the next 12-18 months so I expect the big swings to continue with possibly increasing frequency. However, I'm betting when the dust settles, we will be much higher then we are today in 2017 and beyond.�
1/1/2015
guest I'm with you. The upside on this is so great that you don't need leverage to get spectacular returns. Moreover, this is a long-term play and the time limitations on options can force you to take a loss. So with shares you can just hunker down for as long as it takes. Shorts know it is easier to threaten call holders than shareholder. So as long as a there are a lot of calls held, they can keep attacking the stock.�
1/1/2015
guest Didn't Obama mention something about guaranteeing the safety of existing PPAs at the Clean Energy Summit? Moody's note seems to say a lot of people in California have Solar Systems installed via PPA. If the utilities change the rules in a way that makes the solar assets not cost effective, or if the cost of energy from other sources is cheaper resulting in people defaulting on their obligations, Solar Panel companies might have a problem.�
1/1/2015
guest the only way a rooftop ppa goes under is if the utitlity sells retail electricity for a cheaper $/kWh rate. That's it. Looks at the capital expenditure plans of california utitlies and you quickly conclude there is no chance of that ever happening. The current ppa contracts are all grandfathered so they can not be touched of any future charges/rates are applied at some point in the future. That's why all these systems installed today(and in the past) are worth more down the road to homeowners (reguardless of purchase or ppa). Which, becomes another benefit to going solar. Home values rise with grandfathering. Thus far, grandfathering has an extremely strong prescident across the nation. As a matter of fact, there a zero policies that have ever excluded grandfathering.
so, existing solar ppa's are protected on many levels. The only question is on any future ppa sales, that's where any uncertainty would exist as new policies are enacted.
over the past 5 years solar pv prices have dropped exponentially which you would think, according to that default assumption, would cause Solarcity customers to throw off their system and get a new one. However, Solarcity has doubled every year over the same 5 year period, with 99.985% of all customers making their payments on time and in full. Over 8 years and 200,000 customers later, Solarcity has had a handful of defaults according to this data point. The default assumption has no support, in fact, it is proving to be the complete opposite of what's happening in reality.
over 50% of all households have a credit score of 720 or higher, so Solarcity has a massive prime market work with for a long long time. Any claims of subprime on national TV are slanderous and could be punishable in court.�
1/1/2015
guest EPM
EIA - Electricity Data
One distortion that FUDsters are floating right now is the idea that utility electricity prices are falling. The link above shows that this is clearly not the case. The average residential rate in 2004 was 9.45 c/kWh, but for the last 12 months ending May 2015, the rate is now 12.63 c/kWh. That is a CAGR of 3.13%. Or compared to the 12 months ending May 2014, 12.32, that is an annual increase of 2.52%, over a year within which oil prices have fallen more then 50%. So in national aggregates the idea that retail electricity is getting cheaper is simply false.
Also not that NV is not a critical market for SolarCity. The average residential rate is
EIA - Electricity Data
The next ploy is to cherry pick areas where rates may have come down. Table 5.6B is good for looking across all the states comparing YTD Y/Y. I'd encourages us to spend some time looking at this and keep an eye out for states where SolarCity installs solar. Notable the North Eastern states have very high rates and these are mostly getting worse. It should be no surprise that SolarCity would enter these states.
There is one state where residential rates have come down 17%. A year ago the average rate was 37.82 c/kWh, but now it's down to 31.27 c/kWh. That state is Hawaii. Two things happenned. Rooftop solar penetration skyrocketed, and diesel prices fell. Residential consumption of grid energy YTD fell from 1024 GWh to 979 GWh, a decline of 4.4%. Clearly lower prices did not lead to higher consumption. The decline in oil was not enough to keep customers happy. This is what massive load defection looks like.
Also note that NV is not a critical state for SolarCity. The average residential rate is 13.31 c/kWh up from 12.90 the year before. There may be particular pocket of opportunity, but 13 c/kWh PPA prices will not have mass appeal across the state. AZ is even less important. Right now the big action is in the Northeast where many rates are above 18 c/kWh. Alaska could be a really interesting market for PowerHubs and microgrids.�
1/1/2015
guest I'd also add that under a PPA, just as the customer has the option to buy power from the utility at a lower price, SolarCity also has the option to lower the price they offer. So if your PPA has escalated to 14.2 c/kWh while the utility has lowered their rate to 14.0, then SolarCity could easily offer a comptitive rate of 13.9 and retain the customer's business. The operaton cost to SolarCity is negligible, so they can cut rates much lower than the utilities can. SolarCity may forego a slight amount of anticipated revenue, but it will not suffer any real loss. The utilities cannot win a bidding war with existing SolarCity PPAs, so they won't even try.�
1/1/2015
guest Colorado PUC upholds 1:1 net metering. I guess now 15 of 16 states left to review NEM policy?�
1/1/2015
guest That's great. I wonder if Obama's warning has helped to tilt the politics. I suspect that PUCs do not want to come under federal scrutiny. Also for the utilities, if net metering is the political price not to have their monopoly status quo challenged, it is a very small price indeed. Hands down the biggest subsidy the government has every given to fossil fuels and the utilties is monopoly status. That alone is the franchise the likes of Buffet is willing to pay for. The President called them rent seekers but stopped short of calling them monopolists. Yeah, net metering is a very small price to pay...and it actually does not cost anything to anyone else.�
1/1/2015
guest NV PUC voted to extend current net metering until dec. 31st. No caps, grandfathering too. Viva Las Vegas. Let's see how the market reacts now...�
1/1/2015
guest Very interesting. The weakness today was entirely due to the comment from Moody's, that assumes California will change the rate structure for net metering, in a way that will kill the viability of PPAs. This seems very unlikely and would likely violate anti monopoly laws. Sunpower was equally effected by the comment.
Solar City hasn't been this oversold in a long time. Solar City can grow by 50-100% annually for the next 5-10 solely with government contracts. I'm almost certain a number of states are offering incentives for grid storage, that cover the complete cost of residential grid storage. Didn't Obama recently announce he was planning to further increase the incentives for Solar and Grid storage?
In order for states to meet the mandates for grid storage, utilities, and states will need to increase the subsidies for grid storage. Solar City and Tesla's factories will be operating at maximum capacity for many years to come.
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Incentives for energy storage spread worldwide
In California, the state's Public Utilities Commission required that the three main utilities collectively phase in 1.3 GW of storage by 2020. In a twist, half of the assets are required to be owned by private industry -- a rule that will likely make California a proving ground for the young energy-storage industry"
In New York, the subsidies for storage are especially high: $2,100 a kilowatt for battery storage and $2,600 for thermal storage.
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It is very unlikely Tesla won't need a second Gigafactory by the second year of Model 3 production. I will be surprised if Tesla isn't already identifying sites, and preparing all the things necessary to ensure a second factory can be operational within 3-4 years.
Here is a fun website for anyone wondering how incentives vary by state.
ACEEE | Policy Database
Speculation: It's possible Tesla has already worked with Apple , and other parties to secretly build a second factory in China. $1-2 billion dollars isn't material for Apple, and probably wouldn't need to be disclosed. If Solar City and Tesla's only problems are the need for a few billion dollars to build additional plants, neither company has any problems. There are tons of people, companies, and banks desperately looking for places to invest a few billion.�
1/1/2015
guest awesome, thanks for the continual updates!�
1/1/2015
guest But that seems more like a temporary solution, only until the end of the year. Obviously with the growth in solar deployment the utilities are waking up all over the place. 2016 seems like it will be an important year for this battle to play out. They will come at it from any angle, of course emphasizing the angle mostly of how unjust it is to those poorer customers who can't afford solar who are now subsidizing the rich people and how all those millionaires putting solar ion their roofs are still using the grid at night, but allegedly not paying their fair share for maintaining it.
I think solar will be able to do very well even without net metering, even though it may delay the revolution by 1-2 years. The biggest advantage of solar economically is that you're not buying power from the utility, not that you can sell a little back during the day. As storage becomes better and cheaper the use for net metering becomes less and less. If the utilities do somehow "win" the battle on net metering I think in the end all they'll achieve is an even faster loss of their grip on the market; small and larger microgrids with storage will pop up here and there, interconnect and before you know it the whole electricity distribution system is no longer a monopoly.�
1/1/2015
guest
It is four months, yes limited. However, a new trend has started, which is directly assaulting the foundational premise of "cost shift" every single utility across the nation uses as justification for eroding net metering. The trend is forcing the utitlity to prove these costs and also giving the rooftop solar companies to contest these costs and support its claims of benefits. In NV and AZ, right now, hearing processes are underway to look under the hood in a real way, which has not been done before in this manner and intensity.
For example, in Mivhigan, DTE says rooftop solar is causing a cost shift, yet if you took DTE's own un-vetted cost estimates into consideration at 1:1 NEM with no benefits to the grid added at all, the total cost to DTE customers is .3c per month. Yes, that's 3 cents per month. Does that sound like a strong argument to add fees and drop net metering in order to stop the cost shift placing non solar customers at significant risk of not paying their bills because of the need to increase rates?
the smoke and mirrors are being exposed now. The tried and true talking points of "cost shift" are crumbling under actual scrutiny. And consumers are taking notice.�
1/1/2015
guest I guess I would be surprised if utilities started to make an unfairness argument about lower income folks not being able to get rooftop solar. First if it is just a matter of financing, there is already zero down financing available to anyone with decent credit. Calling for fairness here would amount to inviting the government to susidize or guarantee financing for low income families. So anything in that direction makes matters worse for utilities resisting rooftop solar. The next issue is that some people simply do not have roofs that are adequate for solar. This inequity actually works to the advantage of utilities seeking to limit rooftop solar. The equitable solution to rooftop inequity is community solar and virtual net metering. If I rent my home but my neighbor has a roof big enough to provide solar for both of us, then how is it fair to prevent me and my neighbor from sharing his roof? Net metering for self-consumption only enforces inequities while virtual net metering makes sharing possible. This is a bit like restricting a neighbor who likes to garden to only grow as many tomatoes as they can consume, perhaps selling a few to the grocery market only to be bought back at a later time. Preventing that neighbor from selling or sharing his tomatoes with neighbors is the injustice, and the injustice is made even worse when the neighbor would have difficultly affording expensive tomatoes at the grocery.
Here's a thought. Consider a program that allows people with surplus solar energy to donate that to charitable organizations, such as Habitat for Humanity. The donor gets to deduct the full price of the electricity from their taxes as a charitable gift. The utility distributes the power and also gets to deduct the cost of the service as a charitable contribution and also fulfills certain regulatory requirements regarding low income customer. And of course the recipient of the charitable gift benefits directly. So everybody wins. I suspect it would be very unpopular for a utility to oppose this scheme. I'm sure there are many families who would love to donate their solar power to other families in need. That's what neighbors do.�
1/1/2015
guest This might become the standard methodology for evaluating NEM across the country. Perfect timing as nearly 60% of utilities are challenging net metering right now, especially NV,AZ (discovery currently underway).
http://www.irecusa.org/ajax-link-file.php?file_name=http://www.irecusa.org/wp-content/uploads/2013/10/IREC_Rabago_Regulators-Guidebook-to-Assessing-Benefits-and-Costs-of-DSG.pdf�
1/1/2015
guest NRV Fundamental Investing
Let's review some fundamentals in light of recent prices. As of Q2, SolarCity reported $3057M in net retained value (NRV) and 262k customers. I believe the company is still on track to hit the million customer mark by mid-2018, 3 years away. To do this the need to grow customers by 56% per year. Currently NRV per customer is $11,668. Over the next three years it may be hard to retain this average. Specifically the ITC step down could force SolarCity to grow on thinner margins. OTOH MyPower loans generate twice as much retained value per watt higher efficiency panels coupled with SolarEdge optimizers and inverters could lead to more watts per customers, so such innovations point to the potential to improve NRV/customer. So let's suppose at the million customer mark NRV/customer is $11,000. This gets us to $11B NVR mid-2018. Presently, there are 97M shares, but by 2018 this could reach 110M. So NRV/share is $31.52 presently and $100 mid-2018. Thus, we are looking at a 3X growth in fundamental value over the next 3 years.
Personally I think SolarCity should trade at 2 to 3 times NRV/share. This would account for some.of the value of the huge organic growth engine called DevCo. This engine has the power to double the value of PowerCo, ie NRV, every 12 to 20 months. So that ought be worth quite alot, at least as much as the PowerCo. Unfortunately, the market does not agree with me. It seems to think this engine will stall out within a year. The price has been range bound between about $45 and $60 for quite a while, and recently we have tested $35, whence Musk bought more shares on the open market. So with NRV at about $31.52 per share, the market seems willing to price this at 1.5 to 2 times this. Thus, we see the stock price between $150 and $200 by mid-2018. So at current prices around $40, I think the upside is 300% to 400% in three years. Annualized that is 55% to 71% growrh, which is at least as fast as the company will acquire customers.
The upshot of this analysis is that we can track progress the company makes in growing its customer base and NRV and compare this to the stock price. When the stock drops too far below 1.5 times NRV / share, we may want to buy. The stock needs fundamental traders like this to support the stock price. It appears Musk is willing to do some of this, but it would be good for others to join him. I think trading today demonstrated that fundamental investor are willing to put a floor on this. I am very much encouraged.�
1/1/2015
guest And consumers should take note. The real economic benefit to all ratepayers is that competition from rooftop solar places market discipline on rates utilities might otherwise impose on ratepayers. It is one thing to have PUCs and mountains of complex laws on the books to try to keep these monopolies from over pricing ratepayers, but look at how much retail ratepayer pay over industrial ratepayer almost 100% more. Why do industrial ratepayers get such a better deal from utilities? The generation costs are the same. Both need transmission and distribution. The underlying cost cannot be that far off, but industrial ratepayers take a much more active role in finding alternatives to what the utilities off. Thus, competition is what keeps industrial rates low. Residential ratepayers need to engage alternatives as well and force the utilities to offer more compelling rate plans. Consider also, that over the last 10 years residential rates have increased by about 3.2% per year. What if competition from solar and batteries reduced this to just 1.6% per year? This would keep the national average below 14.8 c/kWh over the next ten years instead of letting it rise above 17.2 c/kWh. The regulatory status quo cannot slow the pace of rate increases, but competition from rooftop solar can. I should hope that would matter to all ratepayers.�
1/1/2015
guest
I'm learning a lot from you guys, so thank you for your insight, but what about PPAs? One reason I didn't go with solarcity PPA is because I knew the industry was going to change and change fast. So the escalator they have each year is fine for say the first 5 years, but when I looked at say year 12-20, the cost was going to be pricey and who knows what the utility prices will be with solar+battery storage by that time. I didn't want to get into a 20 year contract with low payments now and then have the industry cheaper by year 14 or whatever.....thoughts?�
1/1/2015
guest you will be paid something comparable to $190/kW month for grid services for battery +solar. Plus, your rate is fixed for 20 years. Utitlity rates have gone up nearly double the max Ppa escalator with most cases Solarcity beating the california per/kWh rste by over 5 cents per/kWh already.
Ppa's are good to go. At a quarterly conference call last year, Lyndon rive said he is comfortable with his flat .15c/kWh rate in california, in fact likes how the California rate structure opens up a wider market at healthy margin for Solarcity.
If there was one energy company that understands the innovations and sea changes of California energy landscape, it would be Solarcity.
http://www.irecusa.org/ajax-link-file.php?file_name=http://www.irecusa.org/wp-content/uploads/2013/10/IREC_Rabago_Regulators-Guidebook-to-Assessing-Benefits-and-Costs-of-DSG.pdf
if you want to confirm a belief in that rooftop is going to keep up rate changes and expand on net metering, read the above document.
Another document to read is the Solarcity white paper on its "grid engineering" website.
if the California utilities ever do start reducing its kWh retail rates, it will be because of distributed grid asset services, not because of any efficiencies in centralized technologies over the next 20 years. In additional current utitliy capital expenditure road maps clearly indicate retail prices will not be going down for the foreseeable future, and I mean decades. So, again, in my opinion, if there was to be a retail rate cut, it would come from the services Solarcity &customers will be offering in distributed asset aggregation of which you would directly benefit in payment.�
1/1/2015
guest Yes, but I live in TX where rates are cheaper to begin with and what happens if the utilities keep rates lower in year 12 to keep up with the competition of solar+batteries? I would then be paying more for my solar (because of the escalator) than from the utilities, right? Maybe I'm missing something here.
This is what I'm talking about if it goes this way:
�
1/1/2015
guest This was an OK read and a pretty balanced view:
Analyst trolls Chanos, says he's lying about Elon Musk's SolarCity - Yahoo Finance
"We're all entitled to our own opinions but not to our own facts".�
1/1/2015
guest Unless you are a Wall Street analyst with a not-so-well-hidden agenda, then facts are only limited to your imagination!�
1/1/2015
guest You seem to be forgetting that utility scale solar is a thing too, and that it is half the price of residential. The sentiment here seems to be that the 20 year PPA from SCTY is great because the price from utilities will just go up over time, but that doesn't make sense considering that solar has reached parity now and is clearly going much lower. I certainly wouldn't sign a 20 deal with SCTY with an escalator to save a few cents today while solar cost is still dropping 10%+/y. And what if net metering goes away, then the system will be a huge liability right? How strong is this PPA, can the resident get out of it?�
1/1/2015
guest It is a falacy to compare the cost of utility solar to residential rates. In the US residential rates are about 80% higher than industrial rates. Roughly the industrial sector pays about 7c/kWh while the residential sector pays about 12.5c/kWh. The point here is that wholesale prices are the same regardless of sector. So even the average wholesale price goes from 6 to 4 c/kWh because of cheap wind and utility solar, this will mean very little rate relief for residential ratepayers. The spread from industrial to residential has little to do with the cost of generating power. So the spread will remain. In fact the spread has been widening in both absolute and relative terms over the past 10 years. Residential rates have gone up 3.2% annually for the last 9 years, while industrial has only gone up 2.4% in the same time. It is not the cost of wholesale electicity that is driving this widening gap. I suspect the different owes to greater demand elasticity among industrial ratepayers than residential. So increasingly the residential sector is bearing more than its share of the cost of the grid. So utility solar can go to zero, but the residential sector is still stuck with the bill for the grid.
So the primary issue with distributed solar is whether residential ratepayer are willing to pay for the grid. The attack against distributed solar was that these residents were not paying as much for the grid, as if residents have a moral obligation to subsidize the grid for industrial ratepayers. But what rooftop solar owners are doing is expressing demand elasticity. They are simply not willing to pay higher rates and will modify their homes and finance their own energy investments to do so. It is the unwillingness of marginal residential ratepayers to accept high prices that puts economic pressure on utilities to lower their rates. The regulatory framework cannot do this. Only consumers willing to defect can force utilities to lower their rates. But the defection has to be massive. Electricity consumption has actually been in decline for a while, while revenue rises. So a modest decline cannot motivate a utility to compete. But if the threat of defection is high enough to impact solvency, they will have to change strategy.�
1/1/2015
guest thanks for the insight!�
1/1/2015
guest W.A. says solar is the future as it prepares to dump coal : Renew Economy
This is an extraordinary postcard from the future as Western Australia's Energy Minister comes to see rooftop solar as the dominant energy source for the state. This is an exciting evolution in thinking. Note that the government had been subsidizing energy to the tune of $500 per family per year and a bloated capacity market was called a "rort" which is Australian for either a dishonest practice or a wild party. Many peaking plants had been built but never switched on. Within this context, rooftop comes as a sweeping "democratic" alternative that is actually quite inexpensive to deploy. The government can save money and shut down unneeded fossil plants. With deep penetration of solar there is actually no need for baseload generation. What is needed is storage, but given the recognition of rooftop solar's contribution, I suspect schemes to support behind-the-meter batteries cannot be far off. So the people have spoken, and they want their own solar and batteries. This is stunning progress.�
1/1/2015
guest Why do you not want residential solar owners to pay for the grid when in fact they are still using it? You want net metering but you don't wan't to pay for it. You can't just go to Wal Mart and expect them to buy groceries for the same price they are selling them for. When distribution has a price there will be a difference between wholesale and retail it's that simple. You might very well be underestimating grid cost, from the income statements I have seen (admittedly only a few) the profit margin has been around 10% for utilities. And the thing is that we still need the grid, without it residential solar owners would have to pay for a battery much larger than they use 90% of the time due to the fluctuations of their energy use which would drive their average cost way higher than utility rates everywhere (except maybe Hawaii) and ofcourse if the solar array is too large compared to electricity usage all excess will go to waste, this whole scenario is very inefficient at this time, we need the grid and everyone who uses it should pay for it.�
1/1/2015
guest What you are missing here is that utilities have a perverse incentive to "invest" in more assets so they can justify rates. They are legally limited to a 10% return on investments. So if the market is willing to bear a certain price, they need only increase investments to meet that price. This seem really has very little market discipline about it. So we need to step away from the mindset that ratepayers are obligated to pay for anything. Consumers should rather chose whatever is the cheapest and best value for them among competing electricity prividers.
Let me give you an example. Each month I pay Georgia Power about $20 dollar for a nuclear power plant that may be built at sometime in the future. The plant does not exist today and certainly does not power my home. Nevertheless I am obligated to pay the grid for this investment. Now suppose I went to Walmart and at the end of my checkout receipt they added a $20 cost capture fee for a store they would be opening in my neighborhood in maybe 4 or 5 years. Suppose I complain about the charge saying that I should not to pay for this item. But the worker tells me that customers must pay for Walmart's distribution system, and that Walmart has a very thin operating margin anyway. So this cost capture fee is just my fair share of the cost of bringing low, low prices to my community. So what do you think shoppers would do about bearing this distribution expense for Walmart? It actually has nothing to do with what is fair. Customers would simply stop shopping at this Walmart and go to other stores where the total bill is not bloated with arbitrary distribution costs. So Walmart may well have certain distribution investments that they need to make, but they exist in a competitive marketplace. They cannot not arbitrarily pass this on to shoppers. It is the investors who must bear the cost of distribution. Consumers only pay for the items they want and can shop multiple stores for those items.
So if Georgia Power made the nuclear power plant fee an option, nobody would pay for it. If I had my choice of electricity prividers, I could switch to a provider that did not bloat my power bill. But alas Georgia Power has a legal monopoly on electricity in my neighborhood. I really do not have any consumer choice in the matter. What we have is a politically constructed rate scheme. So the nuclear power plant fee for a plant that does not exist is little more than a tax imposed on me and all my neighbors.
Competing companies should be allowed to set up alternative powerlines within the same neighborhood just as they are multiple telecommunications lines reaching homes. When this sort of competion is legally allowed you will find that there are much cheaper ways to distribute electricity to residents. SolarCity, for example, could set up microgrids within neighborhoods (parallel to what the utility has in place) and drive down the cost of distribution. So it's not about forcing residential ratepayers to pay for the grid. It's about allowing consumers to choose the most competitive solutions.
The spread between industrial and residential rate payers is relevant because in principle a microgrid operator could buy electricity as an industrial ratepayer and distribute this power plus any locally generated power to residents in the microgrid. So where the spread is great there is a fair opportunity for a microgrid to make a profit while bringing lower prices and better service to residents. I actually think SolarCity could pull this off.�
1/1/2015
guest Sure they could, but they haven't, and if they did the price of power SCTY offers would go up, because a grid has a price. Fact of the matter is that the grid has a price, whether the optimal grid structure is more distributed than it is today is up for discussion, I don't think there is much to save here if any (there is a reason for grids actually growing larger with sale of power between countries), and that everyone who uses that grid should pay their share.
How are they charging you $20 for construction of that nuclear power plant?
"The spread between industrial and residential rate payers is relevant because in principle a microgrid operator could buy electricity as an industrial ratepayer and distribute this power plus any locally generated power to residents in the microgrid. So where the spread is great there is a fair opportunity for a microgrid to make a profit while bringing lower prices and better service to residents. I actually think SolarCity could pull this off."
Not sure I understand you correctly, are you saying that a microgrid operator should be able to buy wholesale electricity without paying for the distributing network that delivers that power to them?�
1/1/2015
guest Looks like I should of held onto my scty shares for a little longer.�
1/1/2015
guest I'm hoping there's a selloff at $50 and I can get in.�
1/1/2015
guest Would $49 do it for you? Or, as of now, 48.95?�
1/1/2015
guest �
1/1/2015
guest "PayPal of electricity"
Wonderful! Brief, accurate, to the point.�
1/1/2015
guest �
1/1/2015
guest I don't think you grasp that my utility, Georgia Power, is a regulated monopoly. I can only buy and sell power to this monopoly on their terms. If I had surplus rooftop power, it would be illegal for me to run a power line to my adjacent neighbors and sell them that power. Net metering is an issue wherever solar owners are barred from selling power to anyone but the utility.
Georgia Power is able to bill me for an unbuilt nuclear power plant because the state PUC approved it, and as long as Georgia Power has legal monopoly status, I have no legal alternative.
My point about the spread between residential and industrial rates is that a microgrid operator could in theory become a industrial ratepayer, which is buying retail from the utility, not wholesale. Thus, the microgrid is buying power at retail rates with the cost of distribution built into the rate structure. But this industrial power is about 6 c/kWh cheaper than residential rates. So the microgrid buys at say 7 c/kWh and distributes this power among microgrid participants at say 10 c/kWh. So yes the microgrid is bearing the cost of distribution not only on this 3c/kWh spread, but also on any local solar, storage and other services it may provide to participants. For participants they avoid having any direct relationship with the utility paying say 13 c/kWh plus any other fees the utility puts on residential ratepayers. So while this is economically and technically possible, it is not legal in this state. This legal framework explicitly protects the monopoly from this sort of competion.
Now if the a utility really had the most optimal cost structure for distribution, it really would have nothing to fear from microgrid attempting to arb the residential / industrial spread. No competitor would be able to make a profit doing so. They also would not be threatened by distributed solar or batteries. So the fact that utilities are working so hard to keep rooftop solar away from their franchises is indicative that they are not sitting on a competitive cost structure, and would suffer under competition.
Note that utility profit is generally limited to a 10% rate of return. If competition forced utitlies to lower rates 10% or more, adjusting for the cost of fuel, they would be unprofitable. This is why SolarCity can offer rates just 3 c/kWh below residential and face practically no risk of price competition for the utility. A utility charging 16c/kWh is unprofitable below 14.5c/kWh. To get out of this predicament the utility would need to do some very serious cost cutting in their distribution network, but this would also cut their rates and reduce their net income. Utilities are not inclined to kill earnings just to become competitive with rooftop solar. So they are stuck in a position of watching their business model get disrupted. The best they can do for short term quarterly performance is fight regulatory battles to obstruct competition. This, however, is a strategy that puts them at existential risk longterm. Eventually, distributed solar and batteries will be so cheap, that residential ratepayers will find it cheaper to go completely off grid. This will leave massive investments in grid assets stranded. If these really are the investments that lead to the lowest cost residential power, then they have nothing to fear. But if they have been making poor investment choices, then there will be a massive asset bubble in the utilities. Utilities will default on debt and go bankrupt. At this point, useful bits of the grid will be purchased for pennies on the dollar. Utilities may have opportunities to avoid this scenario, but they need to move quickly to strike a new deal with new entrants such as SolarCity.
So the way I like to look at SolarCity's retained value is that it is a hedge on the continuation of the regulatory status quo. If this status quo is breached, then much more opportunity opens up for SolarCity. So either SolarCity is worth it's NRV under the status quo, or it is worth much more in a more deregulated residential power market. It is ironic that shorts want to poke holes in the value of leases and loans with out recognizing that, under those same scenarios, utilities are under much greater distress and SolarCity is much freer to seize the market. If one really does believe that utilities will substantially lower their residential rates, then one really ought to short the utilities, not SolarCity. It is an illogical thesis.�
1/1/2015
guest SolarCity - Current Report
surprised no one took notice that Solarcity board expects to be at $400/share and a $40bln market cap within 10 years... However, 7 out of 10 of the operational goals to that $40bln will be hit within the next 3 years, possibly earlier. Very interesting how that is...
Of note, one of the ten goals is 3 million customers... So very rough estimate of $90bln in contracts, $40bln in net retained value. So, given the fact that they will expect to continue growing after 10 year mark, this looks to be the board is operating from a conservative estimation or rather "realistically achievable" given current growth projections.�
1/1/2015
guest �
1/1/2015
guest My portfolio is certainly on board with these goals!
Been adding with all my extra cash the last few in the 41-50 range. Missed the 35 because I'm not allowed to trade during working hours�
1/1/2015
guest You write very long posts, and you have drawn a lot of conclusions that I don't agree with, but I won't spend my time refuting them all as I'm pretty sure it's impossible to change your mind anyway. I agree that the utilities have a large amount of sunk cost that might have to be written off at some point due to the price of energy about to decline as wind and solar has hit parity and will continue the cost cutting. This doesn't make a SCTY contract today at 16c/kwh any better though as the terms gets better and better for the customer every year. I also don't think that the utility is going away even if some might declare bankruptcy due to asset devaluation, the large grid is still the most efficient today and will be for a while as it allows for the highest utilization rate of capacity.�
1/1/2015
guest I think many "haters" don't understand is that Solarcity rooftop solar installation is only the beginning of the relationship between the ppa/leasee/owner and Solarcity. Much like the Tesla Model S, it will upgrade and improve over time of ownership. This has never happened before in the automotive industry and it has never happened before in the utiltiy business. Solarcity will offer energy storage, smart thermostats, smart water heaters, weather sensors, etc... All revolving around a software operating system that connects and communicates between all appliances, devices, and automobiles to maximize energy savings for a consumer.
This by definition of centralized power generation can never be offered by utitlies. Solarcity is positioned for these partnerships and innovations for the foreseeable future and that means potentially decades. The solar system you get from Solarcity is central nervous system, the next few decades will be the buildout of the connective tissue. 20 year customers will be extremely common because of this type of upgradable/add on capability a utiltiy can not offer to individual homeowners. not to mention the massive advantages to firm near instant demand response, accurate/real time energy market pricing, expensive peaker plant avoidance among many many other benefits to a big utitliy in purchasing Solarcity roof top solar services. It is a resounding win win for all involved. can't hate on it forever. We all see the light bulb eventually. Just some will lose a lot of money before they do.�
1/1/2015
guest I assume you are talking to me since I am the only "hater" in this "circlejerk" of a thread. All of this "Solarcity will offer energy storage, smart thermostats, smart water heaters, weather sensors, etc..." is pure speculation, besides the energy storage that is, but like Elon has been saying himself, utility scale storage will be much larger than residential, utility scale is pretty much by definition cheaper than the small scale residential just like it is for solar. Still haven't heard a single explanation for how residential solar will compete against utility scale when utility clearly is much cheaper. But I guess SCTY can always pivot into a weather sensor company.�
1/1/2015
guest i was talking about hedge funds positioned short on Solarcity. I didn't think you were a "hater." Is this how you feel about yourself though?�
1/1/2015
guest My bad then, I don't know if I would call myself a hater, I am merely perplexed by the hype around residential solar when it makes no economic sense. I am neither short or long, I wouldn't mind SP appreciation though so I can get some attractively priced puts as a hedge against my other solar investments.�
1/1/2015
guest
What assumptions do you feel the rooftop solar hype is based around? Do you feel there is no benefit? I noted in an earlier post that in South Orange county, the utitliy is buying access to 10MWs of energy from a group of 26 buildings owned and operated by retail level customers. This is proving to be multiples of magnitude cheaper then $1billion dollar 10MW peaker plant that has only been used 13 times in 6 years.
That is a distributed energy asset. This adds another data point that supports the massive potential of aggregated distributed assets to the grid of which Solarcity is currently building out. There are currently 8 independent studies that conclude rooftop solar is already abenefot beyond the average retail electricity price right now. I have yet to find a public cost breakdown from a big utitlity that provides visibility into cost formulations and raw data of how they operate.
do you have access to utitlity level cost data from top to bottom costs which is critical in determining what costs and benefits DG solar has in relation?�
1/1/2015
guest Utility scale solar has a total cost of around $1.3/watt which is half that of SCTY, First Solar has a target of $1/watt in 2017. It's called economy of scale, the soft cost is much lower when you install 100MW compared to 8kW.�
1/1/2015
guest How do they come up with retail price to rate payers though? That's Solarcity's price to a consumer. They provide a cost/kWh that is less then the utitlity retail rate.
if utility level is cheaper, then why doesn't this reflect in the retail cost/kWh the consumer sees?�
1/1/2015
guest PerfectLogic, to be sure, I do not see you as a hater either. I think you are simply processing the skepticism toward distributed solar that is quite common. There certainly are reasons to be skeptical. So I mean no dispect. It is a very complex space for a non-utility to compete so it is important to dig deeply into what is going on and where various strategies may lead. What would be quite helpful in our discussion would be for someone to focus on what the best strategic options for utilities. For example, if you think utilities can find a profitable way to reduce rates and retain market share, then dig into that and try to clarify how they can pull that off. This is not meant as a challenge. We simply need to better understand what actions utilities can take so we can all better anticipate how this may play out.
So no hard feelings, I rather appreciate the opportunity for robust discussion and debate.�
1/1/2015
guest Which terms are getting better over time? Residential solar contracts? My understanding is that they're getting better because they're being sold at their current (expensive) price. If they were sold at lower price, Solarcity would sell less of them, the economies of scale would slow down and prices wouldn't drop much. If we had all waited for smartphones to get better and cheaper before purchasing them, they couldn't have improved and become affordable in the first place! Is there any way around?
Is it really all or nothing? There should be many places were it's more economical to generate energy where it's being used. If the installation cost keep going down (at some point, they might be integrated into every new rooftop and simply be plug'n play), how can utility solar remain cheaper?�
1/1/2015
guest
But SCTY isn't necessarily competing with utility scale solar, they are competing with the energy mix of whatever utility is presently servicing a customer. So long as SCTY can delivery energy to the customer at a discount to the existing options there is a very real and legitimate value proposition.�
1/1/2015
guest An hour ago was out driving doing errands and on the way home I see coming up on my left one of those little white cars with SolarCity logos plastered all over it. The guy has his headlights on. A minute later he gets in behind me (I think he was trying to drive right up to my door to get my attention but traffic wouldn't let him). Now he's behind me and as I glance again in my rear-view mirror I see he's furiously giving me a thumbs up signal. I was having a conversation with my wife in the car and I just wasn't registering the thumbs-up being for me, but he kept doing it, vigorously, sticking it way up against his windshield in the hopes I'd see. Finally, dense individual that I am, I put two and two together -- SolarCity, Tesla, Elon, rare Model S in New Mexico. So I wave back, and he sees my wave which sends him into Elon-euphoria; he starts furiously waving like he's seen the Messiah or something, he was so excited to see a Tesla. He followed me almost all the way home, I figured he would've driven right into my driveway -- it was getting a little creepy -- so I zipped through a yellow traffic light kinda to get away from this fan
Next week we have SolarCity coming to the house to do an estimate for an install. But what dismays me is they apparently do NOT do ground installs, only roof. And we're kinda leaning towards ground.
Why does SolarCity only do roof? They don't want people messing with the panels, and they're out of reach on roofs, and it's better for SCTY's bottom line? It seems, if true, that turning away customers who want ground installs is turning away perfectly good revenue, and over time perhaps a nontrivial amount of revenue, no? That would affect stock price?
I've got other solar companies coming for estimates as well, because if SolarCity says no to a ground install, but another firm says sure, I just might go with other firm.�
1/1/2015
guest The reason SCTY can compete on price is that they don't pay their share of the grid infrastructure and because where net metering is allowed SCTY is using the grid as a free battery. The regulation is making for an uneven playing field in the favor of SCTY compared to utility scale solar.
@jhm
I'm glad that you feel this way. I think the utilities will be able to reduce rates soon with the help of batteries being cheaper as load shaving than peaker plants and when more of their capacity becomes solar and wind the cost will come down too. There is a lot of sunk cost though so the ratepayer will probably have to pay a few cents extra compared to the current cheapest LCOE + grid cost as the sunk cost in expensive peaker plants and old fossil capacity is amortized, unless the utilities can somehow get out of this liability of dated assets.�
1/1/2015
guest Eight *(every) independent studies disagree with you that they are not using the grid for free. The reality is they are shaving peak demand and it is a net benefit for the utilities when there is a one to one net metering.
The same batteries that you think will help the grid be cheaper to maintain will allow disgruntled power users to disconnect completely.�
1/1/2015
guest Residential gets cheaper every year yes, and partly because there is demand now, but you must remember that utility scale is the real demand driver. I think we should have an even playing field between utility scale and residential solar and let the market decide the winner instead of the current situation when there is no inherent advantage in residental for society.
"Is it really all or nothing? There should be many places were it's more economical to generate energy where it's being used. If the installation cost keep going down (at some point, they might be integrated into every new rooftop and simply be plug'n play), how can utility solar remain cheaper?"
It doesn't have to be all or nothing, all I am saying is that the playing field should be even, which it isn't now, it might still very well make sense to do industrial sized systems and if residential in some magical way becomes cheaper in time compared to larger scale then so be it, but we shouldn't be loading the dice.
@dha
If SCTY was paying their share of grid infrastructure and couldn't sell excess power at overprice then the value proposition would be completely different.�
1/1/2015
guest Hey jhm, is it time for a SCTY BFPT?�
1/1/2015
guest Solar might help shave peak demand right now when solar is 1 or 2% of capacity, but what do you think will happen when solar is 10 or 20%? In the long term it just doesn't make sense for the utility to purchase power at retail rate when they can get it cheaper.
"The same batteries that you think will help the grid be cheaper to maintain will allow disgruntled power users to disconnect completely."
Seems like a lot of people here doesn't understand the benefit of the grid. I'm pretty sure even the CEO of SCTY has said that it would be inefficient for residents to go completely off grid. There is a large difference in the usage of power depending on seasonality, having to size the capacity for the top of the curve is terribly inefficient.�
1/1/2015
guest How do you know what they do or don't pay? Do you have this information on costs that I can evaluate? What is the cost/kWh of the grid infrastructure and what is the cost a solar user is avoiding?
What at benefits are the utitliy company enjoying at the expense of the solar user connected to the grid? What is the value of delivered energy that solar users provide to a need nearby(neighbor/local business? What is the value of that energy compared to the utility energy provided to the solar user at night when solar user uses the grid exclusively?
Again, if utility solar is cheaper, why aren't the retail prices cheaper for customers? Nat gas has been a record
lows for awhile now, but utility retail prices continue to go up... Why is that? From the data pints I've gathered, fuel costs are a small part of the cost of delivered retail energy. As such, utitlity level solar could go to 2 cents or lower and not affect the retail price to a retail consumer.
In your research, what evidence has you saying rooftop solar energy is not worthy approx. retail prices? what is the cost of grid defection to non solar users? NV Energy is charging a $131mln disconnection fee to Las Vegas casinos that want to go solar+storage exclusively right now, disconnect from the grid(so they won't cost them a dime with their rooftop solar)... Is that fair to someone that wants cheaper electricity on their own without the utitlity? Why is this any different then a residential user wanting to leave the grid? Wouldn't leaving the grid reduce the cost on the utitliy since the residential solar user is a cost on the grid according to what you're suggesting?
the utitlies would lose far more money from rooftop solar leaving the grid then it would from paying for the benefits of solar to all grid users. The non solar grid user benefit significantly from rooftop solar as disconnection from the grid would devistate the current utility system and drive retail prices through the non solar rooftop.
if utility level solar leaves the grid, the utility just buys nat gas. No change to retail prices. Utility level solar does nothing to the utitliy retail prices except act as fuel pricing pressure on nat gas since utilities can point to utility level solar and say "see, we can get fuel for 4 cents, so what you got to compete?"
As such, residential solar is far more valuable to the end consumer then utitliy level.�
1/1/2015
guest Cost of grid infrastructure isn't in the SCTY filings I'm almost certain, so unless the resident is paying for the connection to the grid (which is rare to my understanding) then SCTY customers is leaving the bill for their use of the grid to the rest of society. I don't know how much this cost is exactly, but the cost is obviously real and so is the balancing of the load, you can't run at a 100% utilization rate of capacity, at least not until battery storage is popular, and even then it will still have a cost. These are the two costs SCTY isn't paying for, I feel like I have explained this several times already so unless someone can disprove it then the playing field is uneven and that is my point here.�
1/1/2015
guest Again, What costs are solar users not paying for? Do they not buy electricity at retail prices from the utitlity? What are the obviously real costs? Please provide these costs so I can better understand/validate your position? Numbers would be the way to sway me to your "obvious" assertion.
Again, do you see rooftop benefits? If you do what quantitative value would you assign them?
btw, the cost of infrastructure is in the consumer price of delivered energy to where the load is... the excess that is not used at the load is sent over short distribution, nothing on the transmission level for the utility. The utitliy avoids any transmission, loss of energy along the way, or fuel costs, among other things like reduced water consumption, environmental impacts, etc..�
1/1/2015
guest Solar users are often times net sellers to the utility so actually they are making money using infrastructure they aren't paying for. I already explained the obvious real costs 10 times, the grid infrastructure, the masts, wires or whatever, the distribution network that transfers electricity from production to consumer. And the cost of not utilizing 100% of capacity. Imagine if residents with solar couldn't sell power they don't use and it would all just go to waste, this would change the value proposition immensely, the utility can't just sell everything they make all the time.
There might be small benefits for the utility using rooftop solar to balance their load right now, but why should they be forced to buy this power at retail rate when wholesale is half the price?�
1/1/2015
guest He did say that it would be a bad policy outcome if mass grid defection happened. I'm not saying I think that is a better option to have everyone disconnect from the grid. But the arguments you're presenting are very one sided and are very similar to what the utilities present. If this is the thinking that drives policy I do think they'll be mass grid defection.
To say that utility solar is cheaper and completely disregard all of the transmission cost that it entails to get utility to the door is an incomplete picture.
I agree that residents producing their own power is bad for utilities. This does not mean that shift costs onto other users. It means the utilities are losing revenue if they don't adjust their business model they will go extinct. Everyone talks about utilities solar being cheaper but you have to ask for who. You can produce solar for cheaper than what utilities are charging you and in the case of a home solar system the homeowner Pays. When you are dealing with utility solar to meet new demand it will still Raise Rates as there is a large capital expenditure that the utility has to pay.
Clearly we are on opposite sides here. But it's hard to have a productive discussion when you act like transmission cost are free when in some cases it's the most expensive part of the bill.�
1/1/2015
guest Why are we forced to buy power from utility monopolies? Since we have no other option to sell power because it is illegal, the legal monopoly should be forced to buy power from us at retail. Or let us sell our power to whoever we want. At which point, neighborhoods can start putting in microgrids and use the utility as a backup. Forget about force, utilities are stupid to fight the trends because eventually solar+batteries will drop enough to be cheaper than transmission costs for the utility. At which time users will just put behind the meter solutions where the grid gets none of their power and the system is invisible to the grid except for the extreme drop and unpredictably intermittent usage of power.�
1/1/2015
guest
Thank you for the lively conversation, but I'm going to have to respectfully move on. I feel you're repeating the same things without evaluating what evidence i present or answer the questions I have directly relating to how you come up with your conclusions.
ive said this before, utility level solar is a whole sale product, not a retail product like rooftop solar. Utilities could stop buying utitlity level solar today and it would change retail prices one bit. However if retail customers start to defect from the grid with rooftop solar, the utitliy retail prices will skyrocket. Three Las Vegas casinos are already planning to defect from the grid right now, and NV energy said that would significantly raise retail rates for everyone in Nevada for everyone.
Rooftop solar defection would devastate the utility system and send retail prices for grid users much much higher. However, if utility level solar "defected" utilities would just go to nat gas or some other wholesale seller. There would be zero impact on how they operate after(except now epa rules would fine them). Residential defection is a significantly different story. The utitlies need those customers to stay on the grid. That is a significant value you're not responding to. Added to all the objective evidence that points to rooftop being a benefit to all grid users as is now, it is very difficult not to see how rooftop solar is not more valuable to retail grid users then not.�
1/1/2015
guest There will always be transmission cost unless you go completely off grid and that won't save you anything. Utility scale is half the cost of residential, half, I really doubt a small savings in transmission cost tips the scale in the favor of residential.
@dalalsid
I agree that people should be able to sell power to whoever they wan't, but when using the grid one should pay their fair share. If microgrids makes sense then I'm all for it, but the fixed cost of the community being connected to the grid should be paid by that same community and they shouldn't expect retail price for any power sold back to the utility as it would be literally impossible for the utility not to take a loss on this incoming power.�
1/1/2015
guest In Q42014, SCTY's sales expenditures represented 20% of their Cost per Watt (page 9). The utilities' historical relationship with customers (aka monopolies) provide quite an uneven playing field! If people knew about residential solar as much as they know how to pay a utility bill, I'm sure the soft cost disadvantage would plummet.�
1/1/2015
guest Yes the utility would suffer a great loss if a lot of residents went off grid. This is because of sunk cost into capacity that was necessary at the time to avoid power outtages. If any group of grid users should disconnect the rest will suffer to some extent, that doesn't mean that any group should then get some discount if they stay with the utility, especially when the alternative is more expensive.
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That is not a legislative competition distortion�
1/1/2015
guest Well someone then needs to tell us what that fair share is and charge everyone that fair share evenly. The current battles against solar users are ludicrous. Attempts to impose all kinds of charges that are way out of line.
How hard would a study be to determine the fair value of residential solar power that is fed back into the grid? Oh wait, there are some such studies - Solar Net Metering A Subsidy To Utilities? | CleanTechnica
Study finds net metering to be a net benefit in Missouri | Midwest Energy News
Since we are benefitting the utility, the utility should be paying us for that benefit, right? Not charging us or battling us? (Not that my utility is battling me - I sell all my power to them for more than retail). That's what we should expect. More than retail price, not less. So you are right, we shouldn't expect retail price�
1/1/2015
guest I wonder if any of you guys have even read the report yourselves, the benefits given to the grid are laughable at best. The cost-benefit analyses concluding that the utility benefits from the whole ordeal isn't stated as independent btw, but as "non-utility", after reading some of the logic from the report linked I wonder who is funding these analyses. The majority of the benefit to the grid is avoided energy cost and avoided capital and capacity investment, are you kidding me? How does the utility benefit from not paying for the electricity they don't gain any revenue from? The investment in capacity is included in the wholesale price which is much lower than what they are forced to pay the resident with solar. Other reasons include stability in pricing, which is ridiculous given that fluctuations in price does nothing to the utilities bottom line. And "environmental benefits" I mean sure, but economically this is irrelevant to the discussion. Clearly there should be legislative support for sustainable energy and there is, but favoring residential makes no sense. I can't believe how stupid that report is.�
1/1/2015
guest I think you're confusing something being a net benefit to the grid and a net benefit to utilities profit. No matter what way you cut it the utilities profit will be going down�
1/1/2015
guest Utility level solar competes with nat gas and coal. Residential solar competes with retail rates to rate payers. Two completely different products.
Nat gas goes down, utitliy solar less valuable. Nat gas pricess go down, rooftop solar has no change in value. Utility solar mostly finances through equity and debt at higher interest rates. Solarcity moving mostly to financing through solar bonds and ABS now with interest rates steadily moving toward inflation rate. We are already seeing the impact on cost of capital between utility level solar and Solarcity's rooftop strategy.
Solarcity verticle integrated Strategy is paying off right now as there is a nationwide bottleneck happening on project installations. There are not enough crews to put on the solar, especially all those companies that outsource installation, not vertically integrated. Solarcity is not suffering the same bottleneck of crews to do the number of installs at the current 80%+ compounding growth rate.
So, Solarcity is further distancing itself on market share as a result. Not the case in long term projects such as utitlity level solar, let alone the non integrated solar competition.
bottomline, Solarcity is truly separating itself with the larger "solar" industry. I feel this separation will have it tracking outside of utility solar stocks.�
1/1/2015
guest The grid is a part of the utilities cost structure. Sure the profit of utilities will be going down, I don't see how that is relevant to the discussion though. I wouldn't dream of investing in the utilities.�
1/1/2015
guest tinm, Solar City certainly does do ground installs for commercial accounts. Here in Corvallis, Oregon, Oregon State University has to large expanses over a MW each. I don't know if this is limited to commercial or not. It seems like it would make sense for them to do residential ground if you have the space.�
1/1/2015
guest Wow, listen to what Jim Murren, the CEO of MGM Grand, says about the NV Energy monopoly and rooftop renewable energy scrub to about 3:20 from the end:
MURREN PT 1 | KSNV | 08/25/2015 - One News Page VIDEO
if there is still doubt utilities have to step back and change course on their anti- net metering DG stance, you have another thing coming...�
1/1/2015
guest Better than Net Metering
I would like to try a different race in this conversation by proposing what I think could be a better deal for all stakeholders than net metering. I am going to avoid the word, "fair", because it is quite loaded and business really has little to do with fairness. Rather the focus should be on finding a deal that good for all stakeholder. Clearly, SolarCity is not interested in destroying the grid, rather I wants to strike mutually beneficial deals with utilities so that we can speedily transition to renewables. So in that spirit of trying to find mutually beneficial deals, let me propose what I have in mind, and then we can critique it and maybe iterate to something better. First I'll characterize a typical net metering scheme to the best of my knowledge. Then I'll set out my proposal and conclude with discussion of the advantages.
Typical Net Metering
* Buy at residential rate
* Sell for residential credit to be redeemed with power purchased
* Residential credit to be redeemed within 12 months or forfeited.
Proposed Profit Adjusted Net Metering
* Buy at residential rate, R
* Sell at residential rate minus utility profit margin, R�(1-PM).
* Cash, no redemption limitations
So to put some numbers to this let's suppose the residential rate, R, is 15 c/kWh, and the utilities profit margin, PM, is 8% (this is what PG&E reports). So the propose feed in tariff would be 13.8 c/kWh, while utility profit is 1.2 c/kWh (= 15�8%).
The advantage for the utility is that on every kWh a customer sells, it has the opportunity to sell it at a profit consistent with its business model. It gets to make 1.2 c/kWh whether selling back to the customer or any other ratepayer. This profit is consistent with its targeted rate of return and does not incur any additional cost or suffer any opportunity loss. Indeed, it gains the opportunity to profit without having to make any incremental investment and have to bear the risk of that investment. This allows the utility to become more capital efficient.
At first glance, this may seem like a poorer deal than typical net metering for solar installers and their customers. However, this proposal removes critical limitations on redemption of credits good only for power purchases within twelve month. Those limitations place two costs on ratepayers. First, the delay between sale and redemption is extending credit to the utility for which the customer does not earn interest. Cash is better for the solar customer and solar financer.
Second and more importantly, the redemption limits remove any advantage of producing power in excess of annual consumption. Thus, a ratepayer with an ample roof is disincented to make full use of that resource. Given the soft costs of distributed solar, it is much more economical to install larger systems where feasible. This decreases the installed cost per Watt for the solar provider, which in turn allows solar providers to offer systems at lower prices. The customer who selects a PPA at 12 c/kWh has the opportunity to net 1.8 cents per kWh sold to the utility beyond that which is purchased from the utility, and this helps cover the profit conceded to the utility. For example, suppose the customer sells 2000kWh to the utility and buys 1000kWh from the utility. The customer nets $36 on the sell to the utility and net ($12) incremental to PPA rate on the purchase. Thus, under the proposed the solar comes out $24 ahead of the typical net metering scheme. Thus, the solar customer is compensated for monitizing their roof to provide opportunities to both the utility and the solar provider.
We need to consider other stakeholders. Since this proposal allows utilities to earn a customary rate of return, preserves the grid as beneficial to all ratepayers. This proposal provides a capital efficient way to advance renewables and all of their environmental benefits. Distributed solar adds local resiliency to the grid and reduces dependency on fossil fuels. Advancing distributed solar creates jobs through the economy.
Finally, the stakeholders potentially adversely impacted are fossil fuel interest; however, this is modest because the feed in tariff is actually set by utility costs including power generated from fossil fuels, put excluding the utility's profit margin as an incremental incentive. So in this way it should be less competitive to fossil interests than under typical net metering.
So I've tried to make everyone happy. I don't see that any particular stakeholder is substantially impaired. It is really important that such an arrangement is beneficial enough to encourage voluntary participation. If this is enough of a compromise to help utilities realize the benefits of distributed solar, then that would be a huge gain for the solar industry.
So what do y'all think?�
1/1/2015
guest Even the smartest folks in this thread seem to gloss right over the fact that even a moderate amount of solar undermines the entire profit scheme of the current utility landscape. "You can just tie into the grid for cheap backup" is thrown in at the end of each solution as if the juice will just be there at today's prices.
Once Germany got to 5% solar all their legacy utilities lost 70% of their value and started looking to divest from production. Utilities in the US are purposely undermining the progress of solar because it represents an existential threat to their entire operation. They do not welcome these "benefits". It would be nice if we didn't have a government run entirely by these interests, but that's another discussion in another forum.�
1/1/2015
guest It's a good proposal Jim. It should allow the market to work itself out for several years. But as solar installations really take off you run in to the problem of whether the utility is forced to buy all the power, even if there's no one to sell it to?�
1/1/2015
guest @jhm
You are still forgetting the cost of balancing the load, like the mule and johan mentions. There has been so much talk about peak shaving on this forum it really shouldn't be an alien concept, some of the energy will need to be stored and this has a cost, perhaps a few cents per kwh (just spitballing here). On top of that is the cost of grid infrastructure a few cents too perhaps and then transmission losses. So the sale of power should end up around wholesale (makes sense) which is around 5-8c/kwh I believe.�
1/1/2015
guest And you can't use today's rates as a rough idea of a cost starting point because all the profit is made at peak right now and peak does not exist when solar goes above 3-5% of total.�
1/1/2015
guest I disagree: I'd argue that utilities have the best position to offer this suite of services. They already have the customer relationship, metering and billing, and a large workforce of skilled electricians and laborers. They have access to low-cost capital and cozy relationships with their regulators and state legislators.
I agree, though, that SolarCity is unlikely to see any competition from the utilities, despite their natural advantages. I've yet to meet a utility executive�and I've met many�with the appetite for creative destruction that embracing this model of customer interaction requires. Few young people with entrepreneurial leanings leave b-school and say, "I want to go work for the electric company!" Sad, but true.�
1/1/2015
guest you sound like a good candidate for not only "load defection" (reducing your purchase of grid electricity to as close to zero as possible) but "grid defection" (cutting off your access to the grid w/monster PV and batteries) I was sorta a virtual ISO as my PV array spun my electric meter backwards and it counted DOWN. now if I produce excess, the meter counts UPWARDS AND i get mail from the utility PEPCO on how to reduce my usage as it has gone up since my new meter
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A portion of my transmission and distribution costs are for moving electrons a maximum of 100 feet from my roof to my lights. distributed generation is a more robust method than centralized. I would suggest you download and read the white papers from Rocky Mountain Institute "The economics of grid defection" AND "the economics of load defection" (dont ask for links, google is your friend) Why should i be forced to buy from utilities who do not have my best interests in mind?�
1/1/2015
guest "I'd argue that utilities have the best position to offer this suite of services. They already have the customer relationship, metering and billing, and a large workforce of skilled electricians and laborers. They have access to low-cost capital and cozy relationships with their regulators and state legislators."
From what I understand Lyndon Rive agrees with this statement, and that's why he said that "grid defection" is a result of bad policy.
Utilities have an important role to play in transitioning to DG, and maintaining a smart grid for everyone.
They just need to get with the program, which means moving to a new business model and working with the transition rather than against it.
As you point out, in most cases, they are loath to even contemplate this step, and prefer to dedicate resources to fighting the change rather than embracing it.�
1/1/2015
guest PerfectLogic. Are you Rogier van Vlissingen? you certainly write similar to him. just curious�
1/1/2015
guest
You might be overlooking one key problem with centralized utitlity: they are not customer sided. Solarcity will be able to communicate directly with all appliances/devices/cars in the home in realtime. The centralized, by definition, can not do that. The utility may be able to interact with customers, by Solarcity can interact with customers homes and provide analysis,data, and action directly affecting energy efficiency on the customer side of the meter that saves money reducing their overall bill.
the only tool centralized utitlies have is changing the price of electricity at certain times of the day which forces a customer to figure out how to change their behavior in order to avoid paying more for electricity. Solarcity is developing the capability to interact with devices such as nest thermostats (and many more to follow) to give customers direct visibility of solutions that will minimize lifestyle disruptions while saving money smartly. We are only at the beginning of this range of new values as energy storage will really crack open the innovation box that utilities could only dream of as it relates to customer sided solutions. The utitlies do not have such a future capability innovation ahead of them.
and if you look at the rate of employment at Solarcity, I don't think you've ever seen this many people being hired over a similar time span in the history of any single energy company in history. I'm estimating they are now over 13,000 employees and counting. And from posted tweets on the net I read from employees working for Solarcity, I notice they are extremely excited to work there. I've noticed the non profit activities they do for schools around the world by installing a solar+battery system for free is a major perk for employees since they send employees to these locations to install the systems. It is a different culture from the big utitlies and I think this type of culture is proving to be successful and utilities ought to embrace this type of culture themselves to excite their own employees.�
1/1/2015
guest No, I have not forgotten about the cost of balancing the load. That is already baked into the retail rates. Under my proposed scheme, the utility is not providing in storage. Basically, it receives a kWh for 13.8 from one resident and it flows to neighbor (within the same substation) for 15. The utility stores nothing, but nets 1.2.
Now if you are concerned about the volatility of net demand, then you need to show me that this produces a bigger shock to the grid than a thermostat switching on and off to keep homes cooled or heated. Utilities are quite capable of managing millions of little shocks like this every hour. This stuff is already baked into the cost structure that residential rates are based on. Furthermore if the utilities wanted to smooth these shocks, they could provide incentives for A/C and other devices to smooth out the ramp up and down of load. The solar power itself is pretty smooth, its the A/C switching on and off at the rooftop solar home that is producing abrupt changes in net load. So again if switching load on and off is a problem, there are lots of new technologies that could smooth this out not just at solar homes, but everywhere else.
So I am actually very excited about use of batteries to provide peak shaving. Most residential rate plans do not include demand charges, so you can't get any peak shaving benefits from these plans. But I do think utilities have a great opportunity to compensate residents with home batteries by offering well constructed rate plans with demand charges. If Georgia Power offered me a plan with $20/kW peak demand plus 8c/kWh, I would buy a Powerwall and sign up for it. The Powerwall would help me cut peak demand about 3kW, worth about $60/month, which pays for the Powerwall in about 5 years. This can be coupled with solar and smart devices for even more peak demand reduction. So the point is if the utilities want help managing peak demand and the smoothness of load, they are well within their capability to design optional rate plans that reward these services.
They know this because this is what they already do with industrial ratpayers. Industrial customers get rate plans that reward all sorts of good behavior which is why in the US industrial ratepayers pay so little per kWh. Industrial consumers have for quite some time had the potential to generate their own power and manage load, frequency and voltage. This technology is widely available at commercial and industrial scale. Now we live in an exciting time when such technology is scalable down to the residential scale. Thus, commercial and residential ratepayers need to be treated with the same respect as industrial clients. When this happens we will see better optional rate plans offered to residents, and we will also see the spread between residential and industrial rates shrink. The smart thing for a utility to do about net metering is to design alternative rate plans that are attractive for solar and battery customers to opt into. This is within their power to do. Make the deal.
But the problem is that some utilities just don't want to make a better deal with solar customers. There are myriad ways to come to mutually beneficial arrangements that both parties can willingly agree to. I cannot account for the unwillingness of some utilities to negotiate. Just look at NV Energy's failure to retain Las Vegas resorts as customers. Apparently the utility is so awful to do business with that the customers are willing to pay $196M to end the relationship. You better believe this will discourage commercial and industrial businesses from moving into NV Energy territory. Would you want to do business with a utility like that?�
1/1/2015
guest Wait, I thought I was Rogier.
Is he the passive solar advocate on seeking alpha?�
1/1/2015
guest Yes it is baked into retail rates.. The cost of retail power is wholesale + load balancing + grid infrastructure. What do you think would happen if all the power utilities bought was from homeowners at 10% below retail cost? Do you expect the tooth fairy to pay for grid infrastructure and load balancing?
Let me put it like this; if you want to sell electricity at retail prices, then you need to pay for grid infrastructure and pay for a battery to smooth out the demand curve. So after you, out of your own pocket, pay for these two items, then you can sell power at the retail price. The terms you are asking for is selling power like a utility, but without paying the cost a utility has to pay.
"Basically, it receives a kWh for 13.8 from one resident and it flows to neighbor (within the same substation) for 15."
This is not how it works. Demand varies which means capacity underutilization. If the utility didn't have to account for capacity underutilization then they could lower their prices significantly.
There is nothing weird about Las Vegas paying to be cut off from the grid, the utility has a large sunk cost in order to meet their demand till now. If they wan't to go solo I think it is fair that they foot the bill instead of letting the rest of consumers pay. I also don't see how the utility has done wrong here, if they do not build out this capacity to meet demand there will be outtages, I really don't know what you expect.
@winfield
Nope.�
1/1/2015
guest Ha, that was ron. And perfect logic is highly unlikely to be rogier because rogier is often unintelligible.
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Understanding the utility side of the equation is not hard. So utilities have essentially three choices as I see it for a sustainable future:
1. Get into the solar ppa/leasing/selling business (like nrg) to thwart the threat of solarcity and others.
2. Start getting into renewables themselves at a much more massive scale and start reducing the retail cost of power or at least not raising it, thus making ppa escalators unviable.
However, as incumbent slow moving large monopolies, neither of these solutions are something they want to serious about. So they choose option 3.
3. Lobby against net metering to try to shut down rooftop solar adoption.
Now, 3 is a dangerous game to play, because it is effectively pissing off your own customers who are basically trying to do the right thing, go green, save green.
Instead of this if utilities encouraged the use of solar, lobbied their customers with the benefits of electric vehicles and tried to increase their usage enough that most people couldn't even have enough roof space to go off grid, they would be in a much better long term strategic position.
Yes net metering is not in their best interests, but opposing it is also not in their best interest either. If they want to oppose net metering, they need to come up with something reasonable, like jhms proposal above.
If not they might be subject to stuff like the value of solar Minnesota stuff, which is even worse for them than net metering.�
1/1/2015
guest You act like SCTYs model is cheaper than the utilities, this seems to be the core of the problem here. Do you actually think that if 100% of power came from residential solar that electricity would be cheaper? It wouldn't be, and that is the crux of the matter. Residential only exists because of a strong legislative tailwind, and I have explained this tailwind several times already. Instead of keeping residential growing at an artificially high rate the legislation should make for an even playing field in the solar space which would allow for utility scale to grow even faster and accelerate the shift to renewables. If 100% of the energy came from utility scale solar then electricity would be cheaper, but this is not the case for residential scale.�
1/1/2015
guest In my opinion, what's more important than dollar cost, is environmental costs of residential vs. utility scale. I have lived in Europe for many years past, sadly, any real wild lands have long been completely altered, and large mammals, especially predators destroyed. You see, I live in California and I spend a lot of time in the deserts and I have worked with many wildlife agencies. By and large the utility scale solar projects consume huge amounts of acres. These acres are scraped clean of all life. I can tell you that desert ecosystems are delicate and fascinating, with a huge amount of life if you take the time to look and learn. Utility scale solar electricity is carried along destructive lines (at great current loss) all the way to whatever population center.
Now, think about rooftop solar. In general it only requires about 25% or even less roof area to offset 100% of that home's needs. You have zero transmission loss, zero power lines traveling hundreds of miles to the desert, and ZERO loss of habitat to our wonderful ecosystems that here in the USA we prefer to save for our children's future enjoyment (not to forget the coyotes, tortoises, bobcats, lizards, snakes etc.).
It's clearly a no-brainer, why produce anything in a destructive manner, be it tomatoes, carrots, or electricity, and then ship it at distance incurring losses, if you can make it at home with zero loss?
Rooftop makes more sense, a lot more sense. Rooftop costs less in dollars and environmental losses.
How a Solar Farm Set Hundreds of Birds Ablaze : News : Nature World News
Destruction to land based species: http://www.motherjones.com/environment/2011/03/solar-panels-desert-tortoise-mojave�
1/1/2015
guest To all that believe rooftop solar is subsidized, lets look at the tax code shall we?
Oil and gas tax code provisions:
*Expensing of intangible drilling costs. Expiration: None.
*Percentage depletion for oil and natural gas wells. Expiration: None.
*Domestic manufacturing deduction for fossil fuels. Expiration: None.
*Two year amortization period for geological&geophysical expenditures. Expiration: None.
*Percentage depletion for hard mineral fossil fuels. Expiration: None.
*Expensing of exploration and development costs for hard mineral fuels. Expiration: None.
*Capital gains treatment for royalties of coal. Expiration: None.
*Deduction for tertiary injections. Expiration: None.
*Exception to passive loss limitation for working interests in oil and natural gas. Expiration: None.
*Enhanced oil recovery(EOR) credit. Expiration: None.
*Marginal wells credit. Expiration: None.
Solar tax code provisions:
*ITC. Expiration: DEC 2016.
56% of all our country's subsidies go to four industries: financial, utilities, tele-com, oil, gas, and pipelines. Who's being propped up artificially now? And that's in perpetuity...
Don't see rooftop solar in that list anywhere.... time to open our eyes to what's really going on here and be real...
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It is interesting to note though that more than 1 billion birds are killed by domestic cats each year. Yes, our cats are killing over 99.8% more birds then wind turbines or solar concentrators...�
1/1/2015
guest This I am aware of and is why I have no pets. Cat and dog food containers list seafood by-products and meat, which is actually dolphin and rendered dead cats and dogs.
Environmental costs of pet ownership: How feeding and caring for 800 million pets hurts Mother Nature - The Globe and Mail�
1/1/2015
guest Let me know if the Koch bros sentiment toward the act of reducing oil and gas subsidies as creating, in effect, a "tax hike" on everyday people sounds familiar to you... Some call it a "tax hike" others call it a "cost shift" but in the end the tactic is the same...
Emails Show Koch Industries Backed Effort to Undermine Renewable Energy in Kansas�
1/1/2015
guest Sure lets all use residential solar to avoid using a small space in the desert in order to not disturb the scorpions, lets also all grow our own vegetables to avoid co2 emissions transfering these goods, lets ban all gasoline vehicles and airplanes from tomorrow, lets start living like before the industrial revolution to reduce environmental effects as much as possible. Or, we could get back to reality and use utility scale solar to cut electricity prices in half. I'm sure the savings could be used to protect the environment 10 times more efficient that placing solar on your roof instead of the ground.
Also the bird burner is a thermal solar power plant, that is different from PV solar.
@Foghat
Noone here is saying fossils is the way to go. What I have said is that utility scale solar should be supported as much as residential.�
1/1/2015
guest That is not what I'm saying. I'm saying that no matter what, utilities are between a rock and a hard place. Big evil monopoly trying the screw with the little guy who puts solar on his roof. So they either need to go with the flow or they need to come up with a reasonable alternative.
Well then why the hell is 100% of energy not coming from utility scale solar? Why is my utility trying to bully landowners to build gas pipelines through their backyards instead of utility scale solar/wind? Utility has the same tailwind as residential, if not more. This was no. 2 on my list of solutions above in the post that you are responding to. Provide cheap renewable energy to customers. Nobody in their right minds would put rooftop solar up at all because it wouldn't be viable. Also there is no reason residential / commercial solar cannot compete in price with utility solar in some situations. For two reasons:
1. The space is free
2. The transmission is free
If I put upgrade my array to 12kW from 7kW and 100kWh batteries and some small planned upgrades, I could "survive" without the utility. However, I have cheap power but I see the utility power price and solar plus battery price on a collision course.
Once that happens, utility will automatically be relegated to backup for many + power for solar-unviable structures. They need to be preparing for that future not attempting to delay the inevitable because that just calls for an overnight destruction when those curves meet as opposed to a planned shift in business.
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Hahahaha. Reality on which planet? Can you provide one example where utility scale solar caused even one residential customers price to drop even 10%? I can provide you with the example of my utility which charges extra for "green power"�
1/1/2015
guest I'm not sure where you're referencing but even at today's battery and solar prices if 100% of your energy comes from rooftop solar in Hawaii and is stored and backup batteries today it is cheaper then using the grid. Postcard from the future�
1/1/2015
guest The reason 100% of energy isn't coming from utility scale solar is that you can't change the entire US power capacity overnight, I believe something like 30% of new capacity added in 2014 was solar and 20% wind so the shift is definately happening now that renewable is becoming the cheapest solution. Perhaps the shift should be be even faster but lets give things a year or 2 before we get out the pitchforks, solar has exploded from nearly nothing a few years back.
"2. The transmission is free"
I feel like I'm losing my mind here, for the last time: Transmission is not free, not as long as you are connected to the grid and uses it as a backup, and space just doesn't matter much, utility is half the cost, that is the fact.
Yes you could survivie with just batteries and solar, but that is much more expensive than the utility rate today. Batteries and solar is bringing the cost of electricity down but that is so for utilities too (the effect is just beginning). And being part of a grid is just more efficient than being cut off so there you have it, utility scale solar + batteries + the grid is where we should be headed.
"Utility has the same tailwind as residential, if not more"
No. Residential solar can sell to the utility at retail price with net metering. Utility scale sells at wholesale price, which is less than half retail.
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Maybe it is, maybe it isn't, but that is irrelevant because utility scale solar is cheaper.
@dalalsid
"Hahahaha. Reality on which planet? Can you provide one example where utility scale solar caused even one residential customers price to drop even 10%? I can provide you with the example of my utility which charges extra for "green power""
You do realize that it's impossible to change 100% of the capacity to solar overnight right? Solar is only 1 or 2% of capacity today, you won't feel the difference immediately. Also not sure if you misunderstood me but I was referring to utility scale solar being half the cost of residential. If the whole of US was powered by residential solar today then you would be paying 10c/kwh more than now.�
1/1/2015
guest The answer is not an either or: rooftop and utitlity solar is the majority path to a 100% renewable grid by 2040-2050.
the problem is oil and gas wholesale prices are aritificially created through multiple subsides,so , to say that monopoly utiltiy system stands on it own two feet is grossly misguided at best. Now even with utility solar added to the monolpoy mix at 3-4cents, monopoly utitlies are still charging record retail rates for electricity. As a matter of fact, they threaten rate payers by saying if your neighbor goes solar, I'm going to have to charge you more. Then they turn around and threaten the guy with solar on his roof, that is forced to connect it to the grid with telling them they will have to pay more for electricity because of the fact they have solar on their roof. This is classic extortion of a captive customer. They have no choice but to pay and do as the utitlity wants or they get screwed.
Rooftop solar flips the script. Rooftop solar couple with energy storage and operating systems is a transformative tech for our entire grid structure. To cut this off from happening is a serious problem. Time and time again posters have outlines the overwhelming benefit of roofto solar to all of us that use electricity, it is mind boggling that this idea continually gets poo-pooed and dismissed as pure speculation and unsupported. The evidence is overwhelming and would be better served if acknowledged and built upon in critical manner. To continually say utitlity solar creates a cheaper retail price compared to rooftop is a falacy. To not acknowledge that monopoly utitlies are among the four most subsidized industries in the country where solar is not even in the same ball park is pure denial or deception.
take away all utility subsidies and beyond a shadow of doubt, roof top solar decimates the utitlies on retail price today...�
1/1/2015
guest 100% residential solar + batteries transmission is free. And the grid better be prepared for that reality. The grid better be prepared for me putting in a complete behind the meter solution invisible to the grid that provides most of my energy needs within the next decade and being relegated to being a backup, especially if net metering ends.
That is why I asked for just one example. I'm not saying everybody's rates should have dropped. Somebody is building all those utility scale plants right? Considering solar was among the top new energy sources this year somebody is getting power from those plants right? Has even one person's rate dropped? I'm asking for just one example. Just one. Only in your pipe dream "reality" will retail costs drop from utility scale solar.
That is exactly what I'm saying. When the utility power price crosses that threshold (which it has in many states like Hawaii), it is the end for them unless they shift business practices. Unless in your "reality" you see power prices dropping. Now back to my point. In the scenario that a customer can produce 100% of their power, the transmission cost is zero. And it is not clear if the utility can compete with that even with half price solar.�
1/1/2015
guest It makes sense for utilities to hike the rate when some users of the grid is installing rooftop solar (and net metering is in place), simply because rooftop solar is expensive, 14c/kwh for the power alone excluding the rest of the cost structure is high. It has nothing to do with extortion, the resident installing the solar is making the price go up for everyone else. You act like utilities have had the chance to be 100% renewable right now, that is not the case without rates being much, much higher. Renewable energy is just now reaching cost parity. Wind has been at parity for some years now and some states are getting 20% of their electricity from wind power because of that, perhaps the utilities aren't the big boogeymen you all seem so convinced they are. This will be my last post on the subject unless someone actually brings some new argument to the table.�
1/1/2015
guest 1. Residents install solar
2. "It makes sense for utilities to hike the rate" so they hike rates
3. Go To 1 ...
Some years down the line
1. Lots of residents have solar
2. Utility rates are high
3. Residents install batteries
4. "It makes sense for utilities to hike the rate" so they hike rates
5. Go to 3 ...�
1/1/2015
guest Ha, another state drops net metering changes: New Mexico.
PNM conceded because they want to raise rates by as much as 15%! Stating they need the cash for investments like utitlity level solar... Go figure.
PNM asking for 15.8 percent rate hike | Albuquerque Journal News�
1/1/2015
guest I agree this might very well be what happens under net metering, we end up with a scattered, inefficient and expensive grid. Instead what should happen is to cut the excessive residential solar incentives (net metering and no pay for grid) and continue to force utilities down the cheapest path which will lead to a steady transition into the cheapest overall solution being utility scale solar (and wind) + storage and leave the efficient large grid as is. Cost will go down steadily and, unless something major happens, always be one step ahead of going completely off grid.�
1/1/2015
guest If 100% came from utility scale solar the economic model would remain the same. one way centralized ownership and control. which is better? a 10 gigawatt utility solar plant hundreds of miles away, or 1 million, 10kilowatt roof top arrays, with batteries forming virtual power plants? a few simple reasons. Hurricane Charlie in Florida, 384,000 lose power, Hurricane Sandy, Hurricane Katrina or Rita, the Snowpocolypse and Snowmagedon in DC 2 years in a row with the Derecho (inland hurricane) that took out 10's thousands of houses with no power from centralized plants for days to weeks. The blackout of August 2003. your centralized generation lacks robustness when compared to distributed generation. I could even point out the internet which is extremely decentralized.�
1/1/2015
guest The utilities use wholesale power to load balancing. So you are double counting wholesale power. All solar, whether distributed or utility, actually helps with load balancing because use of A/C is correlated with the sun. Many residential rate plans charge more in the summer than other times of the year because of the A/C load in the summer. So solar actually minimizes the need for expensive peaking power plants.
The problem for utilities is not that solar creates an added burden for load balancing, but that it reduces demand for the generation capacity that has been built up. Utilization of fossil plants go down, wholesale prices go down, both of which undermine utility profitability. I think the utilities are disingenuous when they claim that solar adds costs, and if it did, then they certainly would not want any utility solar. The problem that distributed solar causes for the utilities is that it competes for revenue. This is why no level of feed in tariffs will be seen as acceptable to certain utilities.
Remember that this is not really a discussion about fairness. This is about monopolies suppressing competion. They simply want to make rooftop solar as expensive as they can get away with to discourage anyone from buying into it. Think about how much a typical rooftop system costs, something like $20k for a 30 year supply of energy. And this pencils out to save the customer about $10k or so present value. So regardless of net metering, with every customer who goes solar the utility loses the present value of around $30k of future revenue. The utility was counting on that revenue to pay off its debt over the next 30 years. Clearly, no net metering scheme can compensate for that loss of future revenue. So the utilities will deploy as many regulatory tricks it can to make solar less attractive for its customers. So let's cut the crap about what is fair and what's not fair. The utilities are largely pursuing anti-competitive tactics.
So the big question is how long with this anti-competitive strategy work for the utilities? Well, the price of solar and batteries will continue to decline. I predict that in three years, net metering obstruction will have failed for the utilities. In 2017, Tesla Energy will be cranking out $2B to $5B in Powerwalls and Powerpacks. The utilities must arm themselves with Powerpacks or else ratepayers will arm themselves with Powerwalls. (It's nice to play both sides in an arms race, right?) Regardless of who buys more two things will happen: accomodating solar will be cheaper for the grid and battery prices will travel down the cost curve. So let's look at two scenarios: utilities buy the bulk of batteries and ratepayers buy the bulk of batteries. If utilities buy the bulk, then transmission and distribution costs come down. The grid will be able to accomodate more solar and wind. So here the cost argument against rooftop solar looses credibility. For example, placing Powerpacks at substations stabilizes the flow of power into the neighborhoods and their is no need to transmit power out of the substation and into the larger grid. Any surplus solar power is simply redistributed within the neighborhoods served by substation. The batteries pay for themselves by performing many different grid stabilizing functions. So you don't get to use the argument that batteries are the cost of accomodating solar. No, they create much more value than that. So in this sort of scenario the kind of net metering I proposed should do quite well for the utility. They get to collect 1.2c/kWh rent simply for substation distribution infrastructure which they would maintain with or without the local presence of solar. That is, they incur no incremental cost for the incremental profit. Moreover, under this scenario, the wholesale price of electricity declines, especially as need for peak power is reduced. So generation, transmission and distribution costs all fall under this scenario. So it would seem that utilities could reduce retail rates so that there is little motivation for ratepayers to buy their own solar systems. Perhaps, but cutting rates mean lost revenue, and serious revenue shortfalls mean defaults on debt. So utilities will have a very serious debt structure problem that will make it very painful to cut rates sufficient to be competitive with distributed solar. The compromise is to enter into profitable net metering arrangement to preserve profit even as revenue is falling. Moreover, fostering distributed solar means that ratepayers finance adding solar to the grid, which allows utilities to focus their capital on buying batteries. Basically utilities will have to chose between buying batteries which enhance the value of their piece of the grid or buying solar which only gives them a generation cost advantage. It think the prudent utilities will recognize that the durable portion of their franchise is in distribution and not in generation. (Essentially the wholesale spot market goes to zero as renewables penetrate the market.) So if there is to be no money made in generation, why invest in utility solar.
So let's look at the other scenario where ratepayers buy the bulk of batteries. This is essentially the grid defection scenario. The net metering debate will be moot because the option to go off grid becomes increasingly attractive. Please don't get hung up on the arguments about how many Powerwalls one might need to accomplish this. A home with adequate solar and just one or two Powerwalls can easily add a gas or diesel generator to the mix and make it through a snowy winter. Moreover, the home batteries can help make use of the generator more fuel efficient. This is about the economics of going off grid, not the greenness of how you get there. So in the face of grid defection, net metering becomes moot because obstructing net metering was always about suppressing competition, not about finding a fair price. So under this scenario, I think utilities will find it in their self-interest to encurage the sort of profit adjusted net metering I have proposed. That is, they will have the option of making 1.2 c/kWh profit and other revenue on grid connected customers or make nothing at all from lost customers. So here the loss of revenue and profit can be even greater of the utilities, but they are making things even worse for themselves by not investing in batteries and reducing their cost structure. So they are trying to preserve making money off of the power generation business, but their distribution network is just as expensive and inefficient as it ever was with fewer ratepayers left to split the bill. In this scenario, the utility really lacks the means to become rate competitive. Continuing down this path, they seek government bailouts or go bankrupt.
So each utility will have to chose for itself which scenario will serve it better. If I were a utility I would divest generation capacity as quickly as possible while investing heavily in batteries, microgrids, and other technologies that are more accomodative of distributed energy. The lasting value will be in distribution and services. Wholesale generation will be unprofitable until fossil generators are eliminated. Transmission will be marginal depending heavily on local factors.�
1/1/2015
guest Thanks so much for bringing this perspective. I often focus so much on the economic issues that I underestimate the ecological issues. But why should the homes of myriad creatures be destroyed just so I can blast A/C in my home. But if my roof can provide enough power for my home and another home that might not have such an accomodating roof, then it makes go environmental sense for me to install a larger system than I need and sell that extra power so as to minimize distruction of natural habitats. So limiting net metering to self-consumption only has negative externalities for wildlife and ecosystem.�
1/1/2015
guest Yep, this is interesting. Consumption goes down, so rates have to go up. See what you get for conserving energy. The cost of fuel is only around 3.5 c/kWh so ratepayers get slight temporary relief from declining fuel prices. Beyond that you have a butt load of fixed assets to maintain. Thus, if ratepayers consume less, rates must increase to cover all the fixed cost.
Now in that context, you can see why rooftop solar is so problematic. It simply reduces consumption. The utility would like to add a special interconnection fee for customers who self-generate. The reason is simple, they've got fixed costs to cover.
So should we cheer them for investing in solar? No, it just adds more fixed cost. Even if fuel consumption and prices drop more as a result of utility solar, it is all those fixed costs that drive up the power bill.
When utility move to a service model instead of a fixed asset rental model, then ratepayers will benefit from truly variable cost pricing. For example, netting 1.2c/kWh for redistributing residential solar power does not add any fixed costs to the system and allows the utility to prune its fixed cost over time. So it can become a lighter weight system over time. But adding utility solar or any other generation facility adds fixed costs that remaining ratepayers will bear for the next 30 years.
Also note that the rate hIke is 15.8% for residential customers, but 14.4% for all ratepayers. Thus, the residential sector is bearing more of the weight of this system than the industrial and possibly commercial sectors. I strongly suspect that there is cost shifting from industry to families.
On the positive side, this rate increase should help SolarCity with their marketing efforts. Even an escalator on a PPA does not look so bad when the utility has demonstrated it will raise rates on whoever is left on the grid.
What happens when residential ratepayers learn that they cannot lower their power bill simply by reducing consumption? The more you conserve, the more you pay.�
1/1/2015
guest What about the argument that you publish commercial rates based upon demand and then pay the market at those prices.
Homeowners become power producers through their aggregator. In this case, it's Solar City.
Or John Smith can build his own solar "field" and become a micro entrepreneur.
Seems to be working in Germany.
Haven't heard a good counter argument other than "utility death spiral".�
1/1/2015
guest Cheaper for who? I can't believe even in this example you cannot see the truth. D
The utility rate is outrageous homeowners can put in batteries + solar for cheaper than I can buy power from the utility. Utility solar for a residential home owner would be out of the question it would cost millions of dollars and produce way too much power.
Please explain to me how utility solar is cheaper in Hawaii for a homeowner.�
1/1/2015
guest I'm done with this discussion, I have explained it 10 times already, I feel like I'm debating a christian fundamentalist. Utility scale solar is much, much cheaper than residential, only way the expensive solution can compete is on an uneven playingfield, it's that simple.�
1/1/2015
guest I would argue that it's not inherently much cheaper, it's just considerably cheaper in the US right now because we're not nearly to scale yet on the residential install side.�
1/1/2015
guest
It's not cheaper in Hawaii
Just to be clear in case you missed it it is currently cheaper in Hawaii to go completely off grid using solar and batteries. I believe what you're calling uneven playing field is net metering which is obviously not involved when you're completely off grid.�
1/1/2015
guest Perhaps also due to externalities not bearing their actual cost? Kind of like petroleum, nat gas and coal, if the comparison is allowed. Or toxic waste, incidental by-catch in fishery, etc. Not to mention sub-par securities of yore. The big ones always float to the top, too big to fail so they bail.�
1/1/2015
guest If true then the utility is burning oil for fuel or something weird. If the utility handles the business in a very suboptimal way then sure residential solar + batteries can be cheaper. But going against utility solar + batteries + grid connection residential can't win with the current cost difference. SCTY gets paid 15c/kwh or something like that with an escalator, utility scale solar is getting PPAs without escalator for 4-5c/kwh recently.
Is $50/MWh Solar for Real? Falling Project Prices and Rising Capacity Factors Drive Utility-Scale PV Toward Economic Competitiveness | Electricity Markets and Policy
@mule
I don't think scale will let residential get close to utility scale, also remember that resi can't use stuff like tracking.
�
1/1/2015
guest Fair enough, but tracking has a significant cost as well. When all this gets really moving in 2-3 years we should see pro residential installs at $1.90 and utility at $1.40. I consider that 35% gap to be relatively equal considering the higher ongoing cost of maint and transmission for utility solar.
You are 100% correct though and really should not be engaging in this silly argument. Clearly utility solar would be cheaper(even in Hawaii) as of right now, the costs are less than half of residential installs. It's as simple as that.�
1/1/2015
guest And yet it's not. At least not for a homeowner. The cost of utility solar to the utilities is irrelevant if your cost at the home is more than it would be with solar+batteries.
Perfect logic what you're really arguing is that utility solar plus Batteries Plus transmission will win out against residential solar Plus batteries with very little transmission cost needed.
I think you're very wrong. Me calling it a fact won't actually make it one now and the reality is we will have to wait and see how it all plays out.
I'm guessing someone like Robert Boston could weigh in on some of the grid upgrades required by utility that would not be required on rooftop Solar.
And although someone else mentioned up thread there is a value to having a very distributed grid. It makes it much more resilient.�
1/1/2015
guest Sure, I think the only solution for utilities apart from death spiral is to move to a market price for all generation. So utilities, independent power producers, industrial companires, commercial companies and residents all produce what every power they would like and sell it at whatever price a buyer is willing to pay for it. This is the virtual net metering model I've been talking about. Once a buyer and seller agree to a price, the utility transfers the power and collects a small transaction fee, depending on how far apart buyer and seller are in the network. Thus, the utility is providing transactional service. There is no need to balance the load, because market price simply increase when there is a shortage or fall when their is excess. In this transactional market model, there is still room for aggregators of supply or demand to serve as intermediaries to minimize trading and transacting costs and perhaps to provide financial hedges against market volatility. The beauty of this model is that it is a a relatively free market wherein economic efficiencies can arise to drive down all costs.
From a free market view point, the problem with net metering is that in order to preserve a legal monopoly the government is setting the price for feed in tariffs rather than allowing a free market to trade and find its own prices. A market price mechanism would actually allow the price to change from moment to moment. So we know that any arbitrary scheme to fix feed on tariff is not the market price.
So a basic virtual net metering market could work like this. The local utility publishes any feed in tariff is likes which it can change anytime it likes. Through aggregators, buyers post whatever price they would like to buy fed in power at or may enter into longer term agreements. The PUC sets transfer rate plan, say 1 c/kWh for transfers within the substation, 2 c/kWh anywhere else within the utility's service area, 3 c/kWh anywhere beyond plus any other transfer fees that may apply within another utility's service area. (Of course, this can be made much more complex, but this is enough to get the idea.) So suppose the utility is offering 5 c/kWh, but through aggregators I have neighbors willing to buy at 7 c/kWh plus transaction fee. So I sell for 7 and my neighbor buys for 7 and pays the utility 1 since we are in the same substation. The aggregators manage this trading in real time. So the utility gets to benefit in two ways: it gets to collect reasonable rent on the use of its distribution assets, and it gets full freedom to set any price it likes on feed in tariffs, even negative prices. The advantage of being able to set feed in tariffs in real time is that it harnesses distributed solar, batteries and any other devices to balance the load. If it needs peak power it sets a high feed in tariff to avoid having to source more expensive power elsewhere. If it has too much power it can set the feed in tariff low or even negative. A negative feed in tariff would actually be a penalty for non-curtailment if the system is overloaded, say wholesale spot prices are negative, or an inducement for accepting load to charge EVs, home batteries, or any other dispatchable load.
So the problem with any fixed feed in tariff is that it does not afford the utility the flexibility to balance loads through an efficient market mechanism. This is in part why utilities cannot really find any net metering fixed rate that they would like to agree to. We can have all sorts of childish arguments about what is fair and what's not fair, but in economic terms the value of fed in power changes from moment to moment. When the utility has to pay $600/MWh on the wholesale spot market, you can bet they would very much benefit from being able to obtain a lot of rooftop and home battery power at that time, but fixed net metering denies them access to such a market. So it has nothing to do with what is fair. It is about giving all participants economic freedom to trade power at prices of their choosing. Fortunately we live in the internet age, where it is feasible to allow computers and human agents to do real time trading in micromarkets on our behalf. This was not available generations ago when utility laws creating monopolies were created. Perhaps for that generation it was the the most efficient way to bring energy to ratepayers, but these structures have outlived their usefulness. Real time micromarkets, virtual net metering, virtual microgrids, etc. can help us achieve economic efficiencies never before conceived possible. And in such markets, utilities can provide very valuable services and play a very important role. So their long-term value will be determined by the value they add to power markets, not from the competition that they exclude from the market.�
1/1/2015
guest Net Metering Review: Value of Solar Energy Higher Than Retail Electric Rates | Cost of Solar - Learn the Benefits of Solar Energy
�The solar studies reviewed in this report confirm that huge amounts of solar have already been developed without paying the full value that solar brings. Not only does that mean that solar customers have likely been subsidizing non-solar customers and the utility, but that over the long term, continued development of solar promises downward pressure on electric rates for all.� � Karl R�bago, Executive Director of the Pace Energy and Climate Center."
Here's the report supporting net metering as more valuable than national average retail rate:
http://environmentamerica.org/sites/environment/files/reports/EA_shiningrewards_print.pdf
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Jhm,
thank you for your thoughtful analysis and ideas. I appreciate you sharing and hope to build on from what you've given us here in this thread.�
1/1/2015
guest How is Power Stepped Down? | Southern California Edison (SCE)
California lost over 14.2 TWh of electricity through transmission and distribution in 2013. At about .20c/kWh retail, that's $2.85bln in financial loses to T&D loses alone. What is the impact on losses from DG brings with already "delivered" energy to retail customers?�
1/1/2015
guest Hey, we don't need name calling around here. That is very disrespectful to people here who are intelligently engaging your questions.
The simplest argument I can give you is this. The cheapest utility solar is about 4c/kWh and the cheapest fossil fuel generated power is combined cycle natural gas at 6 c/kWh. So the most that utility solar can save any ratepayer is about 2 c/kWh. Cheapest utility wind is about 2.5c/kWh and has been quite low for many years as someone from Denmark would know, but this 3.5 c/kWh cost advantage over natural gas has yet to reduce residential rates within the US.
This is not any sort of fundamentalist appeal to a higher authority. These are just basic facts that your simplistic assertion cannot explain. Specifically, you need to explain why in this country even as wind has fallen to 2.5 c/kWh and has been widely deployed, retail rates continue to rise by about 2.5% or more year after year. If wind cannot do it at 40% below solar, what gives you so much faith that utility solar will make one speck of difference for ratepayers? You need to address facts.�
1/1/2015
guest That's all well and good if you were designing a fresh system from the ground up, but what about all the legacy producers that are specifically designed for an analog world? How could anything with a fuel and combustion and steam possibly be profitable in this model?
I understand that's what we're looking for, but could the global economy survive if the G20 declared this "the plan" tomorrow? Hermann Sheer got himself assassinated just for pushing the German FiT legislation, you'd better watch yourself.�
1/1/2015
guest Does anybody have information on what utility solar actually goes for in Hawaii? It's one thing to get a $39/MWh solar PPA for a plant on cheap desert land. I've never been to Hawaii, but my impression is that it does not have an abundance of cheap, flat, unused land.
If land is expensive, then your cheapest solar will be atop flat roof commercial buildings. SolarCity has actually done alot with Zep bracketing to drive down the cost and improve the yield of flat roof installations.
So if anyone can find data on solar costs specifically in Hawaii, that could really help our discussion.
Another little fact about the grid in Hawaii is that each island has an isolated grid. There are no transmission lines that connect any of the islands. While this is technically possible, it has not been deemed economically advantageous. The potential for rate arbitrage between islands is not worth the cost of transmission lines.�
1/1/2015
guest That's right alot of the lagacy system is obsolete and increasingly unprofitable. This is the risk that investors make when building out this infrastructure. This is specifically why the coal industry is going bankrupt.
I recognize that the transition is hard, but what all players need to do is look at the long run potential of moving to a market based electricity market and evaluate how much their specifics assets would be worth at market value. Any asset that you would expect to lose value as the market opens to competition should be very closely scrutinized. One should seriously consider divesting those assets. Next you should try to understand what assets you have or could get that would increase in value if the market opened up. Consider investing more heavily in those. So for example, I think utilities should start selling off there gas peakers now to anyone who is willing to take that bet, and invest the proceeds in batteries and developing aggregation programs. So over the next few years, you might pay a little more in standby capacity contracts and wholesale power, but as you build up your battery fleet and aggregation relationships you carve off the most expensive peak rates and keep driving those peaks down until the folks you sold your peaking plants to go out of business. It may seem cruel, but if you don't find some investor to shed this risk to, you will wind up putting the loss onto your customers and driving yourself out of business. So it is the best thing for your customers and your shareholders to divest early. In my opinion, the utilities are sitting on massively over valued assets.
They should not wait until banks and the bond markets figure this out. But once the financial markets understand how serious the situation is utilities will lose value in a hurry. So shareholders need to be very wary. They most basic test to see if utility is over valued is if it cannot offer a competitive residential rate. What is a comptitive rate? It is certainly less than a SolarCity PPA in your service area. This is why I have so little respect for any utility that is trying to block rooftop solar. If you've got SolarCity in your service area signing up customers at several cents below your rate, you are not competive, and your cost structure is probably bloated. If your cost structure is bloated and full of obsolescence, I do not want to invest in you because this could all end quite badly.
The most basic test is, if you had to lower your rates could you? I suspect most US utilities fail this test. Just look at their profit margin. PG&E, which I generally have respect for, has a profit margin of 8%. If they had to lower their residential rates by 1c/kWh, they might not be profitable. If they had to lower it 2c/kWh they would go bankrupt. Now compare that to SolarCity. If they had to cut their rates by 1c/kWh, they would slow their growth in that market. 2c/kWh, they would exit that market and grow elsewhere. They have a distinct advantage by not being bound geographically. What about the PPAs. Their net retained value is around $2/W with a cost of $3/W. So if on an existing PPA they had to lower there rate by as much as 40% to retain the customer, they would still breakeven on that customer long run, and the longer they retain the customer the more the front end is paid off. So their capacity to cut rates grows with each passing year. But it's very unlikely that they would ever need to cut PPA rates, because they are a very cost competitive company in the first place. Sure, other solar installers can match and mildly beat their prices, but this is competing on new installations. It's just not worth paying off a lease early just so you can re-install solar with someone else. Nobody replaces a well functioning system just because a deal on a new one comes along. And as far as competition with utilities go, they will have to go bankrupt and restructure before they can even touch SolarCity's rates, and even if that were to happen SolarCity could cut rate much further still. So SolarCity passes this test while most utilities would fail. Another thing that is significant here is that if the electricity market became more open to competion, my expectation is that the value of SolarCity would increase. For example, if aggregated services, community solar or the like started to take off, this would unlock much larger addressable markets for SolarCity and they've got the talent and entrepreneurial spirit to give it a good go. So as a SolarCity investor I have no fear of the market place becoming more competitive.
So could the G20 survive this plan? Actually I think they would thrive under this plan. Tying up capital in uncompetitive assets is by definition malinvestment, to follow the Austrian school. This malinvestment is a drag on the economies of the G20. Opening to innovation and competition will unlock a much lower cost of powering these economies. So business Costa decline,worker productivity increases, consumers have more discretionary income. All this implies that these economies can grow at a faster pace with less dependency on fossil fuels. The key thing for governments to watch out for is that the legacy losses to be born by investors, not ratepayers. Investors are compensated for putting their capital at risk, and it is their duty to bear the losses not pushing it off to the public. So regulating bodies need to be very critical of utilities that raise their rates in the face of competition as they are most surely putting their economic losses onto ratepayers. But the beauty of this "plan" is that ratepayers get to participate in competing against incumbents with bloated cost structures, and this is precisely what assures losses will be born by investors, not captive ratepayers.�
1/1/2015
guest I don't know why rates are still going up, I don't know the exact cost structure of US utilities, but you need to keep in mind that means of cheap electricity is still new. Wind is cheap yes, but not 2.5c/kwh everywhere, it has been embraced where it is effective though. A large part of the electrical bill is probably balancing the grid (peaker plants hiking the average cost), try installing a diesel generator in your backyard and use that when the sun doesn't shine and take a look at your total power expenses. Batteries have just now come down to $250/kwh and there is a waiting list, this is much cheaper than peaker plants as I know you are aware of so when this change happens, rates will come down, sunk cost in peaker plants will still haunt the rate for a while but this isn't really the utilities fault, they had no alternative when they were built. And then the shift to sub 5c/kwh renewables will over the next 20 years push cost down a few cents too. I have done nothing but adress facts, it just falls on deaf ears.
@Foghat
Next time you quote such reports it is a good idea to at least look it over quickly yourself. I have already adressed that claim in one of my older post, and it makes absolutely no sense.�
1/1/2015
guest @Perfect Logic. You seem to have a penchant for only utility level, centralized solar. I would point out a very few problems.
Utility Solar from centralized plants is the same model as Utility electricity from centralized plants Not very robust versus PV and batteries is a decentralized distributed generation mesh style grid
A (very) few examples from the US grid failures
Dec 8-12 2008 Ice storms in the US, 1 million homes
Feb 26[SUP]th[/SUP] 2008Miami to Tampa (whole state)
Sept 8 2008 Hurricane Ike, Galveston area, 2 million homes lost power up to 2 weeks
Dec 12[SUP]th[/SUP] 2008 Ice storm in NE US, 1.5 million homes up to 2 weeks
Dec 26[SUP]th[/SUP] 2008 entire Island of Oahu went dark, 12 hours (HECO)
Jan 27, 2009, Kentucy/Indiana Ice storm, some lost power until Feb 15[SUP]th[/SUP] (3 weeks)
Feb 5/6 and Feb9/10 2010 blizzards NE US/Baltimore Wasington corridor over 200,000 lost power for days
March 14[SUP]th[/SUP], 2010, windstorm, Connecticut, NY , NJ, Long island, up to 6 days outages
July 15[SUP]th[/SUP], 76,000 lost power windstorms, Michigan
July 25[SUP]th[/SUP], 250,000 Wash DC area, windstorms
Feb 2[SUP]nd[/SUP],2011, Texas, rotating blackouts, 2,000,000 affected
April 27[SUP]th[/SUP], 2011, Storm of 300 tornadoes, Alabama to Virginia, multiple outages
July 11, Derecho (windstorm) Chicage, 850,000 lose power
August 27/28 Hurricane Irene 5,000,000+ lose power
Sept 8/9 Southern Calif/Arizona. 5 million
Late October, Snowstorm, East Coast US, 2 million outages
June 29[SUP]th[/SUP], 2012, Thunderstorms and Derecho, Iowa to Mid Atlantic, 3.8 million lose power
Oct 29/30 2012, Hurricane Sandy, over 8 million without power
Feb8/9 2013 Snowstorm/Nor�Easter US. 650,000 lose power (plus 2 feet snow)
Also, NorthEast blackout of 2003 (August 14/15) about 55 million people, that could have been averted by 500 megawatts of PV added to the 10,500 coming in on the trunk lines so the line wouldn�t sag, and hit a tree and snap ($8-11 billion in losses, cost at time of 500Megawatts distributed PV, $5 billion)
Sept 19, 2003, Hurricane Isabel, 4.3 million lose power
Aug 31, 2005 Katrina, around 2.6 million lose power
This leaves out Europe (Nov 4, 2006, cascading failures, about 15 million households lose power)
This leaves out the sabatoge done in Brazil, Jan 2005, sept 2007, accidents by tree planting crews (Vietnam, May 22, 2013
Please explain exactly how centralized generation, using solar or natural gas or coal or anything is more robust than a decentralized distributed generation grid. All I see from you are reasons utilities give for continued control. I have had my roof top PV array since 1999, which is small, but functions[
"you want coal, we own the mines, you want oil and gas, we own the wells, you want nuclear energy, we own the uranium, you want solar power, we own the ahhh, decentralized solar power isnt feasible, only centralized"�
1/1/2015
guest Another service distributed generation can provide. SolarCity wants to get into this exact business. Use distributed batteries to provide peaker plant services for a much lower cost than a peaker plant, battery or otherwise since the infrastructure would already exist from customers having batteries for their own backup needs. Solarcity has been selling peak shaving batteries to businesses for some time now. You constantly negate every advantage of distributed generation. Everything is not about cost. It is also about level of service. You constantly keep harping about things being cheaper at the utility scale while constantly underplaying the potential of DG, which is soon to be competitive with the grid everywhere and already competitive in many locations. Why do you think the las vegas casinos want to get off the grid?? because they want to pay more for power? There will come a time when DG is cheaper than transmission alone even at a small scale. The utilities need to branch into DG themselves for long term survival. By your own admission wholesale power is 6c/kWh and getting cheaper with renewables, the rest is transmission, peaking, grid maintenance etc. How many years before solar + batteries goes under 10c/kWh?? 5 years? 10 years? 15 years? Based on the answer to that question, utilities need to prepare for a shift in business from primary power source to backup power source.�
1/1/2015
guest If people want rooftop solar or batteries as insurance against outtages, or for whatever other reason then thats their choice. As long as they pay their fair share of grid infrastructure (unless they want to go completely off grid) and they get paid a fair amount for power sold back to the utility which is around wholesale.
@dalalsid
You are repeating yourself, I have already explaned why you are wrong 10 times.
"Why do you think the las vegas casinos want to get off the grid?? because they want to pay more for power?"
This isn't even relevant to the discussion about whether residential solar is subsidized too much or not, as I can assure you they won't be generating power from 8kw residential solar arrays. Sure they will probably be able to save some money using utility scale solar and a cheaper load balancing system. But Las Vegas has much larger economy of scale than a single household.�
1/1/2015
guest Introducing SolarCity, a Powerhouse in Solar Technology - Market Realist
Market Realist has done an overview of SolarCity, not bad as a primer. Article neglects retained value and available cash, two key metrics that helps an investor understand the business model and strategy. Even so, there is a lot of good, basic information in there.�
1/1/2015
guest
@PerfectLogic. You miss or ignore my point. The centralized grid model has a lot of instability, resulting in outages. A decentralized grid consisting of distributed generation with multiple gigawatt hours of storage would be much more stable. Utility scale solar continues Utility scale centralized generation.
Your thesis seems 100% Utility Solar, residential a non-starter except for outliers.
I point out multiple times Utility Solar/Electricity/gas/coal generation massively fails, for anywhere from hours to weeks on multiple occasions. BTW, I pay Pepco every month for various charges, grid, transmission, distribution. I have never been recompensed for the 12,000+ kWh I have generated, nor do I expect to be. You seem to ignore the robustness of distributed generation vs centralized. Will you comment on whether 15 gigawatts of batteries, distributed in an average of 750,000 residences and businesses as 20kW of batteries, aggregated into a 15gw VPP (virtual power plant) would be more robust than a single 15Gw plant? This would mitigate to reduce the Transmission and distribution losses (+6%)(EIA), 100�s of miles versus a hundred feet or less, enable frequency regulation, etc. I should point out the gigafactory is scheduled to use 30% of its 50Gwh of batteries per year as stationary storage, so eventually every year it will churn out 15Gw of batteries for stationary storage.
I would also point you to Dr Richard Perez page on solar energy, http://asrc.albany.edu/people/faculty/perez/
"you want coal, we own the mines, you want oil and gas, we own the wells, you want nuclear energy, we own the uranium, you want solar power, we own the ahhh, decentralized solar power isnt feasible, only centralized"
BTW, If I had a 10kW array and a 20-30kWh battery pack, I could power my whole house and my electric car�
1/1/2015
guest There is no 15GW utility scale solar plant. Even on the utility scale they still get power from hundreds of sources. I'm pretty sure that outtages almost always happen not because of generation problems, but distribution problems. If some wants to pay for a battery as insurance against outtages then go ahead, but they shouldn't let everyone else pay for it.�
1/1/2015
guest Perfectlogic, You are repeating yourself, I have already explaned why you are wrong 10 times. Here is a copy paste:
"There will come a time when DG is cheaper than transmission alone even at a small scale."
"How many years before solar + batteries goes under 10c/kWh?? 5 years? 10 years? 15 years?"
Here is a link to a calculation for current Solar + battery price - http://seekingalpha.com/article/3147876-the-unstoppable-force-of-solarcity-simplified - 20c/kWh. Here is a neat chart extrapolating avg. utility power pricing vs drop in solar + storage PPA pricing from that article (note: that was written by me):
�
1/1/2015
guest
So on your off grid calculations you assume the residents take advantage of new technology, and on the utility calculation you assume they ignore any new technology which I'm pretty sure is against the law. Nice assumptions.�
1/1/2015
guest I assume SolarCity PPA pricing improvements for new customers based on new tech unless you are claiming that SCTY/TSLA will not offer new tech (in which case I can safely ignore anything you say). I also assume utility price rising at the same rate as they have for the last decade. I see no reason for that to change. As you yourself has stated several times, they have sunk costs of infrastructure which will not go away soon and switching from nat gas to solar is only going to save the utility 2c (also according to you). And you are yet to provide even a single example of new technology reducing end customer pricing on the utility side. Also I'm assuming SolarCity PPA pricing which is inherently more expensive than buying a system too. So no assumption there is unreasonable. If you want to argue that the utility will drop pricing, you need to show either
a. average price increase slowing down (not yet happened inspite of cheaper nat. gas, wind and solar)
b. regional price dropping where more renewables are being deployed.
P.S. As usual you are ignoring my main point:
"There will come a time when DG is cheaper than transmission alone even at a small scale."�
1/1/2015
guest Like I have said several times before, utilities haven't had the chance of lowering rates until now, the new technology have hit cost parity NOW and moving foward cost reductions will happen. It's so simple, come on now. You are comparing future technology on the residential off grid side with current technology on the utility side...�
1/1/2015
guest again, you miss or ignore my point. 750,000 residences or businesses, with or without PV, but most likely PV and a battery pack averaging 20kWh each, some more, some less, could be aggregasted as a 15Gw VPP. I am well aware this does not presently exist. I continue to point out that distributed vs centralized is more robust when trouble occurs. On the utility scale, you have a lesser number of centralized, point source generating vs distributed.
We shlll probably have to agree to disagree. You go your way with centralized control and multiple massive failures, and I shal go with distributed, where failures will also occur, but to a much lesser degree�
1/1/2015
guest Hahahaha. That's like saying other car companies haven't had the chance to build long range EVs until now. Or cable providers haven't had the chance to provide affordable broadband until now. Taxi companies haven't had the chance to build an app until now. etc. etc.
Does anybody here have lower electricity bills since 2008 as natural gas prices declined? Haven't had the chance my a$$. Forget about renewables. They had the chance just from natural gas pricing.
Also didn't you just say that some state got 20% of it's power from wind? Wouldn't it be easy for you to show dropping prices in that state?
--Edit--
P.S. Here is how fast the grid is switching to cheaper natural gas from coal:
The American Power Grid And The Economics And Greenness Of Tesla's Luxury Electric Vehicles - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha
Where are my price drops?�
1/1/2015
guest I'm not gonna waste my time digging around for numbers trying to prove anything to you, as I have clearly proven my point 10 times already but it falls for deaf ears, you have made your mind up and won't change it for anything, and that is why I'll actually stop responding now, it's a waste of time.�
1/1/2015
guest You have stated your point 10 times. I have proven mine.�
1/1/2015
guest Utilities are already choosing DG to reduce costs like never before:
"Rather than build a new substation at a cost of $1 billion, New York City-based utility Con Ed plans to invest5 in demand-side management programs (distributed solar generation) and substation upgrades to reduce its load by 52 megawatts by 2018, at significantly lower cost to ratepayers.Additionally, California�s Distribution Resource Plans and New York�s Reforming the Energy Vision (REV) proceedings are two important regulatory dockets that will continue in 2015. Both acknowledge the utilities� revenue diminution dilemma and seek to realign incentives to accept and encourage clean distributed generation resources to the benefit of everyone, including utilities, clean energy providers, and consumers."�
1/1/2015
guest This. Any utility that wants to survive needs to get into DG. Utility scale everything is not a solution and not always cheaper.�
1/1/2015
guest Is variable pricing the way out of Hawaii's solar wars? | Utility Dive
This is a very good article on the importance of getting the economics right. Pricing electricity at marginal cost is consistent with my thinking, though I would go a bit further and allow market to find its price in realtime.
�
1/1/2015
guest Jhm,
Did you read about the "flexiwatt" yet?
in a couple years when the gigafactory is churning out 15GWh of storage, what do you think the cost/kWh would be for a energy storage-as-service to homeowners? Meaning I have a pv system at my house and I want 24-7 off grid energy so I buy access to a mobile powerwall/powerpack storage system in order to do that. Could his potentially be cheaper then grid electricity as powerwall prices go down? Solarcity would rail(or hyperloop) charged packs to these mobile units and charge a contracted $/kWh rate for it. They could also do a combo deal and ppa the entire pv system with mobile storage unit.
this mobile storage service could also be useful for micro grids and everything in between. Solarcity could have a a few large solar farms out in the sunniest spots of the country for the sole purpose of charging powerpacks/powerwalls. Then be continuously shipping packs around the country, again over rail or potentially hyperloop down the line.
I think it really boils down to costs coming down for powerwall/powerpack which could really cause a significant transformation rather precipitously. A person only needs to see a net cheaper cost/kWh retail and they will switch off the utility. If not for just expensive consumption periods of the year, like summer. Ppa the mobile storage or a few months of the year to avoid costly utility bills. Maybe set up a net metering idea for the mobile unit while the home is connected. Maybe these credits can be bought and sold to neighbors on a local market. Potentially turn into a solar Bitcoin.�
1/1/2015
guest "Solar Bitcoin" ....Elon on the front of the coin?�
1/1/2015
guest I have not read this, but I have imagined it. It's a good thought experiment to try to understand the cost of shipping electricity. How much does it cost to send 100 kWh 100 mikes over powerline like versus transporting a battery. First you've got to get a grip on hardware costs. So just 100 mile cable at $10/foot is $5.28M, so you can buy alot of batteries for that kind on money. Then you've got the variable costs. I think the transmission loses are small, just a 1% or so. But what will it cost to move a 880 pound battery 200 miles round trip. It's got to be much more energy cost. I don't have this all worked out, but transmission lines are cost prohibitive for really remote locations, so there may be an opportunity there. But transportation is also expensive. So the more economical use may simply be to produce power locally on remote area, store it in stationary storage, and avoid transport costs all around. So its kind of tricky to find just the right sort of use case. Essentially, batteries have the advantage of being mobile and this is what is to be exploited. Transmission lines are a fixed long-term investment. So mobility has advantages when temporary solutions are needed.�
1/1/2015
guest EIA says 6% loss.�
1/1/2015
guest EIA data also shows California lost over 14.2 Terrawatt hours due to t&d loss in 2013. If you look over the past decade, they've lost close to that on average per year. At .20c/kWh for retail, that over $2.85bln per year, $28.5bln over the past decade. Added cost shift onto ratepayers, in my opinion.
Winfield, have you ever researched how much money is spent on oil spills, failed nuclear plant closures, nat gas pipeline explosions, coal ash dumping violations, rail car derailment spills? how much has this has been cost shifted on ratepayers in higher rates? I imagine insurance rates for utitlies also go up or are higher because of such disasters... I wonder how many cents/kWh of cost avoidance DG solar installs create for utilities in this respect?
Also, how much avoided cost DERs have on power outages? Just over the past month, NV Energy has had numerous power outages, that have cost 10's of millions of not more...
if if we all recall the YouTube video of a Solarcity + tesla storage in operation during a power outage in the Bay Area... I wonder that what that stability in mass woul look like on the utitlity of this were to happen in the future again?�
1/1/2015
guest It would be easier to install PV in non-optimal locations (partially shaded, other side of roof etc.) than constant battery transport, probably. You have a link to this flexiwatt thing??�
1/1/2015
guest
Flexiwatt
5 things utilities need to know about "flexiwatts� | Intelligent Utility
"...demand flexibility cost-effectively increased on-site solar PV self-consumption from 50�60% to 90+% under rates that did not compensate exported solar using net energy metering."�
1/1/2015
guest Foghat, I have been a PV enthusiast since I first read about the Douglas-Martin Sunscreens in "the roads must roll", probably before you were a gleam in your parents eyes. I have had a (tiny) PV array since 1999. BTW, US used around 4,500 terawatt hours per year a few years ago (electricity). If you took $3 Trillion (a famikiar number to some of us) you could install between 75 and 100 million, 10kW PV arrays, fully paid for and make ~70 trillion watt hours/year (and it would take a while to make and install the panels)(we have also pumped over 66 cubic miles of oil since 1965 planetary wide)(and spilled a lot too). If you havent read them, read the 2 papers, the economics of grid defection and the economics of load defection and get the excel spreadsheet from BP "bp-statistical review of world energy 2015..)
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if you do a casual back of envelop cost analysis of a nuke plant. 9.6 years from permit to completion, 40 year life span, cost of fuel and operators is vaguely $20-26 Billion before decomission and "what the heck do we do with the waste?" for a 1.2gw plant (RMI guestimates) vs same time span for PV @5.5hr/s/day generation. cost is not that too much different and you dont have them flood (rivers), run out of cooling water (TVA) and Florida where cooling water is over 100 degrees. Is this what you were asking?
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look at the Germans Solar Decathlon winning house. 5 of the 6 sides were almost completely covered in PV (4 sides and roof, including louvers on the windoes)�
1/1/2015
guest
I was was wonder if there is a dollar amount utilities on average have had to pay for disasters, outages, and other mishaps over the course of their existence? How much rate payer dollars have been spent on clean ups and/or shutdown of costly assets that failed (like nuke here in SoCal)? How much have they padded into current rate case reviews for likely future disasters? I'm sure insurance companies have all that data in order to establish coverage.
It would be interesting to evaluate the cost avoidance distributed energy resources would bring to the table in mass across the country. It is interesting that commission are doing resource planning for 10-20 years out right now and I don't think they are taking this into consideration at the moment as far as I know. It appears there is ample historic evidence to show the added cost of inevitable disasters that happen with most of the generating assets in the works to be added. I think it is of significant importance for commissions to now include these disaster dollar costs into the value of DER during rate reviews that affect ratepayers for decades after since rate hikes are primary due to future capital investments.�
1/1/2015
guest
You are pretty sure that outtages almost always happen b/c of transmission problems but you dont think transmission cost make up an amount worth mentioning when discussing the cost of utility vs residential.�
1/1/2015
guest This argument needs to be taken out behind the Supercharger and vaporized with 120V of DC solar.�
1/1/2015
guest This argument needs to be rapped on the knuckles, put in the corner with a dunce cap for not doing its homework or paying attention during class. No graham crackers and milk for two snack times for this argument either.�
1/1/2015
guest One of the biggest public subsidies is that in the US, the government has assumed liability for any nuclear disaster. Without the public assumption of liability, no nukes would have ever been economical after insurance in the US.�
1/1/2015
guest God Parity
GOD Parity - The End of Utilities using Centralized Generation - YouTube
Here's a simple video explaining the concept of God-parity solar prices. This is the point at which on site solar is cheaper than grid transmission and distribution costs. At this point even if central power producers could generate power a no cost (harnessing the god particle suppose), it would still not be cost competitive to send over the grid with solar onsite. This clip does not cover the issues of storage, but the same cost decline issue applies here as well.
The implication of this theory is that even remote solar and remote wind will not be worth transmitting. Denmark, for example, may need to consider its strategy of having enough wind to cover 150% of domestic demand. Overgenration makes sense now while the surplus power can be exported and fetch a good price. But that price will fall over time as solar and batteries continue down the cost curve. Of course, this need not be such a bad thing for Denmark, since falling battery prices mean that it will be more economical to store surplus wind energy for later domestic use than to export it. The vulnerable link in the supply chain are the transmission operators more so than wind farmers. But localities with too much wind concentration may have excesses that even storage cannot resolve.
Within the US some of our ISOs may be too large geographically. They may need to split into smaller markets over time.
The basic problem with all this is that the grid has up until recently evolved to serve the need of connecting large remote generators with distant populations. The value of this infrastructure depends on the cost differential of remote power and local power. As the cost of local power declines, the value of the long distance transmission infrastructure declines. Eventually it become very burdensome and contentious for society to keep paying for unneeded infrastructure.
I suspect this may already be happening with natural gas. Conventional gas turbines do not require massive water supplies as other thermal energy based on boiling water do, and they do not polute heavily like coal. So they can be located fairly close to population centers. They may not be as efficient as combined cycle natural gas, but not needing massive water resources is a big plus. I would expect you could design a pretty nice small grid with say one gas turbine plant, wind, and lots of distributed solar and batteries, and it would be pretty efficient and not need a whole lot of transmission resources. Essentially the gas plant would just be there to recharge batteries should wind and solar not suffice on certain days. This would suffice for a city of about 50,000 homes. It could function in island mode pretty much indefinitely. It this is true then we don't need massive grid infrastructure. Not that in the US transmission costs are about 3 times the distribution costs. So you can still have small grids with distribution capacity, but save 65% or more on the transmission costs. Really you just need a little transmission capacity to connect to the nearest three or four small grids, where the point is mostly for backup and a little trading of surplus power to stabilize local market prices for power.
So bringing this back to the God-parity idea. The lower the price of onsite power the less comptitive any remote source becomes. The value of transmission lines is largely a matter of arbitrage opportunity between two otherwise isolated power markets. If both local markets connected by a transmission line have pretty much the same price of local power, there is little arbitrage value. Suppose one town has a lot of solar power and another town about 50 miles away has a lot of solar too for about the same price. The two towns would have few occasions to trade power. But if one town has wind and the other town has solar, the transmission line creates value by trading power back and forth thoughout the day with the cycles of wind and sun. So we see that the value of the transmission line depends on the arbitrage opportunities, which depend on differences in how power is produced and consumed. So as onsite solar become cheap and ubiquitous, it affords little arbitrage opportunity from one community to another. Moreover as batteries become cheap and ubiquitous, then daily variation is production and consumption smooth out. If our towns with wind and solar both had sufficient battery storage to smooth out intradaily price fluctuations. So here there is little need to trade back and forth throughout the day, but this also depends on the cost to store. The solar town would need to decide if it is cheaper to use stored solar energy or to use imported wind energy, meanwhile the wind towe has to decide if it is worth more to store the extra wind energy or export it. So the transmission arbitrage is between the value of storing wind energy and the cost of stored solar energy. The cost of storage decreases the value of stored wind and increases the cost of stored solar. Thus, the arbitrage value of transmission increases with the cost of storage. So as the price of batteries decline we should expect that the value of transmission will also decline. I think if we follow this line of reasoning, we get to a place the differential in the cost of wind and solar determines the the arbitrage value of transmission. That is the cost of batteries is identical and increasingly cheep in both towns. So the predominant arbitrage opportunity is simply to use more wind if it is cheaper. Suppose incremental wind was 1 cent cheaper per kWh than incremental solar. Then the value of the transmission line is about 1 c/kWh. That is, the cost of importing incremental wind power (wind plus 1c transmission) to solar town is equal to the cost of incremental solar in solar town. Remember that storage is so cheap that there are no more issues around intermittency so that the levelized cost difference is all that matters to chosing to install more solar or more wind. So if the value of transmission comes down to 1 c/kWh, the critical question is whether the cost of the transmission line is less than its value. Only while value exceeds cost is it economical to add transmission capacity. Now wind town can probably add onsite solar for the same cost as solar town, so if solar becomes cheaper than wind, then there really is no arbitrage left between wind town and solar town, except in extreme conditions as backup. So if solar becomes cheaper than wind, there is practically no value left for transmission. This is the kind of microeconomic reasoning that gets to the place where all power is local. There is no sustainable market for transmission grids.�
1/1/2015
guest Moderator's Note
Remember, this is the Solar City investor's thread. There are several threads in the Energy, Environmental & Policy section that discuss the merits/flaws of net metering, balancing the grid without fossil, going off-grid, etc. I could probably move most of the last 100 posts into one of these threads, but I'll leave them here.
BUT -- please make sure your subsequent posts link back to the core question, should we be investing in SolarCity?�
1/1/2015
guest Found this story on another Solar forum. There is a pretty large savings delta between Solar City and the two competitors.
"According to Greenman-Pedersen's report, Solar City's proposal showed an annual savings in the first year of up to $94,525. Over 20 years, the city would save $2.95 million.Solar Liberty and Monolith could only provide a 20-year savings of $2.1 million and $2.4 million, respectively, the report said."
Council takes shine to Solar City proposal - LeaderHerald.com | News, Sports, Jobs, Community - The Leader Herald�
1/1/2015
guest I appreciate the deep debate that happened over last 100 posts or so. I equally appreciate Robert�s note that we should tie it back to SolarCity as an investment.
I find Foghat�s posts showing us various developments that are happening in the real world to be invaluable.
I was thinking of how we can model all of these challenges (and opportunities) into SolarCity�s prospects. Eg: What does it really mean in terms of losing net-metering entirely in AZ. How much does it affect SolarCity in today�s terms, in 2016 terms, in long-term terms.
Then how do we aggregate all of the circumstances in all the states? To put this all together will be nearly impossible task (or a full time job for a few people), especially given the sporadic nature of the data and the unknowns.
If anyone, the best people who can model this will be SolarCity�s top management. They will be making real money investments based on these opportunities/challenges. Thus they really would have to model all of it and plan for it.
So in a nut shell, the best form of projections really will be from SolarCity�s management itself, wether it�s in shareholder letters, sec filings, interviews. In my view, we shouldn�t try to overstretch ourselves beyond what the management is giving us as guidance/projections.
As it stands, 2015 still looks pretty good. We don�t have official guidance for 2016 but Lyndon said more than once they will do 2GW installations. We got 1mil customer by July 2018 target. And more recently we got 3mil customer by 2025(max) target. - All looking very good.
I want to add one comment to this whole Residential vs Utility debate.
If you read the recent Musk book excerpt on Bloomberg, you see that Musk at one point (in history) knew that Solar is going to be very big but he wasn�t sure how to make money off of it. If you watched/read many of Lyndon Rive�s interviews, he said at least once that, they spent a few years trying to figure out where the best value creation is (yes, a few �years�). If utility solar is really where the value is in, they would have started a company there. For what ever reasons, many we know, some we may not, some we can articulate, some we can�t quite articulate, they figured residential is where the opportunity is.
Add to that, at some point they thought there was no value in creating a panel making company/factory. What�s the point when Chinese were so willing to give us as many panels as we want for as cheap as possible? But then things changed and they saw an opportunity and now they are thinking of building huge giga-factories making panels. This simply proves that they are very agile and will simply move to where ever the opportunity is.
Even as per the latest 8K, they still think residential is where the opportunity is (3mil customer target). Still absolutely no mention of utility solar what so ever. I take that as - there is no opportunity there.�
1/1/2015
guest Excellent point. So it would seem all the situations jhm has provided us, Elon and Lyndon must have also thought about it in some form. I mean, when you take EVs and solar, plus storage (as JB has said they've been thinking about it for a long time as well), you gotta think they knew it was going to change everything and like you said, picked the best place to make money.�
1/1/2015
guest Amazing, in after hours trading there was a single 500,000 share sale, that's about $23,000,000! I wonder who that was?�
1/1/2015
guest Governor Iges energy future (Full interview) - YouTube
after watching this interview with Hawaii governor David Ige, Solarcity will have a massive market expansion there in short order. He is 100% on board with DER centric grid and is looking for "partners" (Solarcity et al) to achieve this path toward 100% renewable grid. He is completely skipping natural gas in this effort. He also is against the heco merger with Florida based utility(which is all about nat gas investments inhawaii).
With Powerwall installs starting in a few weeks, Hawaii looks primed for big numbers starting in 2016. Hawaii will really be the poster child for the mainland and give credence to planning big time DER integration.
he alluded to all homes having pv, so that is a 520,000+ market if all are available to pv installs, not including community solar for apartments and condos which would probably double the market if implemented.�
1/1/2015
guest Yesterday from solarpaneltalk:
"I live in San Ramon, CA in the SF bay area. I've been reading this forums for a few days now. I recently had a solarcity guy come over and make a proposal. We have an electric car and are on PGE's EVA plan. He said that we need not offset 100% due to the PGE's tiered plan. He came up with a system for 80% offset. 7 KW, 28 panels. $35700 purchase price before any incentives. The federal tax credit would be around $10k. They are offering a 30 year loan at 4.99% with $0. He said that the panels solarcity uses are 260w, from REC Norway. Estimated first year production 10137kwh. At first glance, I felt this might be a little expensive. What do you guys think?"
This is the long term problem with solarcity. It's a business built on finding ignorant customers. This sub segment of the market is probably rapidly diminishing.�
1/1/2015
guest That's $4.90/W - Considering SCTY warranties everything for 30 years, gives you online monitoring and performance guarantees, it is upto the owner to decide what that extra is worth. Try getting someone else to give you the same warranties as SCTY. I have a bought system for just over 50% of the SCTY price (after many rounds of negotiation with many installers) but no monitoring, no performance guarantees and no warranty beyond the product warranties themselves and a 5 year workmanship warranty from the installer. And if you look at solarpaneltalk, other quotes from other installers are similar. It takes some negotiation to get better.�
1/1/2015
guest It's $5.10/w in the real world.
But maybe it is $4.90/w when calculated by solarcity fantasy math.�
1/1/2015
guest 28*260W panels = 7.28kW. So rounding == fantasy??�
1/1/2015
guest Well it is when someone is trying to make a point that SolarCity is an evil company out to sell an inferior product.
I do think ~$5/watt is expensive, but I haven't seen someone else offer the 30 year loan and 30 year warranty. In California, for most people, this makes it cheaper per month to own solar than continuing to buy power from the utility.�
1/1/2015
guest IRS makes important ruling. Hint: It has to do with solar - FierceEnergy
I have to say again, policy changes are the biggest influence of SCTY volatility in the market. It is no secret that rooftop solar has a massive market, it is only truely restricted by state caps on expansion as well as net metering policies and soon to be solar+energy storage as ancillary grid services.
Today,(within the past hour) the residential ITC was detertimed applicable to community solar projects by the IRS, which is a positive policy development for Solarcity.�
1/1/2015
guest SolarCity sells a service, not a product per se. The naysayers have a hard time seeing this distinction (not referring to you jjkroll). I bet SolarCity's management heard of all these arguments as to why the model won't work since inception. We have mounting evidence quarter after quarter that more and more people are choosing SolarCity - increase in installs, increase in market share. But electracity and other folk spin the same old argument that the market of ignorant people will dry up. I have personally seen this argument since more than 2 years ago. They have been woefully wrong all along but never admit. Keep throwing the same sh!t at the wall, hoping one day it will stick.
Here is an interesting development. SolarCity is planning to go big into commerical installations aimed at small businesses. We can hopefully agree that small business owners are lot more savvy with money matters than an average household of 4 with cushy desk jobs. Now SolarCity claims in the CC that "The economics to SolarCity will be very similar to our residential business with a gross retained value of around $1.90 a watt". Lets see how much this product, err, service sells. If SolarCity makes it big in this space, will bears admit that they mis-understood the model? or will they simply say - well, these small business owners are all uneducated, dumb and stupid. The ignorant-people market is going to dry up!�
1/1/2015
guest This is very interesting. Apparently the reporter just doesn't get that converting to LNG is a huge capital investment. This is the sort of thing that loads utility rates with alot of fixed costs that drive a load defection crisis. Moreover HECO has blown its bond rating so it is not in a strong position to make these changes without a merger. So Ige is making the right call, sparing the state from a major LNG boondoggle.
I'd also point out that HECO has tried to push through alot of utility solar projects, but these are meeting with resistance from voters. It is entirely hypocritical for HECO to cap residential solar to plaster the beautiful islands with ugly ground mounted systems. HECO is increasingly out of political favor with residents.
So it is not a surprise the the Governor is looking for a partner who can share a vision for 100% renewable and highly distributed energy.
I do think that SolarCity should bid out a microgrid project. Perhaps they could develop a microgrid solution for the entirety of one of the islands. This would give serious proof of concept.�
1/1/2015
guest SolarCity Corp up ~11% in the last five days, has seen a fierce spike in borrowing costs this week. The interest expense to cover short sales is now almost five-times more expensive today than it was just one week ago. Cost conscious subscribers to Jim Chanos�s �subprime financing company� theory may be disappointed to know SolarCity is now at the most expensive borrowing levels year-to-date. Demand to borrow shares is street wide and Prime Brokers are scrambling to scoop up shares, regardless of rate, to avoid closing out their customers� short positions
This popped up from Interactive Brokers traders insight take that Mr chinos�
1/1/2015
guest
It is interesting to note Governor Ige is an electrical engineer. He was born and raised in Hawaii. One of 6 siblings growing up in Pearl City. He is the true definition of Hawaiian local. I sense from the video is his completely sold on DG integration. That said, I think he has the best intentions for the long term energy success of Hawaii in mind. He also has all the best information, including the R&D studies by NREL and Solarcity happening as I write this. He's knows the grid can handle a lot more DG then the utitlities had previously believed possible. Also, NREL just revealed DG assets are not the same as adding fossil fuel power generating assets, they have completely different characteristics and effects when interconnected to the grid. That means the assumptions/risks associated with effects caused by increases fossil fuel capacity are not the same as adding DG capcity. As such Governor ige is learning first had that traditional Utitlity assumptions about DG do not hold water anymore and must be scraped for new ones. Those new assumptions radically change utitlity rate design as well as future capital expensive requests during rate cases.
again, Solarcity is right there next to governor ige showing him this information. Florida based Nextera is not. Suffice it to say, Solarcity is winning over the governor and that is why we hear Lyndon Rive saying Hawaii is the postcard of the future to the rest of the country. If Solarcity can help develop massive solar(&storage) installs while proving safe, reliable and economic for all residents of Hawaii, there can no longer be a disbute around pro DG policy being fantastic policy nationwide (and in perpetuity).
News article just came out showing gdp rising to record levels in CA while greenhouse gas emissions have flattened out in CA. This is a clear indication the exponential DG growth (and utitliy solar among EE) has not hurt he economy. It has proven to be the opposite. And this is only mounting more evidence in Solarcity's favor for unlocking that infinite market down the road.�
1/1/2015
guest I'd be careful about buying options when the cost to borrow shares are high. Such situations can ca use put/call parity to break down. So make sure you look carefully at IV before trading options. When IV on a call equals IV on a put at the same strike and term, you know put/call parity hold. I just checked the option chain and found that IV for near terms is very high and in many cases IV for calls is much higher than for puts. Thus, call buyers are at risk for paying premium. If you want to be long you might consider selling puts instead of buying calls.
On thing that this situation suggests is that the shorts are primarily borrowing shares to short in lieu of holding puts. These shorts can also take advantage of premium IV on calls by selling calls.
So please be careful with buying and holding near term call options. The shorts can very easily turn synthetic short positions in the option market and trash the current call option prices. Sell puts or buy shares.�
1/1/2015
guest Thanks for heads up since it was replacing my shares the nearest term I have is April of 2016 the others are January 2017.
All of my short term options with Solar City has burnt me hoping for better results with these long term ones�
1/1/2015
guest Yeah, I should have pointed out that LEAP are probably okay since the elevation in IV is more of a near term phenomenon. In fact it may be smart to roll to longterm LEAPS, selling high IV and replacing it with low IV.�
1/1/2015
guest Gov. Ige could become one of the most important leaders for the energy transformation. I'm so glad he's got an EE background and is able to think in a total systems way. I think it's taking real courage and leadership to oppose LNG interests.
I do think there are big economic benefits that DG can unleash in Hawaii. Consider how much cash flows out of the Hawaiian economy just to import fuel. Rooftop solar is cheaper. So the solar owner has more discretionary income to spend in the state economy. Also most of the cost of solar is local installation, sales, and other soft costs within the state economy. What actually gets imported is a small component. So this creates more net jobs in the local economy. Next, distributed solar preserves the natural beauty of the state which, in addition to being a positive value for residents, supports tourism. When Hawaii is able to say that it is 100% renewable, this will also be a positive message for tourism. It really is the paradise state. Ige seems pretty concerned about the coats of environmental regulation. Not only is this a burden to industries in the state, a burden passed on tonresidents, but even a burden to the government agencies that must process all the permits and due diligence at a cost to Hawaiian taxpayers. All these layers of regulatory cost are a drag on the state economy. By contrast, the regulatory burdens both public and private, of distributed generation may be far lighter. For example, environmental impact studies and public hearing are required for utility scale installation, but not residential. So this whole transition can be deployed at lower systemwide regulatory cost. Finally, Ige wants Hawaii to be a Research and Development state for renewables. This is not just about solving local problems and showcasing to the world. It is about creating a high tech industry, attracting talent and cultivating businesses that meet compete in global markets. If Hawaii can figure out how to power its islands with 100% renewable, then it will have a lot of export opportunities to take solutions across the planet. So putting all these things together, if Hawaii succeeds in this transformation, its economy will grow and become much more dynamic.
Here's one way Hawaii could pursue going 100% renewable. Allow different companies to collaborate and compete to transform suubstations to 100% renewable energy. A few substaions would be testbeds. A company like SolarCity could be given a special opportunity to take the lead in a couple of test beds. Essentially, the testbed, a substation would work toward becoming a self-sufficient microgrid. It would need to generate, distribute and balance load for all power within the microgrid. There may be opportunities to export and import power with the grid, but this would need to be done in a way that is compatible with the goal of a 100% renewable network of microgrids. So for example, if two renewable microgrids trade power, say one has some wind power and the other some geothermal power, then that sort of trading is entirely compatible with the 100% renwable goal. So these different test beds can try out different approaches and they can trade with each other. Once a few testbeds get to say 98% renwable levels, it should also become clear how to move whole grids to full renewability. Some testbeds will deploy more quickly, other test beds may achieve lower costs, and some may have better reliability than others. But in all that testing, best practices should emerge. Companies that are abke to deliver the best results will win more opportunities to replicate those results. Losers will be weeded out. HECO can be one of the participants, but they will have to innovate at the same levels as SolarCity and others if they want to retain their vertically integrated franchise. Citizens within each substation can vote on whether or not they want their substation to be a test bed. The most willing communities are enrolled in the program first.�
1/1/2015
guest Podcast 7.10.15 on Vimeo
Wow. This aired nearly 2 months ago. Solarcity is a sales machine. One person had 14 sales in one day. One person achieved 35 sales from selling just to 2 customers which shows the power of the ambassador program.
The big eye opener for the big increase in sales is Solarcity moving into malls. They've done as much sales from the less then a year in malls then they have of over 3 years at best buy. They anticipate being in over 250 malls by October and every mall in all Solarcity territories by 2016. If this momentum holds with malls(and their overall sales force) we may see more quarterly booking records coming very soon. Like I said before they shutdown the Solarcity Now website, I was tracking them to break the 395MW record from last quarter. This mall strategy could really be the answer to pushing toward 1.6-1.8GW, possibly 1.9GW install guidance for 2016. it might be a long shot, but this guidance might come at q3 call in Novemeber, maybe during the huge global climate summit in France. November will be a big Solarcity month for sure.�
1/1/2015
guest Anyone know what happened with SCTY in the last 20 minutes of the trading day? I know there was a last-minute market rally, but SCTY, which was already up nicely on the day, jumped nearly 3% in about 18 minutes.�
1/1/2015
guest Few small business own their own building.�
1/1/2015
guest That few might be plenty big.
And don't worry, management will figure out ways even otherwise. Give them a few quarters. You will see.�
1/1/2015
guest Just spec, but seeing a lot of solar flags going up around Brazil(net metering, Sunedison plant, Solarcity exec down there right now,etc)... Could Solarcity be eyeing expansion down there soon? A lot people, a lot of sun, a lot of rooftops, a lot of promising policy....?
I'm also feeling Sunedison and Solarcity might be game for a partnership of some sort. Lyndon rive did say Sunedison purchase of Vivint was a good thing for DG policy advancement, so... Again, just spec for thought...
would be kind of a big SCTY catalyst if it materialized...
im also still a believer that as international expansion happens, Solarcity will develop a bitcoin based payment system down the line... a lot of flags in this direction as well. By pass all banks and currencies in global financial transactions would be pretty significant cost saver. Global Cell phone proliferation has been a massive catalyst for this.�
1/1/2015
guest How 'gold-plating' the Australian electricity grid is killing off coal : Renew Economy
This article covers some of the themes we've discussed here. I'd like to highlight this idea of a national economy growing even as consumption of grid power declines. The decline is largely an ice ease in energy efficiency and rooftop solar. Both are consistent with economic growth. The connection is made even stronger by the fact that for quite some time residential rates had trippled even as wholesale rates declined. (So much for the theory you can lower residential rates buy lowering wholesale. It just doesn't trickle down like that.) Effectively the high cost of retail power is a drag on the economy.
The discussion comments are just as interesting. Note the discussion of economic fuel substitution. Yes, EVs are substituting electricity for gasoline. But note that some Australians with solar are replacing gas appliances with electric. Part of the context here is that utilities have been allowed to set their own feed in tariffs for solar. In some cases the tariffs are as low as AUD 0.05/kWh which is cheaper than natural gas in Australia. So there is a strong incentive to get batteries and to find alternative uses for solar energy. An electric water heater uses about 10 kWh per per day.
So the upshot for a company like SolarCity is to find other uses for electricity and so expand the customer relationship. Right now in the US natural gas is quite cheap, so I don't see solar owners replacing gas water heaters with electric any time soon. But it's worth thinking along these lines, what are really cool things solar owners can do with surplus solar energy? Running clothes dryer or defrosting the refrigerator in lieu of exporting to the grid or charging a home battery may be better uses of surplus solar energy. SolarCity can help customers navigate such solutions.�
1/1/2015
guest a tiny bit of info. total consumption in wind and solar in terawatt hours in Australia (aggreated everything)
2009 2010 2011 2012 2013 2014 terawatthours 0.3 1.0 2.0 2.4 3.8 4.5 solar 4.4 5.4 6.0 7.7 9.3 10.2 wind �
1/1/2015
guest Foghat, what indications is it you're seeing with regards to SCTY implementing BTC or some similar (their own?) non-fiat, electronic, crypto currency in their global business? I see the value of it as/if they start managing constantly growing and interconnecting micro/decentralized grids where power gets traded back and forth. Bypass the utility completely.�
1/1/2015
guest The interest to borrow SCTY shares for shorting has reached a ridiculous level of 48%
I remember the good old days when for TSLA it reached 48% range in early 2013. Then one positive tweet by Musk set off a scramble to cover, the stock zoomed like a rocket and never returned back.
Similarly, I firmly believe SCTY is compressed to an artificially low price. Any reasonable valuation will put it it at $100+ right today. We just need an ignition event, thats it, this thing will zoom like crazy.�
1/1/2015
guest Jervetson, draper, bill lee to name a few are heavily involved in Bitcoin investments. So is Elon. All are investors or board members of Solarcity. Secondly, Solarcity bought a stake in an African solar company(same b model as Solarcity as well)that uses bitpesa/m pesa as payment system in Kenya/Tanzania. Tanzania/Kenyans do something like 98% of financial transactions using M-Pesa digital currency. It's pretty wild how big it is over there... Yet milions of people don't have home electricity to charge their phones. They have to go into town to charge their phones. Solar is cheaper to put on their roof them go into town to charge the phone plus the cost of kerosine to run the home. Home solar is currently seeing a massive adoption rate because of this. Around the world cell phones and digital currency transactions are sky rocketing, yet 1.3 billion people don't have electricity... The home solar market is primed for mega expansion as a result. Just follow where cell phones and digital currency are rapidly growing(mostly emerging markets). Bangladesh now has over 3 million home solar installs, already seeing nearly $100 million in national kerosine savings projected. wild stuff happening right now. Digital currency is actually taking off without the United States so I'm feeling as Solarcity begins to expand beyond the United States, they will start integrating a digital currency payment system that makes sense. I think a solar Bitcoin could be a strong possibility, where consumers can buy and trade kWh production credits around the world as well. Mind blowing the potential to really change the global financial landscape especially from traditionally thought of as third world country markets. solarcity could receive direct payments in real time from far off markets that never existed before in history. Not only could they take traditional global energy market market share, they could also expand the market by 1.3 billion people.�
1/1/2015
guest Thanks, super interesting stuff. I'll read up on the situation in Kenya, which was not on my radar until now.
The advent of digital currency though has been obvious for a long time (I'm invested though not heavily in BTC) and as you point out there are obvious possible synergies with solar and how it decentralizes production and distribution of energy. Kind of the same way that both solar and cryptocurrencies have clear paths to globalize and democratize the world.
I love it how this might be happening already and the powers that be (economically, politically, with regards to energy distribution and production) are completely oblivious as of yet.�
1/1/2015
guest With Elon looking to expand high speed internet access globally(through spacex), a solar home in the backwoods of the Nepali Himalayans could make an electricity payment to Solarcity as easy as a family in Santa Monica California. As well as buy and sell production credits to reduce costs and/or make money. We are at the beginning of some very transformative times.�
1/1/2015
guest Only thing I'm not quite yet grasping is how that transaction (of credits/cryptocurrency) is related to the actual kWh produced/sold or bought unless there is a physical connection that can distribute the energy. I get that you don't mean literally that the family in Nepal sells a kWh to the family in the US. You mean there will be trading within microgrids? And that with time we will see greater and greater interconnectivity between microgrids forming macrogrids if you will, with decentralized production? In in the limiting case you have a kind of global internet for energy, just as we do now for information? If so I can also clearly see how storage catalyzes this transformation and enables it to a large extent (since the distances between the parts of the earth where there's day vs. night are to big for there to be any feasible way of transferring electricity thus trading it directly).�
1/1/2015
guest
Micro grids is one way to transmit the value of that energy, but also that value can be converted into something else that can be globally distributed such as radio signals, light, etc. over the SpaceX satellite constellation. What value to global markets can this capability bring? This is what I mean by credits because Solarcity could be using that produced energy in this way and offering credits as a result.
Example, could it be possible to make a phone call in Santa Monica using a signal created from energy made at Solarcity solar home in the Nepalese himilayans? Or turn on your house lights using a signal created in Nepal? Outsource anything that uses a signal, anything that will utilize spacex satellite constellation. What costs savings can this bring domestically by having access to global distributed energy like this? What about companies like Netflix, Hulu, apple, Google...? Big, big possibilities.�
1/1/2015
guest OK this one I have to think of a little more. I'm not sure what you mean by "signal" here. Surely you're not suggesting that actual large quantities of electrical energy (electricity) gets transferred across large distances wirelessly using a web of satellites? "Beaming" the electricity from one place to another, in the form of a radio signal or [I assume you mean visible] light (both the same, basically its just electromagnetic radiation with different wave lengths) makes no sense. With solar PV you take sunlight, refine it in to electrical potential that can be used for a wide range of things (hence we have converted energy in to a, for us, more valuable form of energy than EM radiation in the visible spectrum). It would make little sense to convert the electricity generated back to any wavelength of EM radiation again in order just to distribute it around the world. Then it would have to be reconverted again in to electricity at the receiver site, presumably by a PV panel of some kind. Sounds very lossy to me.�
1/1/2015
guest each install already has a modem to make digital payment. Signals are already transmitted back and forth. Energy not self consumed is stored on battery. That battery energy can be used to send data/info via communications device on site. Interesting thing is can this be commercialized globally? If so, solarcity(spacex,Elon et al) are positioning themselves to really take advantage.
this is a little further out there, but, is it possible for directed signals (such as those coming from spacex satellites) excite electrons in a tesla Powerwall/power pack? If this is possible, then it is also possible to distribute energy from around the world this way as well...�
1/1/2015
guest Wow, that is crazy. The thing to do is just keep buying shares. Time is on the side of shareholders. Shorts will pay through the nose just to buy time. Eventually they give up or run out of cash to pay interest.
- - - Updated - - -
Are you talking about transmitting power wirelessly a la Nikola Tesla's dream, or just sending wireless signals as point of sale authentication scheme for power to be obtained from ordinary electrical devices?�
1/1/2015
guest Forget batteries, phones could soon be charged by WI-FI | Daily Mail Online
'We also demonstrate the feasibility of wirelessly recharging nickel�metal hydride and lithium-ion coin cell batteries.'
Something like this...�
1/1/2015
guest Yes, indeed. Shorting SCTY is a crowded trade. Even worse, it's crowded on the wrong side.
Here is the scenario:
Short PoV: Negative EPS, even worse growing negative EPS, import tariffs, ITC reduction, net-metering battles.
Long PoV: Solid net-retained-value, even better solidly growing net-retained-value, confidence in management to lower costs to overcome tariffs and ITC reduction (panel factory for example), confidence in overcoming net-metering battles one way or other, international expansion, product expansion (recent commercial, storage, micro-grids).
The battle lines are drawn. You are in one camp or the other. There is no in between (I don't know of any longs who look at EPS).
The shorts really have to ask themselves - who is going to sell now?? Longs won't. Shorts can't.
In a traditional high short-interest scenario, shorts expect that the company will show surprising losses, shares will fall, they cover. Now in SCTY case, even if EPS goes further negative, no long is going to fizzle, because they simply don't care about it (it's just a wrong thing to look at).
To make matters worse for shorts, all longs believe that the stock is insanely under-valued. Then why would we sell now or worse at an even lower price? Look at this thread, when the stock fell into 30's, everyone is buying hand over fist. Even Musk did it himself. This locks up the shares even further.
Unless there is some huge macro event and everyone is exiting everything, I can't see why SCTY will fall much lower from here. Longs won't sell. Shorts can't short any further than they already did.
Ultimately shorts would have to cover here or cover later at much higher prices. There really is no profitable exit for them (from here on).�
1/1/2015
guest Shorts should be going after utilities like Hawaiian Electric Company, which recently had its bonds down rated. Another little surprise that short may not see coming is that the sun shines brightest in Q3. There is a fair chance that SolarCity will post positive earning in Q3 owing to solar electricity sales. But don't tell them about it. Let's keep that our little secret so they can enjoy the surprise.
The funny thing about EPS is it has the wrong denominator for this business model. It is much better to look at net loss to equity per Watt installed. Depending on the tilt of the earth, it ranges from a loss of 14 c/W to gain of 14c/W. This is pretty amazing considering that they spend about $2.91/W installed and collect small payments over a 20 to 30 time horizon with NPV about $1.10/W. It is important to denominated the earning by Watt installed, rather than by shares outstanding, because installation drives their whole business. The more they install, the more their short term losses. It is a business where most revenue is deferred but overhead expenses are not. They've got a healthy gross margin, about 42%, but SG&A and R&D do not get deferred to match revenue recognition. So SG&A is about 77c/W, which is much bigger than the net loss to equity of 12 c/W they saw last quarter. Surely some portion of that is cost that varies directly with sales though GAAP does not allow this to be deferred. Sales alone was 53 c/W and most sales expenses are directly tied to how many MW is booked and deployed in a quarter. So the business really is creating incremental value each quarter.
It is a confusing business model that leads to bad looking conventional metrics, but investors that take the time to understand the business model will ultimately be vindicated. The cash flow from the PowerCo will continue to grow and may become a powerful dividend engine, but as long as the DevCo is growing faster than say 30% per year the income statement will be ugly. So for the next 20 years this could be an undervalued company that grows at an extraordinary rate. So the basic thing to do is to keep accumuling shares year after year. Eventually, it will pay massive dividends.
Currently NRV per share is about $32. In principle, the PowerCo could payout about 5% of this in annual dividends. Presently, about $1.60/share or 3.2% yield on a $50 share. But the reason why they are not paying such a dividend is because they have the opportunity to reinvest it in a business that is growing NRV by about 80 to 90 percent per year. So that dividend potential could grow to $2.90 in 12 months and $5.20 in year another year. So the longer the DevCo can drive extraordinary growth, the larger the future dividend stream from the PowerCo. When I retire in 10 to 20 years, I'll be happy to collect those dividends, but now is not the time for dividend or conventional profits. Now is the time for growth.�
1/1/2015
guest With this short interest data and for the reasons eloquently expressed by SBenson I'm looking at Apr16 $75 calls at $1.83 as a potential bargain to get good exposure to a possible squeeze. My main concern would be (as always with options) timing (there's no difference between the wrong move all together and the right move but being off in timing when you're dealing with options). Another concern would be relatively low liquidity (only 198 open contracts and a rather big buy-ask spread of $1.65 - $2.24). Anyone have some thoughts on this?
The Jan17$75 calls traded last at $4.68.
(I'm not in a position now to sell puts, only buy calls).�
1/1/2015
guest Now this is a very interesting real-life example of how desperate the utilities are getting due to generation glut, and how skewed the landscape is due to the way regulation both limits the profit margins of utilities but at the same time favors very unnatural and counterintuitive business practices:
Pay me to use power? Really?
�
1/1/2015
guest I am no expert in timing. But these are my thoughts:
- As I remember now, TSLA margin rate went into 70's (or even 80's) in early 2013. So it's possible for the margin rates to go up further in SCTY. So we have sometime for the squeeze.
- Lyndon is certainly very annoyed with all this shorting. The best thing he can do is pre-release Q3 installations number and/or give 2016 guidance.
They did something like this for Q3 2013, while they were negotiating pricing of the secondary offering. Stock zoomed up 23% on that day - Oct 11, 2013.
Obviously for the pre-release we need to wait till end of the quarter and then some.
- On a separate note, Model X will be revealed (hopefully) on Sep 29. Then in a few days Tesla Q3 deliveries will be released. TSLA IV is not going up as much as it should for these end of the quarter numbers. I guess the geeks didn't get to code up the end of the quarter scenario for TSLA yet.
- Putting it all together:
-- Buy some Oct 9 calls for TSLA before Sep 29th. Closer to the date better to avoid all this macro volatility.
-- Once that is done in early Oct, roll into SCTY Dec 18 calls.
Dec is the max I would go because I believe Q3 results and 2016 guidance is the best trigger for short squeeze.
I could be all wrong (none of us have a crystal ball�
1/1/2015
guest Thanks for your thoughts.
For sure I won't play the short term game with TSLA. The days of easy money in TSLA calls are over.
With SCTY you have a point and I'll likely divide my purchases between Dec15 and Apr16 expiries. Good thinking that pre announcement would have to wait until late September or beginning of October. You just don't want to wait too long to buy and miss it (get too greedy that is).�
1/1/2015
guest I would recommend not trying to time a short squeeze. IV on near term call options is very high. Buy shares puts direct pressure on shorts and does not require precise timing. Buying longterm LEAPS and rolling them can provide leverage for a longterm investment. If you do want to play short term options writing puts would be more advantageous from an IV perspective than buying calls.
I do believe that shorts have suppressed the price below equilibrium, but this does not mean that you can count on a massive short sqeeze in any time frame. There is a possibility that the stock will continue to trade sideways for another year. If that happens, near term call options lose value rapidly. But if you write near term puts, you will be happy to see those loose time value as well. Holding shares will enable you to hold out in a flat market. It is a war of attrition with shorts. The investors who can hold out the longest will win.
BTW, one reason why I would like SolarCity to announce a dividend policy is that it forces shorts to pay dividends to shareholders. They can base it on the cash that the PowerCo generates, and as the DevCo mutiplies PowerCo holding, it multiplies the burden of shorting SolarCity. I think just announcing a dividend policy tied to PowerCo available cash, say some fixed percent pay out of available cash, would shut down the shorts.�
1/1/2015
guest I have some calls very near to the April ones you mentioned and I split my buy between jan 2017 calls at around 85 strike I think, Also have quite a few at 140 in case we get the fireworks I think we could�
1/1/2015
guest Jhm, Appreciate the caution.
When people are shorting at such high margin rates, they are essentially betting on an imminent business failure - shutdown of operations, bankruptcy, stuff like that. We know that SolarCity is not anywhere close to that. Just last week they announced another $400mil fund to finance projects. On top of that Lyndon asserted on CNBC that business is doing phenomenally well. So what is that which is encouraging so many shorts?? It's puzzling.
One potential negative event is Fed raising rates. SolarCity is negatively exposed to interest rates. They can't pass on the higher rates to consumers because ultimately they are limited by utility rates... A lot of people are expecting that when Fed raises rates there will be a sudden drop in stocks in general. I think shorts are expecting SCTY to fall harder. And thus positioning themselves accordingly.
If this were to happen, the best way to capitalize this event is by buying more stock (this ties into your point of fighting shorts by buying more stock). For my part I am placing a GTC Limit Buy order to buy at $35.
My broker (IB) lends out my shares on my behalf and pays me a small fee for letting them do that. I am going to pull the plug on that at the right moment. I know my position is tiny compared to daily volumes but will contribute with what I can.
If you guys want to fight the shorts you should figure out how you can stop your broker from lending out your shares. Apparently some brokers do it behind the scenes without your explicit consent. Some people believe if you place a limit-sell order (even, say at $200, which is unlikely to trigger) apparently the broker will be reluctant to lend out. This is worth figuring it out.
Having said that, IF margin rates were to creep up to 70's or 80's, based on timing, there will be some very good opportunity to make big returns on calls. Of course this strategy should only be limited to play money. At that margin rate, the stock will have to move big time one direction or the other. If there is no big drop pretty soon, there will be a sudden scramble to cover which will cause a steep run up.
So there maybe a way to capitalize both ways.�
1/1/2015
guest I agree with the need not to bet heavily in call options. Writing puts would be better, I agree, but for me personally this is difficult as I would have to have a large cash position with my US broker to cover that position (no margin for foreigners apparently).
I was looking at nothing more near term than April2016 since a shorter perspective than that is more gambling than trading. And of course I would have to be willing to cut my losses should the stock trade sideways for the rest of the year. I was trying to get a feel for how you guys feel about the pricing on the Apr16$75 calls I described above. Good value? "Expensive"?
After all the stock ATH was $75 in 2014 with much less data, customers, outlook or guidance to support it. The high short interest comes on top of that as well.�
1/1/2015
guest Japan Space Agency Advances in Space-Based Solar Power - Japan Real Time - WSJ
"According to a spokesman at the agency, the researchers were able to transform 1.8 kilowatts of electric power into microwaves and transmit it with accuracy into a receiver located 55 meters away. The microwave was successfully converted into direct electrical current at the receiving end."
Elon Musk Admits Satellite Internet Plan Could 'Over-Extend' SpaceX | Motherboard
"Musk said he�s optimistic about the future of satellite internet. �I think the long-term potential of it is pretty great,� he said, and noted that Space X�s �communications technology will be substantially more advanced� than previous satellite internet endeavors."
I'm feeling Elon is putting up more then global high speed internet up in those 4000 satellites soon. I feel Solarcity will put together a demonstration project for distributed energy "distribution" network over satellite retransmission globally... Essentially PV systems all around the world will collect solar energy and store it on powerwall/powerpack systems. Consumers will sell this energy on the market through a microwave power transmission network(through the spacex satellite constellation). Those that are buying energy will receive directed microwaves to their receiver, then that energy will converted to DC and stored on their powerwall/powerpack. The size of he distribution network could provide gigawatts of energy around the world delivered to where it is needed, so no need for a massive receiver (as the Japanese study suggests). Something in this type of arena is currently happening on Reunion island off of Madagascar, so not too far off concept.
As one could extrapolate(highly spec), Spacex could establish Mars' first indusrty as energy production and transmission to spacex satellite distribution network for earth consumption. In this way, Mars investment now could translate into real dollars here on earth later.
update:
solarcity could integrate the "rectennas" into their silevo solar panels, so could take advantage of production scale of traditional panels.
Also, the solar Bitcoin currency system could be extended to Mars residents as well which would integrate into our terrestrial financial system for sale/payments.�
1/1/2015
guest It would be more efficient to estrablish them on/near Mercury. much higher solar insolation. stories have been written about this for years in the ESSEFF literature. also ground based lasers for spaceship engines so you can boost at 1g and decelerate ar 1 g to Mars etc. 5 days or so.
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anyone read the MIT study that seems to have a thesis of Utility grade PV good/cheap, Rooftop solar/distributed solar PV bad/expensive? (no storage)
https://mitei.mit.edu/system/files/MIT%20Future%20of%20Solar%20Energy%20Study_compressed.pdf
(its about 350+ pages of turgid prose)�
1/1/2015
guest Love your enthusiasm but I don't think any of this is remotely plausible. Even with 4000 satellites you won't be able to beam around a lot of energy without some very difficult engineering and safety issues to solve first. And producing energy on Mars and then beaming it to earth? I don't mean to be rude but do you have any idea how far away Mars is, even at the point of Earth's and Mars' solar orbits being the closest together? I'm sorry, that is just not going to happen. Ever.
Look, the sun provides plenty of radiating energy hitting the earth all the time, allbeit not 24 hours a day. This is where storage comes in. Storage is and will be the solution, a much safter, more economical and realistic one.�
1/1/2015
guest Must say I agree with Johan, you seem to be too far out.
Maybe remove the fog hat and enjoy the sun shine? :wink:�
1/1/2015
guest SolarCity�s MyPower Home Solar Prices Far Above Average, Pick My Solar Finds�
1/1/2015
guest i love my tin hat. This isn't a today iteration. This is part of an evolutionary development over decades that seems to fit the business plan/vision of Elon, Lyndon, et al. Again, none of what I've stated is really that abstract. It's been around for decades, just hasn't been cost effective to do. Now, that is all changing with spacex, tesla, Solarcity scaled production. Litterally everyone in the world has a cell phone so radio freq transmission is in everyone's hands already. Near field transmission is in mass production, digital currency such as M-pesa is approaching 60 million people already not to mention multiples of that number of people using Bitcoin globally. All the elements are growing rapidly in the direction of which I've described in previous posts. If you are comparing an investment in Solarcity with other solar companies, I think understanding the long term innovation road map would give further indication Solarcity might be able to retain customers beyond the 20 year contract with higher probability. This is a major concern for some here, since the retained value is a signifant piece to valuing the company and assessing if it is under priced or over valued.
The Promise of Space-Based Solar Panels | DiscoverMagazine.com
"Mankins, the SPS-Alpha designer, is optimistic, however. He believes he has a business plan that can fly: integrating space-based solar and communications capabilities. These would not be the low-flying satellites that Musk plans to field, but geosynchronous ones that get launched every year to relay TV, radio and telephone signals.
�We could make a very small version of SPS-Alpha and slightly modify the transmitter before launch to send radio signals rather than a microwave beam. Then the power station becomes a high-power communications satellite� with potentially megawatts at its disposal, he says. It could offer 10 to 50 times more bandwidth, thereby generating more revenue, yet cost little more than a standard satellite, he says. Mankins has lined up investors and recently launched a startup that will to try to sell the idea to customers like DirecTV or Verizon."
Two things: Elon has already stated his satellites will be far more advanced then any satellite currently out there and that he doesn't see major set function advances in hardware but rather in the software. With that in mind I think the above quote could be a method of bringing along investors today in developing the advanced energy transmission network that would be required. In Elon's case it's not so much about the space based solar part of mankins idea as it is the duel capability of radio/microwave transmission, communication/energy transmission in the same system.
update:
http://www.solarcity.com/newsroom/press/solarcity-and-directv-make-solar-power-more-accessible-and-affordable-homeowners
might consider the long term relationship between Solarcity and directv(and others)in developing long distance energy distribution over spacex constellation. Would most likely happen through a home satellite dish on the roof(near the PV system). Obviously, powerwall is essential to making this global energy system work. It is to be noted that directv has already 20 million American customers with satellite dishes. Could see this scaling nicely within current directv dish production capabilities.
furthermore, successful microwave energy transmission tests have been conducted from Maui to the big island (92mi). Solarcity is doing a lot of R&d in Hawaii recently and not sure if they have access to these microwave transmission experiments, but it would be very interesting if they do. Again, local distribution doesn't make sense over microwave, however long distance global energy demand might. This seems really relevant for developing countries and as we've seen in Kenya and Tanzania, wireless, mobile phones, and digital currencies are being adopted at accelerating rates well beyond the developed countries... Same is happening for distributed solar.�
1/1/2015
guest Stem, PG&E bid aggregated energy storage into CAISO real-time market | Utility Dive
first consumer sided aggregation sold on the market in california. Remember, each Solarcity solar+storage contract already has 50/50 whole sale share within it so as soon as they begin installing residential powerwalls and commercial powerpacks in a few weeks the aggregation can begin as soon as they have enough installed. Now it's just a matter of how fast they get interconnected to the grid.
Alos, 40 Hawaiian legislators looking at public uliity structure over the HECO merger. This is supported by the governor and the governor is a big advocate for a Rooftop solar heavy grid. All positives for Solarcity business growth.�
1/1/2015
guest Rancho Cucamonga approves $6.3 million in solar power projects
SolarCity gets 931kW gig from City of Rancho Cucamonga, for solar car ports.�
1/1/2015
guest A very good summary on short view.
http://www.forbes.com/sites/greatspeculations/2015/09/09/even-with-musks-magic-solarcitys-light-is-fading-fast/print/
Pretty much ignores (discredits) out the entire Retained Value concept and thus the very business model.�
1/1/2015
guest Yeah, just hammers away at conventional profitability. Comments about Net Retained Value at 6% discount are off the mark. He dismisses this claiming some 8% WACC. I do not know where he is getting this WACC, because interest paid is less than that. But the more serious problem is that NRV already nets out the cost of leverage, so he is suggesting that one should double count the cost of capital. NRV is the value that accrues to shareholder, and it is growing about 80% per year.
The relevance of the discount rate is that SolarCity could pay out upto 6% of NRV in annual dividends. Companies that have spun off yieldco are essentially doing this. They get a clean income statement on the development company, while the yieldco pays a dividend. I am not convinced that this would be a better capital structure, but it would silence the profit tirade that this bear is howling about. With SolarCity you get two great companies in one, a DevCo and a PowerCo. SolarCity is worth the sum of the parts and maybe more. Increasingly, SolarCity is also a manufacturer, so there is a MakeCo to add to the mix.�
1/1/2015
guest So Chanos is trying to double down on shorting SolarCity. He had his chance to exit with a profit back when Musk bought 123k shares. I'll be happy to pick up more shares between $40 and $45. So let's see how far shorts want to push this.�
1/1/2015
guest Nobody on this website should be a stranger to making $$ on the backs of over-aggressive shorts.
SCTY short interest is through the roof right now and shares are extremely hard to borrow. My broker has zero shares available to short. For this reason, put-call parity has broken down and puts are selling at a high premium.
I am willing to hold SCTY for the longterm, therefore, selling SCTY puts is looking very attractive and profitable to me right now.
I sold January $40 puts on 8/26 and closed them last week for a profit of 35% / contract. I am back in today with the October $45 contracts.�
1/1/2015
guest Yeah, the author doesn't give any details as to how he came up with WACC. SolarCity's cost of capital is substantially lower than 6% from all the public information that we know of (ABS, convertible bonds etc).
The author goes on and on about various conventional metrics. While none of them apply to SolarCity. Then he completely discredits the best possible metric that we can assess the business with.
To me it feels like a coordinated bear attack. It's hard to imagine these guys are really that ignorant of how this business works.
I don't have patience to write an article or blog post but maybe dalalsid or someone here would be interested in doing this. Here is a very simple way to understand the business model:
Let�s suppose a company's income-statement (statement of operations) looks like this:
Revenue: $5,000
Cost of Goods: $2,500
SG&A: $1,000
Profit: $1,500
Everyone will be ecstatic seeing 50% gross-margin and 33% operating-margin.
Now let�s say the same company, with the same exact operations, recognizes the revenue over 20-years (instead of one quarter), and pro rates the cost-of-goods accordingly:
Revenue: $62.50
Cost of Goods: $31.25
SG&A: $1,500
Profit: -$1,468.75
Looking at this, some people will freak out. OMFG what a monumental losses this company is making and worse the losses are growing (because the company's operations are growing) - sell, sell, sell. short, short, short!!!
Some people like us recognize that the financial statements are stupid, can't be relied upon and that it is still a great company and would be ecstatic shareholders.
Note, for simplicity I didn't use any discount rate. But using a discount rate doesn't change this point much.
The one and only one way to value this company is by doing present-value calc of all cash-flows and thus seeing what value this company is creating for the shareholders. But bears push this aside and talk traditional metrics because it's an easy point to confuse. Shorts try to exploit that and write out propaganda pieces like this.�
1/1/2015
guest It wouldn't surprise me if someone, perhaps Chanos, had something to do with this article. It is "sophisticated sounding" , but wrong on so many levels.
I think this review from glass door probably sums up how sophisticated the authors company is :
�
1/1/2015
guest Value of battery-backed solar in California: 25¢/kWh : Renew Economy
So one study finds that rooftop solar+battery is worth about 25c/kWh to the grid in California. I wish the study also compared solar without battery and battery without solar under the same methology so we could get a better sense of how value is being created. But other studies have found that rooftop solar is worth about 50% more than the residential rate, or 17 c/kWh compared to 12 c/kWh average residential. So maybe batteries add about 8c/kWh to the value already created by rooftop solar.
But I am not so sure that it makes sense to try to base a fixed feed in tariff off of this. It seems that batteries create more value under variable rate plans. Let the utilities off buy and sell rates that are a linear function of wholesale rates, and they will drive peaking plants out of the market.
But whatever the utilities offer, it won't matter much. The solar owner with batteries has very little need to sell into the the grid. So if a utility wants these benefits, they must be willing to pay for these benefits. The bargaining power of solar owners goes up with batteries, while the arguments around the cost of integrating solar into the grid fall completely appart. With batteries, solar becomes highly dispatchable. Utilities that refuse to make intelligent use of this resource will find themselves losing load and customers while paying to much for grid stabilization and try to pass that stupidity along to all rate payers. It won't fly in a few years. The balance of power will shift soon. It's as close as the Gigafactory.
Consider five different rate plans for a utility with 6c/kWh average wholesale price.
A, 12 + 0.0�Spot c/kWh
B, 9 + 0.5�Spot c/kWh
C, 6 + 1.0�Spot c/kWh
D, 3 +.1.5�Spot c/kWh
E, 0 + 2.0�Spot c/kWh
So residential customers select a rate plan for at least 12 months and can buy and sell at these prices. So what plans might a retail customer without solar or batteries prefer? I suspect A or B. B allows that customer to manage their power use throughout the day to potentially save money. What if the customer has solar? Here it will depend on if spot prices tend to be higher when the sun shines the most. If peak spot prices tend to occur mid-day, then the solar owner without batteries may prefer plan B or C. But if so much solar comes into the system that the peak spot prices shift to evening, then plan A gives the solar only customer a distinct advantage as they sell for 12 while other plans pay less than 12 and buy in the evening at 12 when other plans charge more. So this is a big bind for utilities trying to offer both fixed and variable rates with full net metering. The problem is with plan A coupled with net metering. However, for non-solar customers with limited fixed income, plan A needs to be offered. So this, I think is the basic conundrum of net metering as solar penetration increases. Utilities need to move toward variable rate plans to accomodate more solar, but solar only customers won't want to move on to these plans. So what happens when customers have both solar and storage? Depending on how much storage one has, one may elect to go to plans C, D or E. Suppose that peak spot prices are typically about 10c/kWh with trough prices around 2c/kWh. So under plan D one can sell or avoid purchase of power at 18c/kWh and charge or avoid selling surplus solar at 6c/kWh. This gives one the opportunity to realize a 12c spread for storage and load management. I think this would be sufficient to motivate solar owners to buy batteries, but also to stay connected to the grid and provide benefits to the grid. This is actually cheap storage for the grid, when one contemplates peak load distribution coats. Such a retail pricing plan would exert pricing presure on the spot market and drive down the cost of peak power. What if one has storage without solar? That customer would prefer plan E. That customer can charge 5 kWh at 4 c/kWh, sell 1 kWh at 20 c/kWh, and consume 4 kWh at no net utility cost. This is surely enough spread to motive customers to buy Powerpacks. But is this a bad deal for the utility? Such a customer is providing the grid with storage at 16c/kWh. This is true initially, but as more consumers buy batteries the spread in wholesale spot prives will shrink. The battery customer on plan E will do a great job of making sure that spot prices never go too low. This may push trough prices up from 2 c/kWh to 3 or 4. They will also do a good job of keeping spot prices from getting well above 10 c/kWh, but because they are not generating power, they may not have enough volume to really drive down the peaks. In any case they do a good job of offsetting the need for standby power. Solar+battery customers in plan D will mostly avoid selling into the grid when the system has surplus power. They will mostly self-consume when spot prices are high. Because they are adding to the supply of power in the system and can dispatch when prices are high, they tend to reduce peak spot prices. So over time the typical peak spot price goes from 10 down to 9 or 8. Thus, plans C through E can draw behind-the-meter storage into the system and dampen price volatility in the spot market from 2-10 to 4-8. If this happens, it will be much cheaper for utilities to offer plan A, and solar customers without storage will have little motivation to prefer plan A over plan B, or at least the utility is somewhat indifferent to the choice. The contribution of such customers is simply to drive down average spot prices, say from 6 to 5. Thus, the full range of plans B through E move the spot market to a range like 3-7, where once it was 2-10. This makes plan A much cheaper for the utility to deliver, and all that is required is for the utility to offer attractive plans B through E (which may require smart metering and rate communication protocols) to motivate ratepayers to invest in behind-the-meter technologies. Does this mean that the utilities need to get out of the power generation business? Not necessarily, they can focus on generation power below 4c/kWh and undercut the spot market. So wind and utility solar are wide open. Customers in plans D and E will assure that spot prices don't go too low, so this greatly reduces the risk of underutilization and the cost of integration for large scale intermittent power. Part of the beauty of this scheme is that it gives consumers real choices about the sort of rate plan and and onsite energy investments that make sense to the consumer. Variable rate plans become attractive when you've got technology at home that can exploit variable prices. These arbitrage opportunities are how a utility can avoid grid defection and how it can harness those distributed assets to drive down costs for everyone. Moreover, the value of the grid is enhanced when everyone has an economic incentive to trade power. So maximizing consumer choice by allowing arbitrage opportunities for people with solar, batteries, and other power management devices actually preserves the value of the grid, albeit long distance transmission is mostly for the benefit of remote power producers and plans D and E put them at risk. Regardless, those elements of the grid that are most used will be worth preserving, while other pieces get scaled back.�
1/1/2015
guest If I'm reading this correctly, selling ten $45 Oct23 puts @ $3.58 nets me an upside of $3580 and a downside of owning a thousand shares effectively bought at $41.50. That's delicious, no?
Still trying to understand selling options.....you(the seller) can exit this position at any time taking various profit/loss, but the buyer can only exercise that put at expiry?
As an investor with limited funds sitting in an IRA I'd need to hold a ton of cash to cover these sold puts so my main concern would be missing the squeeze by not having those funds in SCTY shares. I simply buy moderately aggressive medium and long calls to cover that, correct?
Sorry for the kindergarten questions, I'm trying to get up to speed before missing the boat.�
1/1/2015
guest Yeah, you've got to have cash to sit on. But in theory, if you have 882 shares, you could sell them for say $47/share. So $41,454 from the shares plus selling the 10 puts at $3580 gets you the $45,000 you need to cover the put plus $34 for transaction costs. So if the puts expire in the money, you buy 1000 shares at 45. So you've gone from 882 shares to 1000. Or if the puts expire out of the money, then you still have $45,000 to buy back your shares. The down side here is that if the stock price goes above $51.02, then $45k buys you fewer than 882. So you are taking the risk of losing some of your shares. Of course, the stock price is so volatile that if there was something like a short squeeze, you could simply hold your cash until the price comes back down. You also don't need to hold the option to expiration. As the stock price goes up, the put will lose value. So you can just buy to close at a profit, and potentially buy back all your shares before the price goes too high. But all this comes down to quick trading.
BTW, please don't take any of this as a recommendation. I am personally content to just sit on my shares. Additionally, my employer puts a 30 day holding restriction my trades, so trades like this become too risky because I cannot reverse at trade in less than 30 days.
Another way to play this is to sell a put that is sufficiently deep in the money such that you are not too worried about missing upside potential. Say a strike at 60. This put has a bid price just above $14.50. So you are basically committing your self to buy at net price of $45.50 = 60 - 14.50, so long as the stock is below $60, but for price X above 60, your net price is X - 14.50. You can also also look at this from the perspective of selling 968 shares now and 10 puts, and buying shares back at expiration. What's nice about the sell/buy back view is you can see how in effect you are lending out your shares with no assurance of getting them all back if prices go up.�
1/1/2015
guest This is exactly backwards. Either party can exit the position by paying the money to sell/buy back the equivalent of what was bought/sold, "sell/buy to close". But the contract itself can be exercised before expiry by the buyer of the contract. The seller ("writer") has no control over this, nor can he force an exercise at any time other than expiry.�
1/1/2015
guest Good article on one of the first solar + Powerpack installs in Kaua'i.
Kaua'i Utility Signs Deal With SolarCity for First Dispatchable Solar Storage System - Yahoo Finance�
1/1/2015
guest I was just about to post that. This is very exciting and surprising. I believe this is SolarCity's first utility scale installation. If they are able to compete at utility scale now, then they must have more capability to compete in the industrial and commercial markets as well.
They are able to provide a PPA at just a little above the PPAs for 2 other 12MW installations with the utility. So we know this is competitive. What is more is that this includes 52 MWh of storage on what appears to be a 13 MW solar array. Thus the most of the solar power produced will be stored. It will be sold into the evening hours. So this supply of solar does not really compete with rooftop solar feeding in before evening. This is good because we want SolarCity to be able to continue to add rooftop capacity. It's nice that at least one utility in Hawaii is willing to work with SolarCity.�
1/1/2015
guest Even With Musk's Magic, SolarCity's Light Is Fading Fast
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1/1/2015
guest This is awesome. This ties into my point as SolarCity will move into wherever there is opportunity, read: economic value to shareholders. It doesn't matter if it's residential, commercial, utility-scale, manufacturing (or even if it's solar. Yes, Lyndon said that once - if there is a magical new renewable energy source with better attributes, SolarCity will simply get into that).
Dissing out the company based on very specific residential PPA/lease model is grossly misguided. In fairness, PPA/lease model doesn't deserve dissing either. But that's a separate topic.
- - - Updated - - -
Sorry, too late. Already discussed up-thread.
tl;dr - it's a bunch of non-sense.�
1/1/2015
guest
It was posted yesterday.�
1/1/2015
guest Kaua'i Island Utility Cooperative
Recall that Gov. Ige is quite eager to find a utility the state can partner with in pursuing a vision of 100% renewable energy. Could it be that Kaua'i Island Utility Cooperative (KIUC) has an ambition to be that partner? I hope so. This could motivate really good collaboration with SolarCity. Kaua'i is the fourth largest island in the state, only about 30 miles in diameter, 562.3 sq. mi., 66k population. So 52 MWh of storage is about 3.15 kWh per family of four, comparable to half of households getting a Powerwall. This could be a really good proving ground for 100% renewable microgrids.
So here's to KIUC becoming Gov. Ige's energy partner.�
1/1/2015
guest Huge spike in short interest according to the figures just released: SolarCity Corporation (SCTY) Short Interest - NASDAQ.com�
1/1/2015
guest Chanos and his crew double down
Each to their own. I don't agree buy hey, that's what makes a market right? I will watch for a possibility to enter in with some calls if there is an iv. drop and return to normal put-call parity after the ER.�
1/1/2015
guest Yesterday a lot of Oct. puts had IV over .9. Today they're down to under .75. Calls still have lower IV around .65, but still high and not at parity.
So basically alot of ootion holders lost money today, even on calls. But this may be a sign that shorts are backing off. Maybe the dumb shorts haven't figured this out yet.�
1/1/2015
guest California Launches Its First Real-World Smart Inverter Test : Greentech Media
Rooftop PV and behind-the-meter batteries can team up to reduce customer energy bills, shave off expensive peaks in building energy consumption, and store midday solar-generated electrons for evening discharge to help smooth out their impact on the grid. But more complicated functions, like balancing voltage on distribution grid circuits, or disconnecting and reconnecting to the grid for emergency backup power, require a third technology: smart inverters.
On Thursday, the SunSpec Alliance, the University of California-San Diego, and SolarCity launched a project meant to test this emerging standard for advanced inverter functionality. It�s the first real-world test of a technology set to be mandated for all new solar and battery projects in California in 2016, a fact that�s drawn some of the world�s biggest inverter makers into the project.
�We have an ensemble cast of partners here,� SunSpec Alliance chairman Tom Tansy said. Funded by a $2 million California Energy Commission EPIC grant, the $4 million project will run interoperability tests featuring inverters from seven different global manufacturers -- ABB, SMA, KACO, Outback, SolarEdge, Enphase and Ideal Power.
Starting late this year, each company will submit their smart inverters, along with chosen battery and solar integration partners, to testing by UCSD. The university�s state-of-the-art microgrid, which includes pretty much every form of distributed energy known to humanity, will provide a useful control and renewable power resource for the testing, Tansy said.
�That�s where we�ll prove out our communications interoperability, via the SunSpec standard,� he said. SunSpec and partners have built a set of standards around linking inverters with components like batteries, solar panels, and energy management systems. �They�ll be doing things like curtailment, voltage regulation, frequency regulation, both on power from the solar array and from storage.�
Almost all of today�s solar and battery inverters come with advanced features that fit this description of �smart.� But very few companies are turning them on, let alone communicating with utilities and grid operators about what they�re doing, and what they�re capable of.
That�s largely because most utility and grid regulatory frameworks haven�t kept up with distributed energy�s growth. There isn�t even an Underwriters Laboratories specification for smart inverters yet, although a California-led group is working with UL and inverter makers to fill that gap by next year.
UCSD is also providing its digital models of its distribution circuits -- the campus is like a grid in miniature, and submetered to an unusual degree for public buildings. OSIsoft, the biggest provider of data management software for utility SCADA deployments and other resources of circuit-level data, is participating in that part of the project as well, he said. Project partners will also pull data from the distribution circuit maps newly unveiled by the state�s big three utilities, including UCSD�s utility, San Diego Gas & Electric.
The broader goal is �to see how deeply a circuit can be penetrated,� he said. At most utilities, �there�s an artificial cap of about 15 percent of the total demand capacity that can be offset with renewable energy� and other distributed energy resources (DERs), he said, in terms of how much a distribution grid circuit can bear before causing potential problems.
But tests at Department of Energy labs, and analyses of real-world circuit data in DER-rich grid locales in Hawaii and California, indicate that many circuits can bear a much higher portion of distributed energy -- and even benefit from it -- as long as it�s planned and managed well. CEC�s grant request form (PDF) describes the project�s goals: �To develop a complete smart inverter data communication standardization and go-to-market solution to enable photovoltaic (PV) penetration beyond the 15% Institute of Electrical and Electronics Engineers (IEEE) guideline, incorporate energy storage as a standard building block of PV systems, and evaluate the market-expansion potential of a standardized communication interface.�
SolarCity�s energy-smart neighborhood, plus virtual power plant
This brings us to SolarCity�s part in the project, which is distinct from the UCSD work. The aggregator of hundreds of thousands of solar systems across California will seek out about 50 customers on a specific test circuit of Southern California Edison�s sprawling distribution grid, and equip each with a lithium-ion battery system, capable of providing roughly 7 to 10 kilowatt-hours of storage, Tansy said.
That just happens to also be the range of specs for Tesla�s new Powerwall home energy storage systems, by the way. Ryan Hanley, senior director of grid operations for SolarCity, wouldn�t say which battery and inverter partners the company planned to work with on the project, which is set to start some time early next year. But SolarCity is �cost-sharing more than we�re getting from the grant -- we�re putting up more in R&D and program support than we�re receiving.�
�We are going down to one circuit and finding 50 residential customers, and deploying 50 smart energy homes on that circuit,� he said. �In each home, we�ve got solar PV, a smart inverter, a residential battery, and a smart thermostat.� That last control point allows access to air conditioning, a key ingredient of household electricity load that could provide more flexibility in absorbing and redirecting solar power. Think of precooling a home with plentiful solar energy, and �storing� that cool to let the AC idle through the late afternoons and early evenings, when large swaths of Southern California circuits reach their peak, for example.
On the inverter-grid interconnection front, SolarCity plans to provide three main services with its aggregated 350 to 500 kilowatt-hours of storage. �The first one we�ll do is support voltage needs on the feeder,� he said -- something that requires advanced inverter functions to operate in concert with each other and utility-facing grid sensors and controls. Second, 50 homes will also support local capacity needs for the substation serving the circuit, much as SCE�s local capacity resource procurements are doing with storage from Stem, Ice Energy/NRG and Advanced Microgrid Solutions.
�The third one, which is my favorite, is we�re aggregating all 50 of those systems and providing wholesale grid support,� Hanley said, through the Proxy Demand Resource demand-response program run by grid operator CAISO. �What�s of note here is that it�s a heterogeneous portfolio. It�s the first time we�ve aggregated different technologies and bid them into CAISO. The rules were just recently changed to allow this,� he said, with a big demand-response auction set for later this year, and rules for how distributed assets can play in DR markets still under development for rollout over the next few years.
SolarCity�s control platform, which manages its small but growing fleet of Tesla battery-backed solar homes and businesses, will also control this 50-home fleet as a virtual power plant, capable of responding to utility signals and, in some instances, turning themselves over to utility control, he said. The combination of customer and utility benefits from this arrangement are complex, and �part of the goal of the project is to quantify that,� he said.
SolarCity isn�t the first to bid behind-the-meter battery flexibility into California�s grid markets -- behind-the-meter startup Stem has done that in pilot projects in the past two years. Nor is it the first to test solar-battery grid support and load shifting capabilities. The Sacramento Municipal Utility District has a big residential solar-battery test underway. Southern California Edison has the stimulus-grant-funded Irvine smart grid demonstration test bed, and California�s big three IOUs want to do many more pilots over the next few years as part of their distribution resource plans.
But the project SolarCity is part of is the first to use the standard smart inverter specification so soon to become a mandatory part of California�s new solar fleets. UCSD�s inverter tests will serve as a blueprint for SolarCity to interconnect its various distributed energy assets, Hanley said, although it�s not planning to test every new inverter in its 50-home pilot -- �We�ll probably be using one inverter, maybe two,� although that could expand over time.
More broadly speaking, �we believe the industry is better off the sooner smart inverters are widely deployed, and we want to do everything we can to accelerate that,� he said. California is in the midst of reworking its utility regulations to bring DERs into play with utility grid operations and planning, and stand in for part of utilities' multi-billion-dollar investment plans, to reward what they do for the state's renewable energy and carbon reduction goals. The sooner advanced inverter functionality is part of that DER market, the faster new rules and markets will evolve to express that value in terms of kWh and kVAR, and eventually, dollars and cents.
Tags: abb, advanced microgrid solutions, california, enphase, germany, hawaii, ideal power, kaco, regulators, sma, smart energy, smart inverter, solarcity, stem�
1/1/2015
guest Thanks, Gene. That was a good article.
SolarEdge has has announced a new inverter architecture they believe will open up some big efficiency gains. They compare this to the advance that flat screen TVs had over vacuum tube TVs. They are bringing digital processing into inverters. They believe they can get 99% efficiency and use smaller magnets. I hope this plays out. If so, it may even factor into Tesla vehicles, where higher efficiency, smaller size and lighter weight could yield significant performance gains.
SolarEdge Announces Leap in Solar Inverters With HD-Wave Technology - NASDAQ.com
I continue to see SolarEdge as a really important player in the Tesla/SolarCity ecosystem.�
1/1/2015
guest FYI, the interest-rate for shorting is steadily falling down.
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1/1/2015
guest Interesting. Can you explain the difference between rebate rates and fee rates? Thanks.�
1/1/2015
guest It's just a convention. NA vs other markets. Rebate Rate nets-out the rate paid on cash (which is given as collateral) I think. I will post the exact definitions later in the evening. Can't log into the website at work.�
1/1/2015
guest Ok, that makes sense to me. No need to trouble yourself for exact definitions. Thanks.�
1/1/2015
guest What is GaN? - YouTube
Solarcity, spacex, and tesla all will be utilizing gallium nitride instead of sillicon in all their products. As such, a seemingly new moore's law curve will be started and some really exciting innovations will materialize.
Solarcity is creating a massive panel factory(and bigger ones in future) that will be able to transition to gallium nitride semiconductors at scale. Tesla inverter production as well as Spacex satellite production will also incorporate gallium nitride at scale.
I highlight this tech because Solarcity may well be front and center with innovations that determine viability beyond the 20 year contract mark. If this becomes the case, the retained value beyond 20 years is highly likely since they will offer returning customers the best energy system available on the market.
Again, I also believe these innovations will lead to an energy "panel" system that will take advantage of all wavelengths on the electromagnetic spectrum. All roads are heading that direction with gallium nitride reaching cost parity with sillicon this year.�
1/1/2015
guest Yeah! This was less tin foil hat than the satellite network beaming around TWhs every night
If we can find mention from SCTY that somewhere in their Silevo plans they have or will mention Gallium nitride that will be quite an important nugget of info, upon which we should assign a lot of value as investors. I hope they talk about this next ER, or that they get asked by an analyst.
[I know a lot of you TSLA and SCTY analysts read these boards for insight and the latest regarding these companies. Go ahead and ask about Gallium nitride panels, you are free to use my idea�
1/1/2015
guest http://www.pv-tech.org/news/solaredge_claims_digital_processing_innovation_will_bring_flat_screen_revol
The weight and size reductions in SolarEdge's HD wave inverter is pretty impressive, mass 9.5kg down from 22kg, volume 14.5l down from 30l. Also efficiency goes from 98% to 99%. In the PV space, the real upshot of this size reduction is savings in installation cost as one worker can install rather than needing two. Shipping cost should come down, and eventually the price of the whole unit. The more discrete size should be welcomed by customers. Competive inverters are at around 12c/W. It will be interesting to see how much total installed cost this could knock out for SolarCity.�
1/1/2015
guest Rooftop solar is a prime example of free market development | Arizona Capitol Times
Wow, Lyndon blasts APS CEO Don Brandt! Massive flame. I love it.�
1/1/2015
guest Love his eloquent rebuttal:
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1/1/2015
guest Johan, I was just about to add those quotes. I think this points to the essential question of who "pays for the grid." In a competitive market, a business must cut costs when there is a shortfall in revenue or suffer loss of profit. Fundamentally, it is investors in utilities who must bear the risk of building out a cost structure that revenue cannot bear. SolarCity knows it must cut costs by 5% or more each year to remain competitive, why should it be any different for a utility?
The difference, of course, is that utilties are monopolies with government guaranteed profits. And this really is the greatest sort of government subsidy that any business could receive. So I am glad that Lyndon is calling out these entitled entities what they are, state granted monopolies.�
1/1/2015
guest The world is changing, but utilities and regulators are not : Renew Economy
Of course, not all utilities have a sense of entitlement. The CEO of Vector, a New Zealand utility, Simon Kackinzie gets it.�
1/1/2015
guest Utilities are not guaranteed to make a profit -- consider the fact that PG&E went bankrupt. They are guaranteed a reasonable rate of return on used and useful assets; in return, customers are guaranteed to be charged a just and reasonable rate for power. The historical alternatives to a regulated monopoly are grim: unregulated monopolies serving low-density areas, charging what the market would bear, while in higher-density areas, competing networks stringing parallel infrastructure, greatly increasing the overall cost to serve customers.�
1/1/2015
guest That may have been the case historically, but I don't believe it holds presently and going forward. Forty years ago, one could have made the same argument for telephone service. Now we have multiple competing telecommunications networks, and it has never been cheaper to make a phone call, even to places that lack landlines and powergrids. Competing infrastructure is not nearly as costly as lacking for competition. The question is utilities should be granted monopoly status to protect them from competition. I think that day is over.�
1/1/2015
guest PV Magazine Mobil: GTM Research: BoS cost reductions drive falling PV system prices
Balance of system (BoS) are now around 75% of cost of rooftop solar..GTM expects BoS cost per Watt to fall 40% by 2020. SolarCity's Zep Solar is leading the way. Rail-free mounting hardware minimizes the amount of aluminum purchased, transported and installed and labor costs of installation.
The view here is that module costs are such a small fraction of total cost that further cost reductions will do little to drive down installed costs. This of course is true if we assume no gains in efficiency. However, increasing efficiency reduces the number of panels to install, which reduces labor, mounting hardware, some power electronics such as DC power optimizers, and transportation costs. For example, a 4 kW system requires 16 250 W panels or just 10 400 W panels. This is a 37.5% reduction in all BoS costs that vary with the number of panels.
So one of the things I really like about SolarCity is that they are laser focused on driving down total installed costs along all levers. This is why they own Zep Solar for efficient mounting hardware, Silevo for high efficiency panels, and manage their own installation crews for efficient construction practuces. Lyndon has said he must reduce costs by at least 5% every year to remain competitive. I beieve he was making specific reference to the total installed cost per Watt. What's becoming increasingly clear is that these cost reductions will not happen by simply buying cheaper panels; installers have to do the hard work of cutting every penny.�
1/1/2015
guest You'd also think that as SCTY keeps growing and are installing more and more W per month some economies of scale will come in to play, with experienced install crews, even smarter racking solutions, perhaps designs with pre-racked and pre-cabled panels from the factory that can be installed very quickly and cheaply ("plug-and-play"). Perhaps semi-automated installation processes in the future, using specifically designed lifts/machines etc. etc.�
1/1/2015
guest I've always read that the soft costs (labor/installation) of solar are the highest and the hardest to lower, so this is basically the same thing right, just called a different name.....or is it the improvements in BoS help reduced the soft costs?�
1/1/2015
guest My sense is that BoS tends to be a catchall term for whatever is not explicitly detailed. So when GTM is saying that 75% is BoS, I think this refers to everything but the panels and possible inverter, about 70 c/W and 12 c/W respectively. Unfortunately the article I posted was simply reporting on GTM's research and did not get into these details. So we'd need to dig a.little.deeper to know precisely what GTM allocates.to BoS.�
1/1/2015
guest More quotes from southern California.
Solarcity has no "retained earnings" at these prices.
http://www.solarpaneltalk.com/showthread.php?23025-Quotes-are-in-survey-says�
1/1/2015
guest ah, I see.�
1/1/2015
guest Sunrun - Investor Relations
Sunrun posted Q2 2015 results last week. They've got 472.5 MW cumulative deployed, up 46% y/y. They claim the second largest residential fleet. So they seem to be growing at the rate of the US residential market, albeit some of their growth is through acquisition of other solar installers.
What I find most interesting is that their total cost per Watt is $4.08 compared to $2.91 for SolarCity. These coats may not be directly comparable since Sunrun's business model is not nearly as vertically integrates as SolarCity. Sunrun outsources alot of sales and installation. Even so, the installation cost per Watt for Sunrun is $3.07, which if fully outsourced is still above SolarCity's total cost. But for comparison, the installed cost for SolarCity is $2.13 well below $3.07 for Sunrun. Sunrun spends $0.69 per Watt on sales and marketing while SolarCity is at $0.53. So pretty much across the board SolarCity enjoys a leaner cost structure. I certainly wish Sunrun all the best. Reducing their cost per Watt will be key to surviving the ITC stepdown. In Q1 their cost was $4.36 which they brought down to $4.08 in Q2. This is moving in the right direction. I suspect that until they get their costs down to competitive with SolarCity, they will they will not be able to grow as fast as SolarCity.
From the policy point of view, we really do want Sunrun to pick up the pace. That is, all residential solar installers compete at a political disadvantage to the utilities. With each new solar customer and each new solar job, the solar industry gains in political clout. So at this point, it is beneficial for each solar installer to grow scale just as quickly as they can.�
1/1/2015
guest SCTY volatility seems to have cooled considerably and call prices are coming back down to Earth. Hoping this trend continues a couple weeks!�
1/1/2015
guest Can SolarEdge Make a Power Electronics Breakthrough in Solar Inverters? : Greentech Media
For those following SolarEdge's technology, this article helps explain how HD wave works. There's alot of little switching going on in this. It makes me wonder how it could be integrated with batteries.�
1/1/2015
guest Utility-Scale Solar in Hawaii, Batteries Included : Greentech Media
More details about the dispatchable solar battery project for Kaua'i. The PPA is 14.5 c/kWh for 20 years. All power from 17 MW array will feed into 52 MWh battery. SolarCity built an earlier 12 MW array for the coop, which covers about 5% of the power used on the island. This second project should provide another 7% of island power.
The 14.5 c/kWh PPA is surely less cost to the coop than the diesel generated power it will replace. This price should also be competive with NG combustion turbines on the mainland used for peaking power, which have levelized costs starting at 18 c/kWh on new plants. Recall that Gov. Ige has opposed building LNG to Hawaii. This SolarCity project should buttress his case against the economics of bringing natural gas to the islands. Dispatchable solar is cheaper.
Curiously, SolarCity has not identified who the battery maker will be.
Addendum...
I did a little research on diesel generators. A 2MW diesel generator operating at 3/4 load for peak efficiency produces about 14.5 kWh per gallon. At $2.50/gal, this is about 17.2 c/kWh or at $3/gal, 20.7 c/kWh. This is just for the fuel. I'm guessing that the capex and non-fuel opex are easily in range of 5 to 10 c/kWh. (Let me know if you've got some data on this.) So just on fuel the PPA of 14.5 c/kWh saves the coop 3 to 6 c/kWh plus whatever the non-fuel costs may be.�
1/1/2015
guest California Makes Clean Energy History with Passage of SB 350
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1/1/2015
guest The movement in Solar City basically reflects the activity in this thread. If the pace and size of offerings are any indication, Solar City has seen a huge surge in demand. None of the analysts covering Solar City have mentioned this.
Also, this is a bit important.
http://businessdayonline.com/2015/09/nerc-to-increase-energy-tariffs-as-nbet-unveils-new-ppa-template/�
1/1/2015
guest Did anyone try to aggregate up their offerings, draw trend-lines and stuff?
Some Tesla threads are full of charts. Would be nice to have some of that expertise over here. I will try to do it when I get a chance.�
1/1/2015
guest We know for sure that in Q2 they booked 395 MW, but only installed 189 MW. They had doubled the sales force, and the 395 MW booked is the fruit of that. To double every year, they need to increase installed MW by 20% each quarter. So they pretty much started Q3 with enough booked jobs for the whole quarter. No demand problem. Weather in Q3 should not have imposed disruptions as in Q1. So I'm pretty optimistic about installed MW for Q3.
Additionally, Q3 is full of sunlight. So electricity sales are always biggest in Q3. Historically, SolarCity has been GAAP profitable in Q3. This is something that simple minded shorts may be overlooking. SolarCity is a highly seasonal business. It's time for Ra to smite some shorts.�
1/1/2015
guest Head of UKidea of large power stations for baseload is outdated� : Renew Economy
I think this view is very profound. Steve Holliday, CEO of National Grid, has turned to customer centric thinking about energy. From the customer's perspective, onsite solar is now the baseload supply. What centralized power producers and the grid provide is strictly supplemental.
Investors in SolarCity have known this for quite awhile, but it is nice to see it so well articulated. When you take a customer centric view of power, you naturally want to focus on onsite power generation and local distribution, microgrids. The further removed your business is from the customer, the more vulnerable to disintermediation it becomes. Thus, you need to focus on flexibility and agility so that you can constantly move closer to what creates value for the customer as opportunity open and close. I think SolarCity is extremely well positioned for this. Customers need to see them as their primary power provider and the utility as a backup provider. Baseload is the solar on your roof, peak load is your battery, backup is your grid connection.�
1/1/2015
guest �
1/1/2015
guest Thanks for the quote. Insightful indeed, impressive to see a high-up representative for the utilities able to be so agile and flexible in his thinking.
Yes, things will quickly get turned on its head in large parts of the world, where solar+storage will be the new de facto base load.
There's an interesting parallel here to BEVs: I think many people buy their first BEV expecting it to be a secondary car for the household, but soon the BEV becomes the primary car and the ICE becomes the back up vehicle.�
1/1/2015
guest Excellent article! Thanks for sharing.�
1/1/2015
guest Sure, borrow as much as you like.
I'd add that this model also provides a framework for valuing what the grid provides once a family has solar plus battery. One could add a gas or diesel generator for backup. Utilities cannot charge more for their backup service than what it would cost to lease a small 1kW Generac standby system, ~$10/month plus minimal fuel. The solar and battery minimizes the amount of fuel consumed while the battery also provides peak power capacity above the 1kW provided by the generator. So the question becomes what can the utility offer the homeowner with solar and battery to keep them connected?�
1/1/2015
guest That system will work in southern CA. Reliable sunlight throughout the year, not many cloudy days.
Many other places like north-eastern US, there is the issue of seasonal changes in supply (solar) and demand (ac/heating, weekdays vs weekends). You would need quite a lot of batteries to balance supply with demand. I'm not sure if a small 1kW generator will be able to help bridge the gap.�
1/1/2015
guest The generator could produce upto 24 kWh on a day without solar power. If that is less than daily consumption on such a day, then you may need 1.5 to 2kW generator for 36 to 48 kWh per day. It is simply there to replace the shortfall in solar. The amount of batteries need to be enough kWh of energy needed on a day with adequate sunlight for daily consumption and enough kW to cover your peak demand. The basic advantage of batteries when using a generator to cover shortfall in solar is that it allows you to get by with smaller generator. You don't need a 5kW generator if you have 5 kW of batteries plus say a 1.5kW generator. So two 7 kWh Powerpacks is all you need on a sunless day. If that is also enough to cover you over night following a sunny day assuming sufficient PV, then you are set for the whole year. Beyond that the point of adding more PV or more batteries is simply to reduce the amount of fuel that you consume over the year. So one has to do more delicate modeling to optimize the system, but some of this can be done adaptively. Start with basic system like 8 kW PV, 14 kWh Powerwalls, and 1.5 kW generator, and run it for a year. If you find that you need kWh on sunny days, then install more PV. If you need more kWh at night on sunny days or more kW at anytime, then add another Powerwall. If you find that adding another Powerwall would offset enough fuel to pay for it, then do so. Once you find that adding more PV or more storage does not net out against the cost of fuel, then your system is optimized. Of course, part of the equation here is how cheap incremental PV or batteries have become. Suppose that another Powerwall would save you $2400 in fuel over the next ten years. Then wait until the price has come down to that level before you buy it. If consumers take this sort of incremental approach, I think they will be able to get off the grid quickly and then take advantage of falling prices in solar and batteries. The money you saved early on, also helps fuel expansion. Demand for Powerwalls could be pretty steady for many years and families add one every year or two. If the price of fuel goes up sharply, then Powerwall demand will rise with that. Over ten years a family could grow their system to the point that when the generator breaks down, they don't bother to replace it. It was just a transitional device to get off the grid early.
From the utility perspective, they need to worry about the cheapest path off the grid. That's where their business model breaks down.�
1/1/2015
guest umm, this may have been discussed, but using PVWatts from NREL, a 8kW PV array @ 39.9 degrees north (Washington DC area) would make ~12,000+ kWh/yr. 20kWh/day/december, 40kWh/day/July. there is your baseload in mid-atlantic states. A powerwall(s) or 3, 7 - 21kWh worth would do fairly well. So SCTY with powerwall to me is a very good concept PVWatts Calculator�
1/1/2015
guest That's really nice. I was not aware of that tool. Too round this out, one can use gas for heating, so that electricity consumption is close to 20kWh/day in December. 21 kWh of Powerwall gives coverage for a day. I would still feel a little more comfortable with a 1 kW generator. Cost system
$24000 8kW PV, Inverter, Inatallation
$ 6500 21kWh Powerwall, Installation net ITC
$ 1500 1kW Generator, Installation
--------------
$32000 Total
$1982.52 Annual payment on 30 year loan @ 5% interest
12000 Annual kWh
16.52 c/kWh LCOE excluding fuel
25 c/kWh fuel $3/gal / 12 kWh/gal
This is pretty good, but I've introduced some financial sleight of hand. The batteries and generator are not expected to last 30 years. Depending on use the batteries may last 10 to 15 year, but when they are replaced they will cost much less. Moreover I would expect more batteries and PV to be added as prices fall to reduce the consumption of fuel. These increments may actually reduce the average cost per kWh over time, and replacement components may be thought of as a natural escalator. Also the 25 c/kWh is a pretty good motivator to persue energy efficiency projects over time.
I think 16.5 c/kWh plus fuel is pretty fair. It's not too far above residential rates in many places the US. Thus, we can see tenuous the situation is for the utilities. The batteries and generator is only 25% of the cost of the system. Without them, we are looking at a $1487/yr or 12.3 c/kWh. This is pretty good if you have a decent feed in tariff. But if is a utility ditches net metering or adds extra fixed costs then going of grid adds just $496/year plus $200 - $500 /year in fuel. So if the utility is trying to push $1000 of cost per year back onto this customer, they go off grid. A customer with an 8kW PV system is not going to tollerate a $85/month utility bill. A customer with PV + battery is not going to tollerate a $50/month utility bill. Add to this the sense of being penalized and disrespected by the utility, and it is not hard for frustration to trigger defection.
The barrier to defection will only decrease as utilities raise rates and solar and battery costs continue to decline. It is also worth noting that in this set up the utility has considerable oil price risk. Suppose at $3/gal one's fuel cost going off grid is say $600 per year. This cost is part of the barrier to defection. But if the fuel price drops to $2/gal, your barrier just got $200/yr smaller. This may just be enough to reach one's tipping point. So the longer view is that within ten year the barrier to defection vanishes, but along that path a single year or two with a severe down tick in oil or uptick in utility bills will turn the tide. A key matketing strategy for SolarCity may be to pounce on any particular utility rate increases and to educate customers about how to integrate batteries and generators into their PV systems. Investors may want to know how oil price declines may have an adverse impact on utilities while strengthening rooftop solar. Currently the market wants to devalue solar as oil fall, but if gasoline, diesel or natural gas comes down hard enough to liberate residential ratepayers from the grid, then onsite solar would be a huge beneficiary. It is not as if the utilities can pass along enough fuel saving to residential ratepayers to induce them to stay. The problem for utilities is too much fixed cost in the grid that they expect to recover from ratepayers. I think we are still a few years off from this. Powerwalls need to become widely available and come down 20% or so. This development would coincide with more downward pressure on oil prices, specifically coming from a growing EV fleet and batteries offsetting power generated from oil.
So three years out or thereabouts, we could see oil fall below $25/barrel ushering in massive grid defection. This is just one possible scenario. But know that in part of Australia, utilities have added fixed charges to residential plans in order to try to stem the tide of rooftop solar. These fixed charges are quite regressive against ratepayers who consume less power. For example, a resident that consumes only 7000 kWh/yr may wind up paying 0.72AUD/kWh or 0.52USD/kWh. This is well below the cost of home generators. So it is ironic that in an attempt to suppress rooftop solar these utilities have created a rate plan that leaves them highly exposed to low oil prices. This creates an alternative path to yet more solar: get a generator, go off grid, install PV to offset fuel consumption, install batteries to offset even more fuel, iterate until practically no fuel is required. Get out the popcorn, this should be fun to watch.�
1/1/2015
guest one small quibble here. Some may grid defect, cut the cord, most will probably 'load defect' stay connected. microgrids, some ad hoc, some planned will spring up. during superstorm sandy princeton had an 11megawatt microgrid for 3.5 days. FDA at whiteoak, maryland has a microgrid that goes online apparently a lot and keeps them up. Microgrids and Secure Power Supply discusses microgrids. SCTY and powerwalls and similar will be integral�
1/1/2015
guest Just to be clear, I am not suggest that people shoulw or will go off grid in large numbers. I do see it as a policy failure that is suboptimal for everyone. For me, the point of working out grid defection scenarios is that these represent a termnal point and logical outcome of business as usual. The current utility business model cannot survive past the grid defection scenario. So we need to know how far we are from the cliff and hope Thelma and Louise will not punch it. Utility investors especially need to understand how tenuous BAU is. In my view utility assets are already substantially over valued. They simply will not be able to recover all fixed costs plus a profit. Under a grid defection scenario, most utility assets from distribution and transmission to remote (so called �centralized�) generation become stranded assets. It is not the case, however, that thess assets have no value; they simply have value that is far less than current utility valuations would suggest. I do see this as the next great asset bubble. One way or another utilities will be reorganized. What would cause some utilities to pull a Thelma and Louise? Such a player may be counting on a government bailout. They will reach a point where no rate plan can recover fixed costs without incurring mass defections. So their next move is to impose fixed rates on all residents regardless of whether one is connected or not. This is being contemplated in Australia right now. This sort of solution is little more than allowing the utilities to impose a tax on all people, and this would be a highly regressive tax at that. Politically this is very ugly. The next step is government bailout wherein taxpayers absorb the losses and allow utilities to reorganize. This is essentially a transfer of wealth from taxpayers to utility bondholders and possibly utility shareholders too depending on how generous politicians care to be. So why would someone hold shares in a utility headed down this path? Dividend investors are on autopilot. The longer the defection scenario can be forestalled, the more cash is collected in dividends. Without fat dividends, the dividend investors would flee and few other kinds of investor would care to jump in. Dividend investors love BAU. They are the Louise giving the nod to Thelma just to keep driving. Other utilities will come to their senses and chart a new course. These are the ones that understand the importance of being flexible and agile and meeting customers on their own terms. So how do you induce a homeowner with solar and storage to stay on the grid? Simple, you trade power with them. In trading, both parties are able to realize market based returns on investments while driving down costs for everyone. This is the move to microgrids and micromarkets.�
1/1/2015
guest SCTY 2018 LEAPs are available now. Crazy bid-ask spreads right now but those will slowly come together. Just thought I would share.�
1/1/2015
guest End of quarter time. Has been stuck between $47 and $51 for entire quarter. Short interest at record highs even though Solar City has been beating expectations. There will be s big move in the coming weeks.
Bear Argument : Solar City has no way of knowing what its panels will be worth in 20 years, will never make money, and will ultimately go bankrupt. Elon is in denial or lying about SolarCity. Also, Net Metering and incentives could disappear, which would create more problems for Solar City.
Bull Argument : The Bears don't understand Solar City's business model. The Bears also don't understand that traditions utilities use very expensive outdated machinery, that fails a lot more frequently than Solar Systems, and costs a lot more to service or replace. Elon Musk knows what he is doing. Elon's financial situation guarantees Solar City will never run into cash problems. Net Metering won't disappear. Incentives are almost guaranteed to get renewed in some form and possibly increase. Incentives for Oil and gasoline are likely to be significantly reduced and possibly disappear altogether.
Here is a good article that provides a lot of useful details :
Aging US Power Grid Blacks Out More Than Any Other Developed Nation�
1/1/2015
guest These are HUGE factors! And they are generally deeply underestimated by the bears who have a very hard time believing that change they evidently see going on in front of them - the death of fossil fuel and the birth of renewability - and especially they lack the ability to envision what will come in the future, as this changes continues AND picks up the pace.�
1/1/2015
guest SolarCity posted two new presentations on it's website.
- Storage Product and Opportunity Overview
- MyPower Product and Accounting Overview
Events & Presentations - SolarCity
Couldn't tell the dates. I'm thinking they are new as I haven't seen them before.�
1/1/2015
guest Storage fully installed for $4k. That's lower than the $5k we've heard before.�
1/1/2015
guest I get the feeling some (or all?) of the Tesla battery integration on the utility side will go through SolarCity. Am I mistaken?
I vaguely remember JB Straubel saying in that Stanford storage presentation that Tesla will directly work with utilities.
So which way is it?�
1/1/2015
guest SolarCity does not have an exclusive with Tesla, and they are not particularly well positioned to do battery projects for utilities. However, they do want to aggregate Powerpacks in homes to provide services to utilities.
They do have a deal with Kaua'i Utility to provide a dispatchable solar facility with 17 MW PV plus 52 MWh storage. This facility will store all its solar power for dispatch after sundown. The project has a 20 year PPA @ 14.5 c/kWh. This is a first, and it is very promising. Such a facility could be build just about anywhere and compete directly with gas of oil peaking plants. Gas peakers have levelized costs starting at 18 c/kWh. So if SolarCity wants to play in this market, I think they can compete.
We'll have to wait and see what sort of ambition SolarCity has in the utility space.�
1/1/2015
guest Thanks jhm.
On a separate note, I found their PowerHub product (in slide 12) to very impressive. Battery+Panels combined into one. Less than 2-hour assembly time is amazing. If price is competitive, which I suspect is, they will sell in thousands in developing world.�
1/1/2015
guest What the heck is dragging down all solar stocks today?�
1/1/2015
guest Not sure, but oil went down in the same way. Solar tends to get drug down with oil. I don't get it.�
1/1/2015
guest TECHNOLOGY: Net metering vs. storage creates clash between some allies -- Wednesday, September 23, 2015 -- www.eenews.net
Very good article. Author seems to overplay the gentian between net metering and storage. It's important, nevertheless, to understand how fixed rate plans with net energy metering fail to create any economic incentive for adding storage to a solar system. I am coming around to the view that we need time varying pricing plans, such as setting retail rates at a multiple of spot market rates within optional retail rate plans so as to capture the greatest economic value of batteries, solar and smart devices. Such a plan would in fact compensate a battery owner for providing energy storage to the whole grid. This in turn reduces the cost of stabilizing the grid and enables it to harness increasingly more renewable energy.�
1/1/2015
guest '
Wasn't just yesterday... off nearly 11% in last 3-4 days...�
1/1/2015
guest Yesterday evening Stifel initiated coverage of SCTY with a Buy rating and a price target of $64.
For whatever reason market has decided to completely ignore any analyst research with respect to SCTY. The average price-target now stands at $78, with a range of $50 to $105. Meaning SCTY is trading lower than the most pessimistic analyst projection.
This is unfortunate. Especially given the uniqueness of the business model/financials, one would think that analyst reports are even more useful.
SCTY management has been doing its best to explain out how the business works and how the cash flow works. But people keep reverting back to the traditional financial models, which simply don't apply to SCTY.
I don't know when this market will properly grasp SCTY strength and it's potential. Worst case, we may have to wait many years where growth slows to a point, where recurring-revenues aggregate up to defeat and gain over sg&a, and ultimately the company starts showing profitability in a traditional sense. How far away that is, is anybody's guess. My sense is that it is at least several years away.�
1/1/2015
guest Thanks for the article.�
1/1/2015
guest Low oil prices => low demand relative to supply => cheap energy => harder for solar to compete.�
1/1/2015
guest Although as we know, not much oil becomes electricity. But it seems many investment decision makers bunch stocks together into branches, like Energy, and coupled with the general downturn as well as German (and other) car makers' troubles these last few days, maybe they simply have to sell off something. Solars have been looked at sideways, so they are among the first to go.
Just my uneducated guesses ...�
1/1/2015
guest Where do residential ratepayers go to buy all this cheap electricity?�
1/1/2015
guest SolarCity Introduces New Solar Service for Affordable Housing Communities - NASDAQ.com
SolarCity announces a virtual net metering program that brings lower cost solar to low income communities. This could be a win all the way around. Utilities have traditionally been tasked with supporting energy assistance programs for low income ratepayers, but with this twist the utility is only on the hook for providing a distribution network. It looks like their is money from the State of California to support this too.
I'd like to see the virtual net metering model grow as an alternative to net energy metering. The virtual for has the ability to broaden the distributed solar market beyond self-consumption among those who own their own roofs. So their are deeper societal benefits. Additionally virtual net metering avoids the problem of simply using the grid as a battery. It transfers power, rather than doing time shifting for free. So this should be a little more welcome by utilities. However, I'd like to see the concept grow beyond special government sponsored programs. Essentially, if my neighbor has surplus power to sell and I am willing to pay her for it, then we should be allowed to do so, paying also a reasonable distribution fee to our shared utility. So a system would also allow me to donate my surplus power to a charity of my choice. Or if I have a Powerwall and my neighbor has surplus solar, we can trade solar for storage for day and night coverage. All sorts of wonderful things become possible with virtual net metering.�
1/1/2015
guest As a Sixers fan I'm a bit surprised there's not more discussion on here about the options buying opportunities over the last few days on this dip. Sam Hinkie preached that if nothing occurs to change your mind on a player's value, a downswing in perceived value should be seen as nothing more than a buying opportunity for the unemotional general manger(investor).
Options prices and bid/ask spreads have been ridiculous for a month(even during the last deeper share price dip to $35), now we get our wish and no one seems excited. You can buy $70 Jan17 calls for $2.35 and $80 Jan17 calls for $1.60! Maybe I'm nuts and should just be buying shares on this dip, but those are amazing deals right?
Perhaps people just don't like to talk about good opportunities until they've executed?
Anyone have thoughts on where the Jan18 $90+ calls will move over the next little while? I want to move into those as a hedge against my Jan17 timing being off, I do obviously believe a squeeze/skyrocket is inevitable. If one can get $90 Jan18 calls at $3 today, is there potential to never see a price like that again after the next round of earnings and general consensus coming back to reality?�
1/1/2015
guest Solarcity will be sitting on over $9billion worth of contracts, over $4.4billion in gross retained value come October 1st and now currently is at $3.85billion market cap...
The market is giving Solarcity zero growth at the moment which is astonishing since they've grow nearly 100% compounded over the past 5 years and are expected to grow at least at the bare minimum 40% compounded in 2016...
To me, there will be a massive squeeze at some point, it's just a matter of when...
The key market drive is completely about net metering and added charge rate changes. Stock went down lock stock and barrel when sandiego util said will hit cap sooner then previously thought which will create another Nevada type situation. California in general is the net metering linch pin. It would be wise to follow these developments if you are looking at entry points and/or exit points. Short or long. Lot of money to be made on big sides of the coin. Timing is king here.�
1/1/2015
guest SolarCity seems to ramping up headcount like crazy. Not a big fan of this from an efficiencies standpoint, but certainly a good sign that they intend to dominate at all costs.
How can SCTY securing $1B in funding from GS to finance solar installs be a considered a bad thing? People just don't seem to understand renewable energy economics at a very fundamental level.�
1/1/2015
guest I think it is time for SolarCity to step forward with an off-grid product for states where utilities add penalties for rooftop solar. These utilities need to know that they are playing with fire. These California utilities think they can get away with adding a $3 per PV kW per month, or $720/kW over a 20 year life while cutting feed in tariffs in half. This added cost pretty much pays for a couple of Powerwalls plus a small generator. SolarCity can totally take customers off grid, if these utilities get their way.�
1/1/2015
guest When I think about my energy needs and the way batteries seems to be going I have to think I'll be looking for battery-backup for solar within 5 years as an almost certainty. Solar in the spring when Pennsylvania rebates come back online is a lock, then wait and see for a couple years to install battery backup. I bet I could be net-zero without too much trouble.�
1/1/2015
guest To me the price action is not directly related to fundamentals. Maybe to some degree it is. But I don't think it entirely is. I see many things happening -
1) Utility battles
2) Oil/energy weakness, people wrongly lumping scty with other energy companies
3) Rising interest rate environment
4) Broad market weakness/volatility
Utility battles are getting least bit of coverage from mainstream media though. Other than in this thread and local news links posted here, I literally did not see anything from any major or even minor newswire. No analyst notes on this topic either. So I really get the feeling that this is not what is moving the stock. Unless people in the know are pushing and pulling the stock without making noises. Even that I find unlikely given the volumes.
If you are in for the long run, you should do ok eventually. But as jhm pointed out several pages earlier, maybe not a good idea playing with options.�
1/1/2015
guest State solar users would lose savings if proposal is OKd; SolarCity describes future - LA Times
Front page of the LA Times Business section yesterday. Pretty big story here in California. Note the quote from Rive about catastrophic results of approval by CPUC.
I think this is exactly where today's weakness came from. I actually expected a much worse day today. My guess is that people following CPUC more closely than me were already moving the stock down last week.
Solarcity did outperform both RUN and TAN.�
1/1/2015
guest SolarCity: What a difference a year makes | Photo Galleries | Buffalonews.com
�
1/1/2015
guest Thanks. I somehow missed that one. LA Times is certainly a big news vendor.
To me it appears the short term dynamic is different from mid/long term dynamic.
The short-term seems much more correlated to broad-market/energy prices.
In terms of mid/long term, SolarCity is ultimately capped by utility rates. If SolarCity cannot provide savings the business will slowdown pretty dramatically.
On the other hand SolarCity will be facing quite a number of headwinds over next few years.
1) Tapering of ITC
2) Rising interest rates
Which can NOT be transmitted to consumers, unlike banks
3) Dilution of net-metering
If batteries are added, it's an added cost that SolarCity needs to bear
The only weapon that SolarCity has is to lower it's costs adequately to accommodate all of these. So it all depends on what pace these things will come into play. If all three come into play together, SolarCity will find it hard to do any more installs (let alone 'growth' in installs).
Thus the market doesn't want to give credit beyond 2017 timeframe. We might argue that even 2016/2017 is not getting priced in. But that depends on how you frame the value (whether you include the renewal retained value and how you factor in the convertible debt).
As SolarCity keeps proving out that it can overcome the headwinds and still keep accumulating the retained value, the stock should go up in line with it. Or else I speculate Musk or others will simply take the firm private, or I wish, just merge with Tesla. But gone are the days where future potential retained value gains get priced in today.�
1/1/2015
guest I'm not so worried about ITC step down. SolarCity has excellent cost control and has been preparing for this. The step down will impact both utility and distributed solar. In fact, SolarCity's leasing business uses the same legal provision as utilities going to 10%, while the provision for homeowners who buy their systems will go to 0% ITC. So unless Congress rectified this unfair situation, SolarCity stands to capture a lot of consolidation to happen among rooftop installers, as installers without solar leasing will be driven out of the market. I am hopeful we will see some legislative action, however. It is very important to support home and grid batteries to drive out obsolete grid balancing costs for everyone. I would love to see ITC extended to free standing battery systems and a gradual tapering. If ITC were to step down just 2% each year, this would be slow enough for solar to keep growing by cutting costs, but would eliminate the incentive in 15 years.
I do not see interest rates as a big problem. Utilities will simply pass higher interest rates on to ratepayers. The financing that SolarCity needs for its existing book is already locked in. I see no refinancing risk on the existing book. For new installations, the higher interest expense can be passed on to new customers. This is doable because utilities will be raising their own rates. So it nets out on a competitive basis. Remember that utilities generally supply the market with 10% financing while SolarCity is at about 5% financing. This has been one of the basic advantages SolarCity has over the utilities.
Another topic I've been thinking about is how SolarCity's rate of growth is related to operating losses. Last quarter the operating loss was about $132.4M on 172MW installed. Excluding the G&A portion of the cost per Watt, gets this operating cost per Watt to $2.66. So the operation loss was the cost of about 49.8MW. If SolarCity had only installed 122MW, it would have broken even. Thus, if SolarCity had held back sales about 29% it would have had an operating profit. Of course, those extra 50 MW of growth are very valuable to shareholders, adding about $55M in incremental net retained value. So I would not want to see SolarCity slow down one bit, but it is comforting to know that if necessary SolarCity could slow down growth to around 60% pa and post profits. So the irony of ITC slowing growth in 2017 could be that they post profits instead, which very well could attract more investors and a higher valuation than we see under hypergrowth.�
1/1/2015
guest jhm, You make a number of good points.
Trying to put it all together, here is the million dollar question.
When do you think SCTY will reach, say, $100?
My view is that net-retained-value will have to reach $10Bil for Market Cap to "safely" reach $10Bil at which point the stock-price will be about $100. My guess is it will happen in 2017ish.
What is your take on the stock price and it's trajectory?�
1/1/2015
guest ITC is not a big driver of current stock fluctuations or future downward pressure. ITC is already baked in as solarcity already has $9billion in contracts locked in at current rates. With over 99% of all payments received since 2006, they have a really good track record of customer payment fidelity moving forward which also bodes well for better future interest rates then any other company in the world. Former CFO Bob Kelly stated early last year that Solarcity could see lower rates down the line, even if the fed raises rates considerably. To add, Solarcity is reducing cost across the board, even as the cost of modules has plateaued. This is not talked about much, but is probably a significant factor in them continuing to be competitive despite a drop in the ITC. Also, policies are currently being refined to increase permitting rates, as well as standardizations happening across the country that hold utilities accountable for interconnection times. There are a lot of different cost reducing measures (as well as the above tailwinds) happening concurrently that will enable Solarcity to remain competitive despite a drop in ITC.
Now, as I've stated before, the net metering/added charges by utilities are the single greatest threat to compounded growth of solarcity by far. It doesn't matter if the ITC gets extended if a customer has to pay an extra $50 a month just to have solar because of added charges and unfair credit for putting their energy on the grid(net metering). Heck, the ITC could go to 40% and it wouldn't help the market grow if these utility rate changes happen. It is extremely important for Solarcity to grow rapidly for good rates to be in place. After really looking at how the stock has performed over the past 2 years, you can map out the sustained decline based on the rate changes and challenges from Arizona to Nevada to Massachusetts, California, and every contested net metering rate in between. Yes, oil dropping big time had an impact, but it was only an accelerant, not the root cause. ITC has been priced in for a while, so clearing all these tertiary issues, net metering and added costs have been the culprit of current stock position in my opinion. It's nuanced but does really feed into the downward pressure and short interest. (high short interest is also a supporting deterrent to long term investors in the stock).
Now, an interesting development is happening on the net metering front that should give those that have discerning eyes some interest. If you look at Arizona right now, all 5 of its PUC commissioners are under investigation and are facing possible removable and/or possibly be forced to recuse themselves from any solar rate cases. Bottom line, rooftop solar is not taking these changes to net metering lying down. They pit bulls ready to fight the establishment. So far, they are demonstrating great resolve and getting results (i.e. Arizona&Nevada) which sends a warning salvo across the nation to all other utilities that are thinking of adding fees/changing net metering. As a result, negative net metering changes may not be as a forgone conclusion as some investors may think and actually yield positive tailwinds as more cases rule favorably toward the rooftop industry. Again, the key is to watch for these policy developments as possible consistent short term indicators to enter/exit scty. The next date to watch is October 5th. California PUC hearing on net metering starts up.
Lastly, net metering is NOT a big deal in the long run to utility profits. Net metering is actually a really great initial business model. As more and more people go solar, more and more ground work is established for distributed energy storage to come in over time. Each home that is currently solar only, will add energy storage. Solar+storage will yield greater costs saving then solar only net metering will, therefore, the vast majority will integrate energy storage over the next 10 years. As more and more net metering homes become solar+storage demand response providers(hence a different business model with the utilities) the utilities will dramatically reduce net metering customers, as such, net metering will fade into minimal existence naturally while utilities profits improve and capital costs decline precipitously. So, the cost projects of net metering on income are grossly overestimated and are/will be continually shot down. This will begin to translate more openly to the public investor as the solarcity pilot project publishes numbers/values on aggregated solar+storage, as well as solarcity ramping up solar+storage sales in 2016 and beyond. Therefore to me, utilities are working off an antiquated 2012 playbook that will backfire massively as new data continues to come in favor of rooftop solar through the end of this year and into 2016. Commissions will have no choice but to rule in favor of net metering because of its vital importance to the foundation of aggregation(solar+storage) infrastructure, or face the legal onslaught/entrenchment that has already yielded results for the rooftop solar industry.�
1/1/2015
guest jhm and foghat, I understand where you guys are coming from. I too am as bullish as you guys are. But here is the thing, stock market is like the good old newspaper beauty contest. Here is a reference:
It's NOT about who you think has prettiest faces. It's about who you think, market will deem as prettiest faces.
My point is not that I am worried about those issues/risks. My point is that the market does NOT want to price-in future installs and growth, before they actually happen, given the risks (again, in market's perception).
We believe that SolarCity will overcome these risks. But I don't see price recovering much or going much beyond a threshold, $60, until there is proof that SolarCity has actually overcome the risks.
The proof is in accumulated net-retained-value (minus renewal, if you ask me) and/or wide belief that SolarCity is past the issues. In my view, that wide belief is hard to come by. Or at least relatively harder than actual growth in net-retained-value.
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Here is a better reference:
When you have a pretty big investment in a stock, and that stock is doing poorly, it's natural to wonder when this poor performance will end. I am just trying to get to that.�
1/1/2015
guest SBenson: I agree, for now SCTY must show a very solid growth in undeniable underlying fundamentals to earn mr. Market's higher valuation. The thing to me is that as this happens over the coming years something else will happen in parallel (something that has already occurred with TSLA): the market will realize not only the already established value but will also assign a much higher P/E to SCTY reflecting a understanding of the enormous untapped growth potential and (I'm assuming and hoping) proven track record of aggressive growth. As all this occurs we must also keep in mind that very large pools of capital will look to divest away out of fossil fuel investments... Hmm, I wonder where all that money will flow..?�
1/1/2015
guest Good point. However, you don't make money following the market. You make money predicting it and placing your bets before the herd picks up on it. To know where it will be is the key. My belief is you've got to have a point of view of what the energy business will be doing in5-10 years. That takes time and research, but pays off. I did that with tesla and solarcity both in 2012. Solarcity in my opinion is a bigger company then Tesla over the course of the next 10-20 years, therefore I weigh my portfolio accordingly. Again, my strategy is accumulation. I buy when I see a sale.
update:
Again, the pain ends with judgement in PUC rate cases, specifically in California is the biggest one. Nothing else affects the business more. The fundamentals are sound. This is not a solarcity organizational problem. This is a political/policy problem. Retained value should have renewal in it. We've war gamed this a length over the course of this thread, the support for renewal is extensive. Solarcity will retain most if not close to all its customers on contract after 20 years as a result. It also will have a much bigger market then the US, so growth beyond US borders will put Solarcity in a much greater cash flow position then most US utilities over the course of the next 10-15 years, which leads increased economies of scale and continued competitiveness across the board on all product offerings. Again, panel prices could go to near zero and still solarcity may end up offering a better value proposition then fellow competitors 20 years from now. Also, as we've already seen in evidence, Solarcity has an innovation culture. Innovative cultures develop best in class services and products which is a competitive advantage. Think about the development of solar+storage and the nearly decade it will take to make it a default product(and solarcity to be the first to do it). 10 years from now, salorcity's first customers will be hitting the 20 year market and up for renewal. If solarcity is the leading solar+storage provider at that time(and the customer is used to solarcity ecosystem) would the vast majority extend the contract(at 90% of $/kwh 20 years ago) or purchase a battery (or complete new solar+storage system)? Look at where solarcity is today in their development of aggregated solar+storage and look at the competition and where they are at today. Look at the scale of solarcity and compare that to the competition today. It is clear the road map to success in the rooftop solar industry is pretty much exactly where is Solarcity has positioned itself. This foundation can't be disrupted overnight nor will it be disrupted in 20 years from now based solely on economies of scale and severe lack of market saturation.�
1/1/2015
guest
Over the next two quarters the retained value will grow ... a lot... on top of that you will have guidance set for next year where most analyst are modeling like a 20 percent growth rate it will of course be much higher than that. I have been wrong with the timing on Solar City before but with the huge increase in Net retained value on the horizon and the 2016 estimates coming from management at the q4 earning call (maybe sooner but I would not bet on it....again) I think the answer to your question of when will the poor performance end is soon.
As most of us saw with Tesla with such a high short interest it will be a fun ride when it happens.
Edit: the renewals that so many people get hung up are generally only one quarter of net retained value, so in q3 the Net retained value - renewals is the same as the q2 net retained value with renewals�
1/1/2015
guest Dividend Growth
That's a good question. My personal view is that SolarCity should trade at about twice NRV, but the market does not agree with me. I should hope we would not need to wait until NRV gets to $10B before the market cap hits $10B. At that point you have SolarCity being valued as just a yeildco with no production or manufacturing capability, but that would also be a yeildco with no yeild.
The market does seem willing to value SolarCity at around 1.5 times NRV. So growing at about 80% pa, we should hit $6.7B NRV and $100/sh by H2 2016.
There is one reliable way for SolarCity to add attraction in a beauty contest. Why should investors care about NRV or its quarterly realized cashflow, Available Cash. These are novel metrics that structure the business model SolarCity is guided by, but I am afraid they are just abstractions to the casual investor who takes not the time to make sense of them. So the question is how do we make investors take these metrics seriously. One answer is to spin off a yieldco, but this splits up the company into two separate pieces that may have less real financial strength as one whole company. The idea is to attract dividend investors to the yieldco which holds the book of solar contracts and to use this entity to supply capital to the parent company. The parent is also able to recognize revenue immediately when assets are sold to the yieldco. So the income statement of the parent is cleaned up. But what happens if the parent company loses control of the yieldco? What happens when the parent company needs to raise capital without the benefit of holding those solar contracts? The whole arrangement can get strained. In theory, it makes no sense that the two separate companies could be worth more than one combined company, but they both could be valued much less. So I am deeply skeptical of the yieldco solution.
So here is what I would like to see. Let SolarCity issue a dividend policy to distribute 50% of Available Cash as dividends to common shares. Remember that NRV is the present value of Available Cash on existing business discounted at 6% pa. So a 50% dispersement gives shareholders near term access to half the longterm value being created while the other half is reinvested in growing future available cash and the dividends derived from it.
Where would this dividend policy put us now? Last quarter, SolarCity reported $114M available for the trailing 12 months. A dispersment of $57M is dividend of $0.59 per share. So with a share price around $60 implies a yield of 1%. This is very good considering that in 12 months the dividend could easily rise to $1.10. So if the market like this combination of yield and growth, then the stock price rises to $110 by next August. But at the current share price of $41, the yield is 1.44%. So even if this is the yield that brings dividend growth investors in, then next August we're looking a share price over $75. Either way, the stock price becomes tied growth in the dividend.
This linkage between dividend and share price reinforces the fundamentals that guides management. Specially dividend investors will take a keen interest in available cash and NRV because these are the source of their dividends under this policy. Moreover dividend growth investors will take a keen interest in the DevCo because its success in creating value is what drives growth in the dividend stream. It becomes advantageous to leverage this growth because that maximizes the longterm value of the dividend stream. So I think this sort of dividend policy could attract the right sort of investor to this stock and motivate them to take the time to learn the business model. I do believe that the dividend growth investor is the best sort of investor for what SolarCity is trying to create. That is, they are growing like crazy to build up a massive multidecade income stream. That is exactly what dividend growth investors are looking for. So why not start now? Build up the track record of growing dividends year after year. The longer that track record is, the more dividend investors will be willing to pay for these shares.
Sadly now the stock is hardly valued for its PowerCo, a yeildco that pays no dividend, and the DevCo is given almost no value at all. This is all because we have no idea if or when the company will finally start paying dividends. But SolarCity has the potential to keep doubling every couple of years for several decades. If the company waits until growth rates slow down before initiating a dividend policy, shareholders could be left waiting for decades for dividends. So why wait? Start now, and build up awesome dividend growth history.�
1/1/2015
guest Good discussion this evening, guys. I'd like to hear more thoughts about how to bring utilities along to rate plans that reasonably compensate ratepayers for installing batteries. I get how there is value worth paying for, but the utilities seem set on not encouraging any loss of marketshare. So I worry about utilities fighting batteries just as much as they fight panels.
Here's a nice little unrelated article: SolarCity CEO: One million solar customers to come through education - Fortune�
1/1/2015
guest Thanks all for your thoughts. Appreciate it.
Just to clarify, I am not anywhere close to thinking of selling at these prices. For financial planning purposes just trying to see how long the wait might be. Because I may need to raise some cash a few years down the line.
jhm, Very much like your idea of dividend payments. But I doubt they will do it anytime soon. They are constantly trying to raise money for installs and projects. They think they can get a good rate of return on these investments. So they will not think of giving cash out.
There is an alternative, potentially more effective way, to shore up the stock price. Back in 2011/2012, Berkshire announced that if at any time the stock price drops below 1.2 times the book-value-per-share, they will go in and buyback shares. SolarCity can make a similar announcement, saying anytime the price drops, say 1.2 times net-retained-value, we will buy back shares.
Borrowing Hank Paulson's quote - 'If you have a bazooka in your pocket and people know it, you probably won't have to use it'.
Just setting a floor out in public can automatically make the stock trade higher than that. Then SolarCity doesn't even need to spend the money to do the buy back. Worst case, if they do buy back, its money well spent anyway.
Then we also don�t need to worry about risks like a hostile-takeover or going-private and such. As a long term investor I want the stock to remain public, basically forever.
But in any case, as much fun as it is to fantasize over this stuff, I don't think we have much influence over what management wants to do. If they think that stock price is important, I'm sure they will think of ways to manage it. But if they don't care of the short term price, it is what it is. So ultimately it's all up to them. My hunch is, Musk doesn't care much about short term prices, but Lyndon does. So I hope he will convince his big brother to do something about this lol�
1/1/2015
guest the immediate bazooka might be 2016 guidance. That could come in October pre conference call or during the conference call. They are at nearly 1.6GW/year booking rate six months before 2016, so I'm willing to bet they go 1.6GW -1.8GW as guidance. This would significantly higher then any whisper estimates out there now. If they hit the high end of that, nominal contracts would balloon up to $22billion + with net retained value at $8billion+. Conservatively, at 2x net retained value without any renewal, market cap would approximately $11bln. Stock price on current share count would be around $113 by end of 2016.�
1/1/2015
guest Yes, repurchasing shares at some threshold linked to NRV could work to. You still have the challenge of competing uses for cash. One thing to reconcile in our minds is that SolarCity is a hypergrowth company where it actually creates more value to grow faster on negative cash flow and net operating losses than it does to slow down to a level that supports growth from earnings. So long as SolarCity has a hypergrowth opportunity it will need to take on more capital. Bond investors often look to equity to see how much skin shareholders have in the game. So it is important to maintain healthy share prices and solid market cap as this is the buffer that gives bondholders some protection against default. If equity gets too thin then bond investors may require stock secondary equity offerings to attract competitive bond yields. Offering shares with dividends, whether preferred shares or common, is another way to give bond investor a margin of safety. When equity is receiving and expecting dividends, then bondholders know that their bond payments have priority over dividends. Thus, dividends are a margin of safety for bondholders.
So it is important to understand that dividends create value for bondholders which is critical for preserving strong credit and low borrowing costs. Stock buy back programs can shore up the stock price for shareholders, but it does not really add anything to total market cap. So I'm not sure it would give bond investors much confidence. Additionally not that all sorts of utilities are traditionally big bond issuers and big dividend payers. Even TAN the solar ETF has a dividend yield of 2.5%. All these comanies have to raise capital from the bond market and other lenders, which does not preclude them from paying a dividend. Rather paying a dividend on equity is integral to obtaining cheap financing from debt markets. Given that the solar industry as a whole pays out a 2.5% yield in dividends, SolarCity may do well if the market would be satisfied with a 1% yield. I do think this is plausible given its tremendous growth prospects and track record.�
1/1/2015
guest Special Solarcity announcement with Lyndon rive and Elon musk this Friday, October 2.
Inside Energy | Presented by SolarCity | Home�
1/1/2015
guest PV Magazine Mobil: SolarCity maintains grip on US residential solar, says GTM report
SolarCity is continues to hold 34% of the residential market. So the competition is stepping up its game. GTM expects 2GW of US residential solar this year. This is really tremendous for the whole industry.
Curiously Sungevity went from number 3 to number 5. This article points out that Sungevity was outsourcing financing to focus on sales. Perhaps this is not a winning strategies. Financing has been the key to unlock the rooftop market despite what the critics would have us believe.
So consider that rooftop installers as an industry is now applying three times the competitive pressure on utilities as SolarCity alone. No wonder utilities are pushing back so desperately.�
1/1/2015
guest Let's see what happens in the 2nd half of 2015. Remember, there is a big bottleneck for needed installers for these levels of bookings. Solarcity is not suffering this installer bottleneck because of its vertical integration. Expect to see the market share rise a significant amount since they have enough crews to continue growing at 100% compounded and to 920MW-1GW level. Look at the 3Q guidance (and expectant 4Q guidance) from vivint and others and you'll see they are going to lose ground precipitously. Also have to remember, these numbers don't include the commercial installs, only residential. Solarcity is again set to be the #1 commercial installer by widening margin as well.
Add on:
Who wants to make a friendly bet the solarcity "special announcement" is about Solarcity expansion into Brazil?
Brazil Could Be the Next Global Solar Superpower. But Theres Still Work to Do | Greentech Media�
1/1/2015
guest My friendly bet is that they will announce key metrics from Q3 results.�
1/1/2015
guest Interesting. If SolarCity really does hit 920 to 1000 MW this year, then either GTM estimate of 2GW is too small or SolarCity gains substantial market share, 45% or more. So that will be fun to watch.
Personally I'm not concerned about SolarCity gaining market share. I care about their growth, not the ability of the rest of the industry to keep up.
But growing as fast as SolarCity is a very tall order for any business. I really don't see how smaller contractors without financing to offer can keep up. It takes a lot of investor backing just to double your crew every year. Heading into the ITC step down a lot of installers will find it relatively easy to drum up business of people eager to install before 2017. Basically, they are riding on the marketing work of SolarCity and other big installers to educate consumer. Then they step in and offer a system at lower cost. And you see these guys badmouthing SolarCity every chance they get. But they will find it hard to deliver, hard to make a profit they can really grow on, and very hard to survive past the ITC step down. I've heard that in Australia there have been a lot of fly by night operators that have left unwary consumers with substandard systems. I'm sure these were the blokes that electracity was so enamored with. But personally, I would not want to do business with an installer I was not sure would survive past the ITC step down. Warranties are only as good as the companies that stand behind them. So I worry about 2016 being flooded with alot of dubious players in the installation space. Regardless, I trust that SolarCity knows what they are doing. They know how to cut cost and maintain discipline around profitability. So I am willing to bet they will survive and even benefit from consolidation in the industry.
I would love to see SolarCity expand internationally. I think there are many choice markets in all the Americas. I also think this can diversify some of the policy risk we encounter in the US.�
1/1/2015
guest With Elon, too? Sounds like it could be something pretty big.�
1/1/2015
guest My guess: Solarcity investment in Gigafactory 1 or 2.
--
Update: also, could be the contract to supply the gigafactory(ies) with PV systems.�
1/1/2015
guest It could also be some very large deal either with a utility, to supply a very large combined solar+storage system or it could be an announcement of a big deal to bypass the utilities completely somewhere in the world and create a solar farm+storage farm+microgrid.�
1/1/2015
guest Whisper it: Quiet wind power with a revolutionary design : Renew Economy
I'd love to see SolarCity offer small scale wind like this where it makes sense. Combining solar, wind, and batteries is a pretty diverse supply of 24�365 power.�
1/1/2015
guest too much liability and maintenance. if it falls down, it has to be inside your property. the yneed regular maintenance�
1/1/2015
guest Lyndon Rive on CNBC: Going to announce "a world record in the US and NY" tomorrow.
I guess the announcement is not Brazil expansion, but a 5GW expansion of the silevo factory... that's my new guess for the announcement tomorrow.�
1/1/2015
guest Press release: SolarCity Unveils World's Most Efficient Rooftop Solar Panel, To Be Made in America
More from GreenTechMedia: Is SolarCity�s New PV Module the �World�s Most Efficient Rooftop Solar Panel?�
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Was SCTY already in the utility-solar business? If not, how big is this opportunity and how could that impact their current operations?�
1/1/2015
guest Silevo acquisition was a good move. Very pleased to see SCTY grow in different dimensions.�
1/1/2015
guest Here are the money paragraphs:
I just bought more shares.
Also, I figure we're looking at 370 W panels. At full capacity, Riverbend will produce 9k to 10k panels per year. So this puts annual output at 1.2 to 1.35 GW. This is well above the nominal 1GW/year nameplate capacity.�
1/1/2015
guest Excellent! Keep on advancing SolarCity!
I thought the same thing. I was waiting for the difference between the companies and then when I read that, the little light bulb above my head turned on.�
1/1/2015
guest This is good news. But it just sounds like old news with new proof (third party testing).
Did anything change from what they said during Silevo acquisition?
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From Investor's Business Daily: SolarCity Swipes SunPower's Most-Powerful-Panel Title SCTY SPWR - Investors.com
So in 2017 when the rest of the industry will be crumbling, SolarCity is set to have a smooth sail. There will be a lot of consolidation. I expect SolarCity to buy up a lot of local players. 2017 will really be the year of growth for SolarCity. This is exact opposite of what market fears.
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Some more bullish stuff
�
1/1/2015
guest A heads-up that Messrs Rive & Musk will be beginning their keynote address at the Inside Energy 2015 conference six minutes from when I type this. Those with Twitter accounts might be able to glean - and share here - something from the #InsideEnergy link.�
1/1/2015
guest They haven't made any production panels yet.
20% efficiency is expected to be common in 2017.
They wouldn't be talking about "a world record" at this point if they didn't have nervous investors.�
1/1/2015
guest Welcome back. That said don't be such a Debbie Downer. They will go in to production this year. Ramping takes time, but that's no different than potential competitors. It's best to be first, right? It's best to produce a low volume of the most efficient panels than none of them, right?�
1/1/2015
guest And this would be a good thing. They'll need 22% efficiency panels to be cheap (under 55c/W) and widely available. In 2017, they will be installing 2 to 3 times as much as the Riverbend plant can produce. Who's going to fill the gap.
So SolarCity really needs the whole supply chain to keep up with it. So part of the value of announcing this now is to signal those expectations to all potential suppliers. This is what it's going to take to earn SolarCity's business in 2017.�
1/1/2015
guest Love you electracity.
This is same as Tesla making a big splash with non (or semi) production cars. We show the same love to SolarCity here.
Sources?
Thanks for the speculation. But no thanks.
jhm bought a bunch of shares today. I bought at 41.5 recently and have a limit order in at 35. Sell it hard. I will be happy to take the other side.�
1/1/2015
guest "SolarCity will begin producing the first modules in small quantities this month"�
1/1/2015
guest This is from
SolarCity's First Panels Convert More Sun Than Industry's Best - Bloomberg Business�
1/1/2015
guest Electricity's criticism is the same as Porsche CEO saying "we could build a better car than Tesla if we wanted to. And maybe we will in 5 years".
In my native tongue I'd say "too much talking, too little hockey".�
1/1/2015
guest From twitter #InsideEnergy
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Another
�
1/1/2015
guest Elon just said the gigafactory now has a certificate of occupancy. May the energy storage ramp begin!�
1/1/2015
guest Another
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As happy with SolarCity as always
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Just a side topic. I wonder what shorts think when Musk talks about Mars and stuff? Do they think his Tesla, SolarCity ideas are equally esoteric? Just a weird guy talking weird stuff. Short him!
@electracity, any ideas?
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Another item to the side topic
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As I wonder many things in life. I miss those debates between folks who were SPWR fans and SCTY fans. I wonder if SPWR fans will gradually convert into SCTY club with all these developments.
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Lyndon now saying the same thing:
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From Lyndon
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This doesn't seem to quite sit well with the above two quotes. But whatever, if Lyndon is saying it, that gotta be true. Maybe just different contexts. Or maybe there is an inter-link.
�
1/1/2015
guest lyndon said he's more optimistic then ever the ITC will be EXTENDED.
Microgrid are an international statement. Secondly, he is also alluding to aggregation of Solarcity systems in essentially microgrids where they do not require a central system as back up.
He said utilities are fine to enter the market so long as they start up a non regulated business that's not using the regulated rate base to pay for installations.�
1/1/2015
guest By "asymptoting" I believe that Musk means that efficiency was converging to a long run stable limit. It was necessary to penetrate that limit to keep the industry from plateauing. So this move to Silevo and high efficiency panels was all about pushing suppliers to step up on efficiency technology and not just iterate on diving down manufacturing costs. And yes, China needs all the panels they can make, so there is also a capacity need.�
1/1/2015
guest 
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I think that's it folks. Well, that was fun copy-pasting all that good stuff. I should find a job like that.�
1/1/2015
guest Great job! Thanks for keeping us posted. This is all very exciting.�
1/1/2015
guest remember just as the tesla electric car is complete advancement break away from plateauing ice, so is gallium nitride for plateauing silicon based pv production. It is my belief when Lyndon rive is quoted in Bloomberg as saying Solarcity "is only at the beginning" of its efficiency advancement, that gallium nitride based production is the next big leap beyond anything traditional manufacturers are working on. Added to which, tesla also will be developing gallium nitride to its inverters and other parts of the vehicle systems. Not to mention the implications to spacex and spacex satellites. The synergies alone are a massive competitive advantage for many years to come for Solarcity.
this is only the beginning�
1/1/2015
guest The price action today is incredible, and SolarCity will ring the closing bell.
My impression is that long-term investors are digesting this news and buying in. SolarCity is taking a serious technology lead. This is rational longterm investing, not momentum trading or shorts in a panic, not yet at least.�
1/1/2015
guest I'm not sure what you are looking at but its up just 5% and tracking the general markets in a rally from -300 pts at open to +50... Not very impressive.�
1/1/2015
guest SolarCity is up 4%, but SunPower is also up 3.3% too. I own both. My impression is that the Silevo efficiency announcement is also good for SunPower. It validates their effort to bring higher efficiency panels to market. SolarCity will not be selling their panels wholesale. So installers that want to compete with SolarCity where high efficiency matters will have to buy from SunPower. Friendly competition is a really good thing for the whole industry.�
1/1/2015
guest china consumption per year of PV in terawatt hours, 2010 to 2014 ( 5 years)
doubling or almost doubling every year for 5 years (15.7% of planetary production)
0.9 2.6 6.4 15.5 29.1
�
1/1/2015
guest Done buying insane 2017/2018 calls for leverage, feel like I got some pretty good bargains over the last two weeks. Bought shares just now and am gonna sit for the long term, hopefully turning these options profits into shares in 15 months. Wish I had given more thought to what today's announcement would be, could have just bought shares at the bell.
One that note, I feel like myself or anyone from this board could have articulated SCTY value much better than Lyndon last night on CNBC. Let the engineer geniuses do their work and send some PR guy next time.
The value to everyday consumers of panels made in the US by a reliable company that isn't going to disappear cannot be overestimated. My hope is the SolarCity lease and sale products start selling themselves and we can knock the soft costs down, do not like all this advertising.
If you want to see what SCTY will be doing at the stepdown of ITC, just look at the pace of installs in Germany when they stepped down the feed in tariff at years end a few years back. I think they installed something like 3GW in ONE MONTH one the eve of one of those stepdowns. I expect this stock to explode on the convergence of the stepdown, shorts being squeezed and new state support like we'll see in PA as soon as the new budget's signed and rebates are put back in place.
SCTY........from here to the moon!
(or perhaps Mars?)�
1/1/2015
guest Panels to fall in price to $US0.50/watt
Deutsche Bank says that while overhangs like trade cases or minimum price agreements could cloud the near term, market inefficiencies will be worked out over the long term and the clearing price will reach $0.50 or lower within the next several years.
Companies like SunEdison have publically targeted $0.40 cent per watt panels by the end of 2016, and many Tier 1 Chinese manufacturers are achieving sub $0.50/w already in 2014. :Given that most manufacturers are improving 1-2 cents per quarter, less than ten cents improvement (to reach $0.40) over the next 12 quarters is likely conservative.
If panels are sold at a 10 cent gross margin for a total cost of $0.50/w, manufacturers would achieve 20% gross margin � well above recent historic averages. Furthermore, transportation costs and �soft costs� which inefficiently raise the price of panels should gradually improve as governments work through trade issues
Solar Costs Will Fall Another 40% In 2 Years. Heres Why.
�
1/1/2015
guest Your argument earlier has been SCTY's financing model and power purchase plans are overcharging customers. Yet they are growing their customer base like crazy. This must mean that in general people are idiots. So I'm sure they'll be buying these highly efficient panels head over heels too, even though your analysis shows they're really not better in any meaningful way and overpriced.�
1/1/2015
guest Wonderful news! Thanks for sharing.�
1/1/2015
guest http://files.shareholder.com/downloads/AMDA-14LQRE/2353759788x0x762645/19BE5B87-3C6E-40CD-A19F-7994611A4A2C/Sunflower_Investor_Presentation_FINAL.pdf
they actually beat the expectation set out in the Silevo presentation last year at the aqusution announcement. Instead 340w, they achieved 350-360w in production. Instead of 18 high efficiency panels for a standard efficiency 24 panel roof, it's now 16 high effciency panels. Also, as pointed out Johan earlier, the riverbend factory will be producing north of 1.2GWs/year, which is much higher then plublicly announced 1GW.
They are are setting a good trend of exceeding expectations.
it would not be advisable to short now, especially with a fully loaded gun of Q3 numbers coming down the barrel at any moment. Again, I was tracking they will break the 398MW booking record before they passworded up the SolarCity Now website. They also will see a nice bump in bookings will occur with this new world record effieciency announcement(add that to the energy storage sales bump as well.)�
1/1/2015
guest Thank you, good information!�
1/1/2015
guest SCTY drops all the way back after hours? What's up with that?�
1/1/2015
guest
SolarCity Corporation (SCTY) After Hours Trading - NASDAQ.com
No volume, don't worry about it.�
1/1/2015
guest Shorts will get to full-on panic mode. This will be similar to TSLA's meteoric rise in early May 2013. I was watching from the front row like many of you folks here. It was a very un-settling feeling. Shorts panicked, even some longs fizzled. Very oddly some ultra-bulls turned short, chanting the over-valuation mantra. Eg: Randy Carlson from SA. He eventually turned back to being long much later.
That sort of insane, ludicrous, short squeeze will happen in SCTY as well. It's just a matter of time. It can happen as early as in Nov when they report Q3 and give '16 guidance. But for that the market should be willing to look at things like MWs and NRV. The next opportunity will be in '17 when industry goes through a huge turmoil and massive consolidation. Or worst case we will have to wait till '18ish when EPS turns positive (just my wag).
There is a chance that it might happen anytime. So I hate to step out. I will stay in and enjoy whenever it happens. That's the beauty of holding shares, you can wait indefinitely.�
1/1/2015
guest I'm waiting for the moment you speak of with 3500 shares in hand!�
1/1/2015
guest I don't get it - Solar Panel efficiency has been at least 24...25% already and how comes 22% is the record?
Solar cell efficiency - Wikipedia, the free encyclopedia�
1/1/2015
guest Solar City's announcement is for module-level efficiency, not cell-level efficiency. The value is always lower for modules because some of the area is taken up with structural components or electrical contacts.�
1/1/2015
guest And cost is kinda huge too, right? These guys are talking 22% near the bottom of the price arc, not some fancy and expensive lab-only setup.�
1/1/2015
guest I assume the cost is good for a high efficiency module, but the in house cost leader Trina Solar had an average cost of 39c/w last quarter, and I assume the 55c/w SCTY is talking about is when the Buffalo plant has ramped to 1GW/y in early 2017. So if they can achieve the 55c/w cost they claim in 2017 then it is definately competetive, but no huge leap forward for the industry by any means.�
1/1/2015
guest Of course Chanos is not impressed: http://finance.yahoo.com/news/chanos-solarcitys-worlds-most-efficient-192200078.html�
1/1/2015
guest There are systemwide benefits to higher efficiency panels. A reduced number of panels for a given system reduces shipping cost, labor, mounting hardware and power optimizers.
Higher efficiency panels all can increase the size of the system where usable roof area is limited. Thus, they can get more sales they might otherwise not make and sell more kW per sale. So this effect reduces the sales cost per Watt. Currently, the average residential system SolarCity installs is just 6kW. We could see this average system size increase.
It also matters that these panels are built in the US as this avoid punitive tariffs on panels from China and many US consumers have a preference for domestic products. So this is more savings on import costs and sales costs.
So Lyndon sees this panel as saving 10c/W in panel cost plus another 10c/W in other installation costs, and sales efficiency savings could take this even further.
Certainly, SolarCity has evaluated Trina's panels. If they thought that they could save money using them, they would be doing so already. SolarCity is an installer first and only a panel manufacture to assure there are no gaps in the supply. So they are pursuing the sort of panel they need, but that the industry is not well supplying. There are plenty of cheap panels on the market that are low efficiency with low durability and poor lifetime performance. Such panels may be suitable for an installer that does not own the system longterm, but SolarCity takes an equity position in most systems it install. So lifetime performance matters.
So SolarCity see this new product as saving them 20c/W over what is currently on the market.�
1/1/2015
guest How much money has Chanos made shorting the coal industry? Any short that has not made huge money off of the enormous decline of coal really does not understand the utility space.
Chanos's thesis on SolarCity seems to be that rapid decline in the cost of solar will undermine the value that customers have in their SolarCity systems. I doubt that this will translate into any real losses for SolarCity. However, if Chanos really believed this thesis, he would be shorting the utilities. In the face of declining solar coats, utilities will continue to raise rates to service bloated and obsolete fixed cost structures. They do not have long-term contracts with ordinary customer, who will increasingly turn to solar for rate relief. So if SolarCity is at risk of declining solar, the utilities are at monumentally higher risk to the very same competitive threat. Chanos is targeting the wrong players for his thesis. So either he does not believe his stated thesis or he is blind to what is really going on in energy markets.�
1/1/2015
guest "There are systemwide benefits to higher efficiency panels. A reduced number of panels for a given system reduces shipping cost, labor, mounting hardware and power optimizers."
Yes, thats why I said their product is competetive in spite of being much more expensive per watt.
SCTY is using modules from Trina right now so you shouldn't be so quick to bash the company. Trina is a so called tier 1 producer in China, their modules are some of the highest quality modules in the market and has very little degradation. You shouldn't just make nonsense claims like that when you clearly don't know what you are talking about.�
1/1/2015
guest 
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From EEtimes, July 2015:
Monocrystalline technology gains market share
A monocystalline PV solar panel module is made from a single silicon crystal and is more efficient, though more expensive, than newer polycrystalline and thin-film PV panel technologies. Monocystalline modules are usually recognizable by their black or iridescent blue color while polycrystalline cells have a variegated appearance.
Mono-Si cells have the highest efficiency in the commercial PV market at 24%, 2% ahead of polysilicon and other established thin-film technologies. These high efficiencies can be combined with multi-layer solar cells in applications where space and weight become an issue, such as powering satellites.
?
Current average production cost is $0.38/Watt for monocrystalline cells and $0.34/W for multicrystalline cells, though Mono-Si modules have an average power output that is 4% � 8% higher. They are particularly advantageous for distributed systems such as rooftops, with demand coming primarily from the US and Japan due to their requirement for higher output per unit area.�
1/1/2015
guest Sorry, I didn't think I was bashing Trina. I was simply spelling out the ways in which panel price per Watt is not the main criterion for selection regardless of who the manufacturer would be. I see that we are in agreement on this point.
Shorts like Chanos are clearly trying downplay the advance SolarCity has made pointing out that cheaper panels are on the market, implying that that is the only consideration that matters. I respect that you have a more nuanced view.
It's really important to recognize that SolarCity is and will continue to be a net buyer of panels. Riverbend will only supply a fraction of what SolarCity needs in 2017 and beyond. So any price and performance advances of suppliers is in fact a benefit for SolarCity.
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Nice, but there is a gap between cell efficiency and module efficiency. For example, SunPower has 24% efficiency cells, but in modules the efficiency is only 21.5%. SolarCity's claim is only to lead on module efficiency, not cell efficiency. So I rather suspect they do not yet have a 24% efficient cell.�
1/1/2015
guest Solarcity will be ramp production of 100MW pilot plant this month with the new high efficiency panels. They will replicate this production line at the buffalo plant starting sometime Q1/Q2 2016, then ramp up that production to full capacity 2017. This all means 100s of MWs of Solarcity high efficiency panels will be produced and installed from October of this year through the end of 2016 before full capacity production in 2017. So, lots of product will be already in the field before 2017. The cost reductions will be felt within the 4th quarter and through out 2016. CNBC tweeted out Solarcity will starting pricing systems for post Itc drop by Q2 2016, so they are already prepared to move forward 6 months ahead of time, even as Lyndon Rive stated he is more confident it will be extended. They operate from worst case scenario planning so expect a major stock pop regardless of outcome on itc. If itc goes, Solarcity will only gain increasing market share and acquire installers on the cheap. If itc is extended, Solarcity will be able to operate at the best margins as well as expand solar+storage at an accelerated pace over previous expectations. It's a win-win in my opinion that stems from efficient all in cost reductions.
i don't think many people understand the magnitude of Solarcity's breakthrough they are making the highest efficiency panels at .55/watt. They reduce at 24 panel job done to 16. I anticipate Solarcity will install 1.6-1.8GWs in 2016, if they grow 50% compounded in 2017 then I anticipate they will guide for 2.4-2.7GWs, with full production that year they will save over 1.6million panels from having to be installed. That's 1.6million panels crews don't have to install. There is tremendous cost savings. Now if they do a 5GW plant, they would save crews over 8mlllion panels from having to be installed. These savings are incredible and a compelling reason to expand high efficiency/lost cost production as soon as possible.�
1/1/2015
guest It seems to me that solarcity is just spinning a probable high cost per watt in 2017. The "rule of thumb" to date is that good, basic solar solar equipment has the best ROI. This is the type of equipment they choose to install today.
Yet now high efficency expensive panels are better, according to solarcity.�
1/1/2015
guest Once you get to $.55/W and below, you'd rather have major performance/convenience/efficiency gains that a few pennies less cost. I think that was spelled out in great detail above.
It's now a race to see ho can get soft costs down near Germany levels.�
1/1/2015
guest How do you explain the last sentence in their press release:
What are their plans?�
1/1/2015
guest To become the largest panel manufacturer on the planet while only producing best in class panels.�
1/1/2015
guest These are research (as in, laboratory), cell efficiencies.
SolarCity announcement was about production (as in, factory) module efficiencies.
Big difference X 2
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Company Production Cell Efficiency Production Module Efficiency SolarCity unknown 22.04% SunPower 24% (Maxeon) 21.5% (X-Series) SunEdison 20.2% (PERC) 17.7% (Silvantis R) Trina Solar 20% (Mono Pilot Line) 17.7% (HoneyM Plus) JA Solar 21% (M6PA-4) 17.4% (JAM6R) Yingli Solar 19.8% (Panda Cells) 17.2% (Panda60) Renesola 19.2% (Mono) 16.9% (Mono-275) JinkSolar 19.6% (Mono) 16.8% (JKM275) Canadian Solar 20.2% (Mono PERC) 16.6% (CS6V)
But what is the average price it sold at? I see Trina has a 20% gross-margin.
With BOS savings, SolarCity will have it's panels for an effective price of 45 cents/watt.
If some other firm is able to make panels cheaper than this, it is still the cost to that firm. The price to the end user is a whole another story. You will need to include operating costs (assuming the cost is at the gross cost), profits for the firm, transportation costs and tariffs.
For SolarCity the cost and price are the same thing as they will use it all for themselves.
The question really is can SolarCity get the panels for cheaper than effective 45cents/watt. The answer is obviously not and hence the factory.
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I'm not sure how SolarCity is contradicting the "rule of thumb".
The said reasoning is that the high-efficiency modules currently in the market are too expensive to be competitive.
If the high-efficiency modules are made cheaper, then they would have better ROI than cheaper standard efficiency modules.�
1/1/2015
guest I don't get the impression from this post that they have big plans do utility-scale field installations. We do know that they have done one 12 MW ground installation with Kaua'i Utility and have plans for a dispatchable solar+storage system for that same coop. If they do get into utility systems I'd like to see them focus on dispatchable solar.�
1/1/2015
guest Nice to see the stock retain price gains from Friday and take it up another 2%. I would have expected a little pullback from Friday. I continue to be hopeful that long-term investors are carefully pricing in the advances in high efficiency panels. Of course, even without this, the stock really ought to recover to the $60s. However, we still have shorts who are bent on suppressing the stock price. As long as shorts are willing to provide this discount pricing service, longterm investors are content to wait for even lower prices.�
1/1/2015
guest Nor should they get too heavily into utility scale. The bids are ridiculous so the margins are probably already pressed too thin to bother. SCTY is quietly building an undeniable scale and positioning advantage for the residential market, that's where the profits will be.�
1/1/2015
guest I wonder what this trade was after hours? $188,000,000 worth of Scty!
4,044,392 shares at 16:06�
1/1/2015
guest I noticed that as well...very peculiar. Also, volume during regular trading was much higher than usual today.�
1/1/2015
guest We know when SCTY acquired Silevo they had a 21 percent cell efficiency. In their Silevo Presentation they show that if they reach 24 percent cell efficiency they will have a 340-W panel. With their recent anouncement they claim a 350-360-W panel. This means they are either over a 24 percent cell efficiency or they have found other ways to increase the module level efficiency (such as framing that covers less of the solar cells.)
With the new announcement Lyndon said that this is only the beginning in regards to efficiency. It is pretty wild how far and how fast they have pushed this Silevo technology. Will patents they file become public knowledge relatively soon after filing them? Anyone know a good spot to look those up? It sure seems like they will advance these cells/modules past what they thought was the theoretical max. I would love to see how they are doing that. Goodluck to all the longs.�
1/1/2015
guest A gigantic after-hours trade in SCTY for sure. To test the waters, I looked at late trades in SUNE, SPWR, JASO, HQCL and CSIQ. SPWR had one trade of 53,850 shares at $22.78, for a total consideration of $1.227mm, which also is a sizable after-market trade. Nothing else of significance in the other names. Good catch!�
1/1/2015
guest I agree. The money is in residential. The Kaua'i dispatchable solar project may serve to keep the island open to more residential solar by giving the coop on favorable terms what it needs to be able to integrate much more rooftop solar.
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This is intriguing. Why would they not tell us the cell efficiency if it were greater than 24%?
BTW hear is how I arrive at 270 W per 65 by 40 panel. I'm assuming 1000W/m2 from the sun and 22.04% conversion for the panel. Perhaps someone who knows more about these calculations can point out where I'm going wrong, but this is what I get:
0.2204�1,000�65�0.0254�40�0.0254
=369.7024864�
1/1/2015
guest Wild speculation on my part here: That might be the Merlin connector system from the infamous GTAT who suddenly went bust a year ago, brutally ruining a single mom of a special needs son, among others. (Tom really should do time for that stunt, imho.) They also had the very cool Hyperion tech, shooting H+ ions into sapphire, that they never made quite good enough or in sufficient quantity, to chop it into perfect slices. Too bad really. But the Merlin seemed sensible and able to simplify production of solar modules with less loss from shading.�
1/1/2015
guest It obviously depends on the price difference. By the time solarcity is at production, it is unlikely that the efficiency difference between them and common panels will be large. If Trina is using their current technology, they will likely be at 19-20%.
But solarcity's Silveo effort really shouldn't be judged by what is happening in 2017-18. It will take until 2020 to tell if the technical choices and execution was good.
Because solarcity won't sell panels in the open market, and they are not profitable, evaluating the benefit of the silveo effort will be next to impossible for outsiders until they reach major production numbers.�
1/1/2015
guest Let me just point at this post in the short term thread. I mailed the same PR to some people a few minutes ago, about Solar City's deal with a CAL school district that will save over � a million in the first year alone and $35M over 25 years.�
1/1/2015
guest Interesting article
Solar Wind Reach a Big Renewables Turning Point : BNEF - Bloomberg Business
Though they don't mention the Capacity Factor for a solar plant + batteries plant. Would it be near 100? or at least closer to 85 that coal has? In that case as costs decline for both panels and batteries, there will almost be never a fossil fuel plant ever built again. The trillion dollar question is when do they hit parity.
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If you were to believe the decks they put out during quarterly results, then you will be able to clear see the impact of the new panels as they break down all the costs.
If SolarCity continues to grow strongly post ITC drop, then that too is an indication that the cost savings measures are working in aggregate. Rest assured, we know SolarCity won�t do projects which don�t contribute well to cash-flows/retained values.
Growth in retained value and/or retained-value-per-watt should tell us too if cost-saving plans are working, of which panels is a big part.�
1/1/2015
guest EIA - Electricity Data
The actual capacity factor for coal as reported by the US EIA is only around 61% and this is after retiring a huge chunk of coal capacity. The 85% capacity factor seems to be what the industry uses on a pro forma basis to justify and finance new plants. But the reality of actual utilization is much lower. In the last 12 months the highest monthly utilization was 68%. Since a plant in good condition can supply 85%, this implies an over capacity of 25%. Or put another way, the fleet needs to be reduced by about 20% to realize an 85% capacity factor in at least one month out of the year.
Notice also that peak coal utilization occurs in July and August. These are also the months that can harvest the most solar energy. Thus, solar cuts directly into coal's money months. As solar installations increase, this should further erode coal utilization and profitability.
Similar remarks can be made of natural gas. Baseload CCNG has 48% utilization while peaking CTNG is utilized at only 4.8% of capacity, about 70 minutes per day. Dispatchable solar (i.e., solar plus batteries) and dispatchable wind can make gas and oil peakers obsolete. Baseload plants can handle seasonal variation in net demand, while batteries handle intradaily variation in net demand. This leaves peaking plants little to do other than to collect capacity payments.�
1/1/2015
guest The utility scale comment is solarcity doing community solar. That's utility scale solarcity will be growing in extensively, evidenced already in a $200mln project in Minnesota. Also, "utility scale" micro grids are most likely a massive future revenue stream.
Also, so many critics and journalists don't get that the Silevo panel is not a threat to Sunpower or panasonic. Solarcity is self consumering every panel they produce. They are not putting their panels on the market, so no competing what so ever with other high efficiency panels. Secondly, solarcity is still the most efficient commercial panel on the planet due to it's total year long energy production, specifically in high temperature conditions. Panasonic just threw out a public release to try and assuage investors/suppliers/retailers that they have something in the works. There is no data to support year long yield, nor in there there a cost per watt. Again, we all know there are panel far more efficient then 22.04%, but at the effective cost per watt... not even close to solarcity and Sunpower/panasonic know this. Panasonic is just saving face in front of their own people. Probably the same will happen with Sunpower soon.�
1/1/2015
guest SunEdison strategy questioned as renewables developer cuts jobs : Renew Economy
SunEdison is cutting jobs. They seem to have overreached with growth by acquisition and weakened their capital structure by spinning off a yieldco, which has also lost about half of its value. This is a painful lesson.
I sure hope that SolarCity never goes down the yeildco root.�
1/1/2015
guest A great piece on battery storage from RMI.org: Report Release: The Economics of Battery Energy Storage
The report covers:
I've only read the Executive Summary, but thought these were key points:
�
1/1/2015
guest Lyndon Rive said the back up capability of solarcity solar+storage is only 5% of the value of the system. 95% of the value comes from grid services to the grid. He said those customers that buy/lease/ppa the powerwall+ solar package now for back up purposes will be able to take advantage of grid services compensation when it becomes available in the near future.
Essentially, when you buy/lease/ppa solarcity energy storage package you will also get "upgrades" that will further reduce your per kWh rate. That's a pretty great sales pitch to future customers of powerwall. It's the same as the model s/x... it upgrades the longer you own it. The same for solarcity.
I find this to be a massive shift in how we the American consumer relate to our electricity and the energy industry in general. Now we are participants, rather then hapless spectators. When a company like solarcity can be at the center of a consumer's psychological transformation like this, it would be difficult to stop the momentum of sales/services growth, even in a hostile environment of incumbent utility entrenchment.�
1/1/2015
guest New York Draws Another Solar Manufacturer as it Shapes New Hub - Bloomberg Business
�
1/1/2015
guest Solar Wind Reach a Big Renewables Turning Point : BNEF - Bloomberg Business
I think I have posted on this before, but it is very important to understand how renewable energy can make fuel based energy more expensive. This is critical to understand how quickly the economics can turn against fossil fuels. So at the risk of repetition, let me set out an example.
The levelized cost of energy is a combination of fixed cost allocated over units of energy produced and variable costs directly associated with each unit of energy produced. The tricky thing is that the allocation of fixed costs depend on the assumed capacity factor prospectively and upon actual utilization retrospectively. So the retrospective is given by
RealizedLCOE = Fixed�CF�Utilization + Variable
So let's consider a gas peaker which prospectively has a levelized cost of $185/MWh based on a capacity factor of 10%. Suppose also that the fixed cost at this CF is $135/MWh and variable $50/MWh, but the actual utilization is only 5% (and this is true of gas peakers in the US). So we realize the following levelized cost:
RealizedLCOE = 135�10%�5% + 50 = $320/MWh
So the peak power that was supposed to cost 18.5c/kWh has blown up to 32c/kWh. We see that the realized cost is very sensitive to utilization.
So we all know about SolarCity's 14.5c/kWh PPA for a dispatchable solar project. Such a plant would already compete well with an new gas peaker at 18.5c/kWh or more. But realistically the utilization over the life of the plant is likely to be much less than the pro forma assumption of 10%. In fact with the encroachment of solar and wind over the next few years even a 5% lifetime utilization would be unsupportable. But optimistically at 5% utilization this plant costs 32c/kWh, and more conservatively at 2.5% utilization, the levelized cost reaches 59c/kWh. At this point, I do not see how any competent bank would be willing to lend for a new gas peaking plant. Even without Tesla bringing $250/kWh batteries to market, much more expensive batteries beat a new gas peaker quite handly.
So why is a dispatchable solar plant not subject to the same utilization problem that a gas peaker is? I see at least three factors. First, the solar power without storage can always be sold into the spot market. It can bid all the way down to zero if necessary. Second, battery packs are consumable over the cycle life. So long as cycles are not too infrequent, most of the cost of the battery is in fact a variable cost, not a fixed cost. Third, batteries are redeployable. If a facility was not utilizing cycles at a fast enough rate, surplus battery packs can be redeployed to another facility that will make better use of them. So most of the storage cost is truly a variable cost, while the fixed costs associated with solar are subject to underutilization owning to lower marginal cost competitions. So a dispatchable solar facility avoids nearly all the utilization risk that a gas peaker is faced with.
Once banks and bond investor figure this out, it will be lights out for any new funding for gas peakers. Moreover, any older plants in need of upgrades or major repairs will be met with the same financing problem. Batteries will find their way into the market. Once the transformation gets going, I think it will be quite swift.�
1/1/2015
guest Again, all one has to do is look at Germany. Solar hitting 5% of overall supply meant that on a lot of days solar was meeting 30-50% of demand at peak. No one could make any money selling wholesale juice. All the major utilities lost more than half their value, Eon tried to divest itself from production entirely and was halted by the govt. Imagine a top three energy supplier in the US begging to sell off all it's production!�
1/1/2015
guest That's a good point. And also in Germany we see a market for storage that is willing to pay in excess of $1000/kWh.
This also points to an additional advantage of dispatchable solar. It helps support midday prices. Actually I think that any fossil plant that can become subject to negative spot prices needs to contemplate buying its own batteries. This too would improve the dispatchability of these baseload plants, which would improve their utilization.�
1/1/2015
guest jhm, Batteries with solar may support supply shifting (from morning to evening) and potentially some storage for next day. But what if it's cloudy for multiple days and storage runs out and panels are not producing anything? How does that get factored into these Capacity Factor type calculations?�
1/1/2015
guest The 10kwh powerwall solarcity is selling doesn't support load shifting. They say they will use it to occasionally sell power when prices are very high. The frequency of selling power is set by the battery warranty.
Of course if they have sold power immediately before a power failure, the battery no longer provides backup.�
1/1/2015
guest I was asking about the utility scale solar + battery farms, like the one SolarCity is building in Hawaii. That project has compelling economics, partly because it's in Hawaii where there is lots of sunshine year round (I assume). I am not sure how the economics will change if that project is perceived for north-east US.
One way this can play out is, as jhm and BNEF article point out, the peaker plants will become insanely expensive and thus the demand charges might sky rocket (if regulators allow for passing on those prices to consumers). This in turn will increase demand for customer sited storage. This virtuous cycle will play itself out until there is enough batteries cumulatively that a peaker plant is never ever needed. But this will take a lot of surplus batteries is my guess.
You make a good point about residential battery packs. Overall, when Musk unveiled batteries, he showed map of US and said all you need is a pixel of batteries to support the entire country. I am not sure if that is for a 'given day'. or if it is enough to support multiple days (no matter what the weather conditions are and what the demand changes are).
In any case, Musk and co seem to have some ideas. Both SolarCity and Tesla employed a ton of people in R&D to figure this out. I heard this over the grapevine. I trust them to come-up with good solutions.�
1/1/2015
guest Right, for the next 20 to 30 years the grid will sit of a glut of fossil and nuclear power plants. Baseload gas and coal will still be used to hand seasonal supply issues. Right now it is the peaker plant that is most vulnerable. Baseload plants need only meet average demand net of renewables, whIle batteries increasing handle the intradaily variation in net demand. This pushes the spot market to a narrow daily spread from peak to tough. So the peak prices get too low to support peaking plants. They get priced out of the market.
So specifically if there are too many rainy days in a row, the the store of energy in the grid declines and that triggers baseload plants to ramp up. Once the batteries get back to their usual storage levels, these marginal baseload plants ramp back down. So combined cycle NG plant gets something like 80% more energy out of gas than a combustion turbine. The only advantage that the CT plant has is that it can ramp up in about 10 minutes, but it thanks the CC plant several hours. Adding just a few hours of battery storage to a CC makes it even more responsive than a CT. CC plants are built for a 40 year life, so they're going to be around for quite awhile. Additionally, there are renewable sources of gas, so climate change is not the issue to worry about long-term. So CC gas plants plus batteries can be a long term solution for hanging seasonal demand and other backup. The question remains how much of this will remain economical for how long. Current utilization of CC plants is only about 55%, while CT plants are below 5%. Even at this utilization, I think CC gas is still cheaper than dispatchable solar. So dispatchable solar pushes out CT gas before knocking out CC gas.�
1/1/2015
guest a bigger problem than rain...might be snow. does anyone know of any solutions out there ..or companies working on a solution. it seems racking and tilting help, but does not snow play a huge limiting factor in solar? in Germany how do things work? is there huge variation in winter months for need for 'utility' power vs summer?�
1/1/2015
guest The scenario in your second paragraph is quite interesting. I think it depends on a few things, specifically that batteries are by fiat excluded from the standby market. Otherwise, batteries could flood that market and drive down standby fees. But it would be economically absurd for regulators to go done that path as it becomes public assistance for unemployed generators. Essentially these standby capacity markets exist because plant owners cannot count on enough revenue from peak prices to finance the plant, while buyers of power need price protection from extremely high prices. So the capacity payments are a little like options. Utilties are willing to pay for the option to buy more power when supply is scarce. So the value of that option in economic terms is reduced as batteries reduce volatility, both volatility in power prices and in the gap between production and consumption volumes. Batteries smooth out both price and volume. So the value of a call option for stand by power should actually decline, and it would in an efficient market.
So daily global consumption of electricity is around 60 TWh, and Musk thinks that about 90 TWh of storage would suffice to eliminate all fossil fuel generation. So this is storage for 36 hours. Hydroelectric must factor into this, but otherwise this seems like overkill on battery storage.
This biggest economic changes will happen when the first hour of battery storage is added to a grid. Given that peak plants in the US is utilized 70 minutes on an average day, one hour of battery storage systemwide should be sufficient to displace all peak plants, so long as there is sufficient baseload capacity to recharge those batteries and this looks to be the case. One hour of storage globally is about 2.5 TWh of batteries and it would take one gigafactory 50 years to manufacture this. So obviously a lot of work is to be done, but the economic damage is done much sooner than full replacement. IIRC, about 6GW of new peak capacity is added annually to the global grid. So 12 to 24 GWh/year of battery production would saturate this market. Thus one Gigafactory producing 15 GWh of Powerpacks/walls can come damn close to wiping out the market for new peak capacity. Plus other battery makers will not stand still either. We are only about three years away from this.�
1/1/2015
guest SNOW
One of my arrays - 18 panels' worth - is tiltable, and the difference at our 63� latitude is such that summer-optimal and winter-optimal is quite a lot. However, after six years of experience, we have learned that the performance of the array is negligibly - truly: not measurable - different in the summer whether we have the panels tilted at the ideal angle versus the extremely steep (approximately 80-85 degrees) winter-optimal. So.....we keep them at that angle all year-round.
And, at that steepness, there is almost no problem with snow. There is an exception: at temps around the freeze point we do sometimes have tenacious ice form, which certainly drops production immensely, but that is one weather problem that very, very rarely is a concern for us!
A second array - my prototype 4-panel rack - is 65' / 20m off the ground, and I have two cables attached to each edge. I can vigorously work those cables to cause almost all snow to drop off. It's fun to watch an air-avalanche coming right at you! Just step out of its way in time....�
1/1/2015
guest What caused today's gains?�
1/1/2015
guest Insiders peeking at 3Q earnings results?�
1/1/2015
guest When is the Q3 ER?�
1/1/2015
guest Nov 4: http://www.nasdaq.com/earnings/report/scty�
1/1/2015
guest Thanks for saving this lazy person some work! :smile:�
1/1/2015
guest Thanks AudubonB. much appreciated to get some insight into that. it is a pretty steep angle!�
1/1/2015
guest You're welcome. On re-read, for clarity I should have written the first sentence as: "....the difference...between optimal summer and winter tilt is quite a lot.�
1/1/2015
guest I don't know, but I wonder if shorts lost interest to focus their efforts on Tesla.�
1/1/2015
guest Jhm, you mentioned 1 hour of power at 1TWh. However, what happens when more EVs are on the road charging daily at work or home? We need offsetting solar PV equal to 120% of the daily EV demand to make up for it. Some say gasoline has embedded electricity costs, but many refineries generate power locally rather than pull from the grid.
i believe batteries initially will charge at night and dump later in the hot afternoons or early mornings during deep winter. Batteries and the energy losses during round trip operations initially will have more demand on the grid and then slowly lower their impacts. It is about 15-18% round trip losses with grid storage systems. So, solar pv output or steam plant output losses will need to factored into anyone's demand profiles. Someone producing 50kWh on their array daily will store a usable 42kWh and on cloudy days, much less. They will output less to the grid or they end up going off grid. So homeowners actually will increase their 24 hour grid demand as they add batteries, or else they need to add about 20% more modules to their pv array to make up for the losses.
power plants will eventually produce less power as distributed production and storage grows but it surely will take decades to get there at the rate we are seeing PV adoption now. We do need to add strong efforts to go to LED lighting, perhaps, subidizing it at 70% or higher ratios and also keeping up with time of use rate plan deployments so businesses will be incentivised to actually care to replace their lighting fixtures which also, in turn, lowers their AC demand on hot days but then in turn raises their heating needs on cold days as fixtures with LED put off less heat.
the major benefit of storage is somewhat minor up front. A bit less peaker plant spin up. But we add EV and new housing demand every year as well. Watch the EIA data and other tracking organizations. I doubt we get much real visible offset for quite some time, maybe 15 years.�
1/1/2015
guest If you're a consumer with a large solar array, a basement battery pack and a huge car pack, I would think you'd be inclined to go completely off grid or onto a micro grid quite rapidly. I just don't see a scenario where grid demand at peak increases. People charging at work will likely be under a cheap solar canopy trickle charging once EVs are everywhere. Not to mention that solar going from <1% of supply to 8% essentially wipes out the traditional peak period.�
1/1/2015
guest EVs are an interesting issue. It will take much longer to replace the fleet of fossil vehicles than the fleet of fossil power plants.
Solar power alone will have an easy time keeping up with EV demand for energy. Consider that an average EV needs about 10 kWh per day. 3 kW of solar is sufficient from an annual energy point of view. Gobal cumulative solar should reach about 233GW this year and keep growing at about 30% each year for the foreseeable future. Thus, about 70 GW will added in 2016 and this is enough to energize about 23.3M new EVs. Of course, we won't see that level of annual EV sales for quite awhile, probably not in the next 10 years. By 2020, the solar fleet should reach 1TW. At that point adding 30% more is sufficient to energize 100M EVs per year. Thus, by 2020 solar alone would be able to support 100% EV penetration in the auto and light vehicle markets. I personally do not expect to see that penetration level before 2030. So solar is at least 10 years ahead of EVs in energy supply.
The next issue is how to coordinate solar production with EV charging. Basically solar penetration will push electricity spot prices to zero at midday. As EVs become mainstream, 10M new EVS per year, I expect alot of action around harnessing this cheap midday energy. Workplace charging is an obvious solution for daily charging needs. Midday charging could become the norm, beating out overnight parking.
It's going to be great.�
1/1/2015
guest The demand style will depend on whether workplaces offer a large scale solution of L1 or L2 for whole parking lots. 200 cars at 3.3KW is nearly a nameplate 700KW at noontime. If all the commuters need 40 miles of recharge, that is 13 kWh times say 300 cars or 4000 kWh of refill. It is bigger than a typical canopy, it would be an acre or more of modules to match the new mid day demand. It may be better to offer 120V 15A across the whole parking lot than anything more. This allows workers not to have to move their cars. An all day draw of hundreds of 1500 W adds up. This energy now is supplied by refined gas at which the plants burn their own oil for electricity to produce the gas. Now, that energy will need to be harnessed from more renewables or demand on existing grid resources. The net benefit is less pollution. But a gallon of oil from the ground from loose oil sources, like Saudi Arabia is extremely energy rich with low energy expense to drill it. It will take a massive scale deployment of renewables to replace that energy. It will also take many people slowing down their fun and working in concerted conservational agreement, and I just don't see that happening with our humanity in its current state. I guess the long plan is to tax or fee energy sources to the point where doing anything of interest needs to be well planned out due to the rising costs to come. Frugal will become the norm (kinda like living in Russia as a typical citizen today). Our kids have a future of lowering their expectations of doing "anything at anytime" like we have today.
I drive electrically around town. I see 99% of the cars around, including the pickups, suvs, cuvs, buses, trucks, rvs and more all burning oil. This is going to take some time. And the only real public face I have seen lately was a new presence in my local Best Buy of lead generators from Solar City trying to get people to consider Solar through their lease programs. What I don't see is widespread installations of solar on warehouses, government buildings, airports, parking garages, malls, scrub land, full land fills and other adaptable acreage. Trying to get regular people to install widespread individual small generators and not pushing for large scale installs (similar to the Walmart roofs in California) seems short sighted. One Walmart roof is like 100 homes and only takes one contract and permit per store versus 100 install permits, team scheduling and other logistics.�
1/1/2015
guest Scenario I just thought of. It's Monday, tens of thousands of EV drives arrive at work to a nice sunny morning. All plug in by 9:00am.
In the city, the draw is 3.3KW to 6.6KW times 50,000 cars and couple local superchargers are bustling.
The day warms to 90*F by 10:20am. AC is kicking in all around the area.
A front starts rolling in with some clouds causing nameplate Solar PV to drop from producing full power to 30% of value. Cars are still charging. The aggregate of the cars charging in the lot is greater than the AC and lighting demand of the workplace where the workers are.
What is the typical grid reaction to this? 225,000KW of new charging autos is drawing from the grid which 5 years before was not.
What is needed there are reactive smart-grid charging software on cars to lower their charge rates when signaled by the grid or by sensing local voltage drop (like Tesla does with a voltage drop on an HPWC).
I don't know of any EV on the market other than Tesla that ratchets down charging rates programatically.
The lot full of Volts, i3s, Leafs and so on need to lower their draw when the regional frequency response signal is sent. This won't happen until the fleets build this into their systems and this also won't happen without the grid providers enabling the signal as a standard.
With future time of use charging causing mid-day power at businesses to rise, supplying free plugs may not really due to ongoing costs. This leads to needing larger batteries on board cars (ie. Telsa) over the smaller EV design. "Infrastructure on board" may be the only way that ICE vehicle demand will convert to EV. Needing your workplace to install L1, L2 or other charging will most likely be a non-starter as businesses will start to absorb more costs for power use during mid-day periods.
The need for the $30k and lower 200-mile EV is certainly key to moving people off of ICE/oil and into EV solutions..
One government mandate for this would be to require banks to offer very low priced loans to EV buyers. Not government give-aways or tax credits but guaranteed 0% loans for purchase. The idea is that EVs do last a long time and people should consider buying an EV for a 9-year window that they normally would lease 3 cars in. Maybe offer 0% lease credit for 5 year periods so that buyers have lower monthly fee.
Also needed is 2C+ charging - 120 KW charging of 55 kWh batteries for that 200 mile EV. This of course puts high demand locally on a substation if there were to be a lot of charge points to serve so they should be scattered well. But consumers are very convenience-oriented and even 2C charging with the full charge in 35 minutes seems like it is too long for many when they compare to their ICE experience. However, so few think about the "leave home daily with a full tank if electrons" lifestyle when making this compare.
Anyway - the rambling above is why I think that peaker plants will be needed for at least another decade or more - even at the rate we are installing solar pv, they need to handle the same outlier days as they were built for in the first place. Peaker plants are not needed when mild conditions are in place. They are there for extremes - very hot, very cold and when large generators have to be taken offline. And that is my "USA" view. The real action regarding electric grid challenge is in Asia (China/India primarily) as the population grows, so does the middle class and the flow of "middle class opulence" that comes with enrichening a nation or region. They are building large baseload plants while we in the USA are trying to shut down peaker plants. I think this is far more complex than any of us know. The hard questions must be answered. One particular one - what do we do about population growth? With politics and our religions calling for basically constant growth so both can prosper - this is the big question. Show me one politician advocating for negative population growth through education and common sense?�
1/1/2015
guest @bonaire, remember, 1,000 SCTY 10kW battery backs, sprinkled around a local area, could be rhe equivalent of a 10 megawatt VPP (virtual power plant). and the batteries will probably be a multiple of 10kW�
1/1/2015
guest Couldn't that be handled on the EVSE side by simply stopping charging when needed, then restarting? Sort of a rolling blackout on the lot of vehicles.�
1/1/2015
guest Coming back strictly to Solar City, even if not its investment angle (hey - it's Sunday) -
Has anyone knowledge of where a Solar City install emplaces its thermocouple/temperature sensor? My system stopped showing a temp readout on September 14. HQ tells me it's a software issue, but I wanted to check the sensor and its connections. For the life of me, however, I cannot locate it. Any clues?�
1/1/2015
guest Jim Chanos talked about SolarCity again and stock is down: Jim Chanos: Tesla Is an Overpriced Car Company - YouTube
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1/1/2015
guest Bonaire, I think you are getting lost in too much complexity. Let's be clear. Peaking plants do not exist to produce energy, MWh. Rather they exist to provide marginal power, MW. They are utilized only about 5% of the time, while baseload fossil plants utilized 50% to 70% of the time. Batteries provide power regulation more efficiently than peakers, both +MW and -MW, but they do not produce any energy, only store energy produced elsewhere. So if you base sufficient battery capacity, any shortfall in energy is easily met by increasing baseload utilization just a few percent. Baseload fossil plants are sufficiently dispatchable to assure that batteries maintain an adequate reserve of energy to fulfill whatever grid stabilization they are needed for. Why would you fire up a gas peaker at 18 c/kWh to recharge batteries when there is sufficient capacity in combined cycle gas plant at 6 c/kWh to do the job.
So even if we ignore all the complexities of intermittent renewables and EVs, we see that just managing thermal electric sources when batteries become cheap enough they make peaking plants obsolete. Baseload+batteries will have better economics than baseload+peakers. Batteries are declining in price and increasing in performance. So eventually batteries will cross that threshold where they are cheap enough to halt all new construction of peaking plants. The question is when. Consideration of renewables, aggregation of DERs, EVs, smart load devices, etc. factor into the timing of this disruption, but not its underlying inevitability.
For example, wind is at a levelized range of 2 to 4 c/kWh, utility solar at 3 to 5 c/kWh, and CCNG at 6 to 8 c/kWh. So opportunity to firm up wind and solar with batteries is greater than for CCNG or coal. Thus renewables get batteries to economic tipping points a little sooner than thermal baseload alone.
Given Tesla's price for Powerpacks, my view is that the only barrier that remains is simply manufacturing capacity. In 2018 the Gigafactory should be able to put out 5 to 10 GWh of Powerpacks. Moreover, other battery makers will be racing to beat those prices and production levels. Since the new peaker plant market is only about 6GW, total grid battery production in 2018 will come damn close to saturating this market and the new economics will make it very hard to pencil out any plans for new gas peakers. So there will still be a few plants built after 2018, but they will have been projects planned and financed prior to 2018. So that's my personal speculation. Remember that utilities will basically be looking for ways to increase baseload utilization while decreasing the cost of providing peak power. Batteries fit the bill, while gas peakers do nothing to improve baseload utilization. This makes batteries the new default choice, so that gas peakers are only considered in rare situations where there is a shortage of thermal baseload capacity.
How does a company like SolarCity factor into this scenario. First, rooftop solar with net metering is putting surplus power onto the grid at midday. This is contribution to a situation that is undermining the utilization of both thermal baseload and peaking plants. Even so, the utilization of both are highest in July and August. Thus, solar still has much more potential to drive down fossil generation in those peak summer months. But in the fall and spring, thermal utilization is at its lowest while solar production is pretty high. So close to equinoxes is when spot markets are most likely to see negative spot prices. At such times thermal baseload is literally paying for utilization. The grids most need batteries when they risk oversupply that take spot prices below variable operating costs. Batteries are able to absorb this surplus power and provide price support to the spot market (something peaking plants cannot do). But the question becomes who is willing to invest in these batteries and provide this valuable service to the grid. This opens up a second business opportunity for SolarCity. SolarCity and their customers are willing to invest and site grid tied batteries. This enables distributed solar to retain it's midday surplus, easing the risk of oversupply in the spot market. Moreover this stored solar can be used in the evening to ease the risk of overdemand at that time. Thus, adding batteries to distributed solar will help stabilize the grid in a way that is beneficial to baseload thermal capacity , but is disruptive to peaking capacity. The stabilizing impact of distributed batteries can be harness to even greater economic efficiency is players like SolarCity are allowed to aggregate thesee resources and sell service to utilities or if time varying pricing plans allow DER owners to essentially trade in real time. Whether through aggregation or micromarket trading, SolarCity can leverage distributed assets to create additional revenue streams for their customers and the company itself while improving the economic efficiency of the entire grid.
The upshot for other grid participants is that SolarCity and its customers are providing services to enhance grid asset utilization at a price lower than financing and installing these batteries directly. This is not so much a statement about where it is most efficient to place batteries in the grid as it is a necessary condition of of an efficient market. Essentially, suppose a nuclear power plant found it was more economical to finance an build out their own battery array to improve the dispatchability of the plant. If it were more economical to do so, they would. This option for all utility players to add their own batteries places an upper bound on a market price for aggregated distributed storage services. Batteries in distribution also create value to their owners that the grid cannot provide, such as back up power when the utility connection is lost. So distributed battery owners do not require participation in grid services to fully compensate for the cost of the asset, but they are willing to offer surplus capacity in trade. Thus, there are opportunities for storage services to be offered to the grid at lower cost than for utilities to build out this capacity on their own. So this too impacts how quickly batteries can put peaking plants out of business. It the situation was merely replacing gas peakers with battery peakers that would imply a certain critical cost threshold for battery prices. But if the alternative is gas peakers versus aggregated distributed storage, that very well could imply reaching a battery tipping point much sooner. But this depends heavily on the regulatory framework to allow such competion. Regulators should be concerned, however, that blocking aggregated batteries runs the risk of pushing the grid to pay too much for storage or alternatives such as peaking capacity. The very serious risk is that these economic inefficiencies will be pushed onto ratepayers, which is unfair to all and actually induces a death spiral scenario. In my opinion the only way PUCs can be sure that ratepayers are not being charged too much for grid stabilization is too allow distributed battery owners to participate in competitive markets for these grid services. So while utilities have argued that distributed solar pushes certain grid costs on to other ratepayers, an even stronger argument that barring distributed battery owners from participating in and benefiting from grid service markets imposes higher grid costs on ratepayers. Essentially, the argument against NEM has been that it allows solar owners to use the grid for free storage services. That may well be, but the tables turn once solar owners are in a position to offer cheap storage services to the grid. A refusal of utilities to make economic use of cheap distributed storage would amount to an imposition of above market costs onto all ratepayers. Regulators should not allow utilities to get away with that, nor would that even be in the long run interest of the utility. The utilities have an excellent opportunity to negotiate arrangements that would eneble them to secure cheap storage, improve baseload utilization, virtually eliminate net energy metering, and provide lower rates to all their customers. In the long run, utilities have to figure out how to offer lower rates at a profit, and striking the right sort of deals with companies like SolarCity and customers with DERs can do that. Unfortunately, utilities that expect to keep turning a profit from their peaking fleets are going to find this a bitter pill to swallow. The sooner that utilities come to see that peaking plants are now obsolete, the better it will go for them. They may still be able to find willing buyers for these plants, independent power producers willing to bet against battery disruption, but each year delay will fetch lower prices.
So I think SolarCity is right in the center of this transormation. They are certainly working to find innovative ways to bring this value to the grid. The question remains to what degree are utilities and regulators willing to embrace these new models. In the long run, this will get sorted out, but certain grid players could dig their heels in and make this more costly for everyone.�
1/1/2015
guest Turning buildings hybrid-electric | Watch the video - Yahoo Finance
Here's what we're talking about with batteries disruption peaker plants. The office buildings are creating primary value from peak shaving and they are participating in a secondary revenue stream by selling grid services.
The male newscaster is a real duffus. He seems to have the idea that the Powerpacks are displacing the ordinary commercial use of the building.�
1/1/2015
guest Yeah, and unfortunately Susan Kennedy didn't pick up on that and correct him. Her wording was also partly to blame for the confusion.�
1/1/2015
guest These Three Trends Have Radically Redefined the Energy Market - Bloomberg Business
This slide indicates that utility-scale solar would only compete with natural gaz starting 2035. I'm curious to hear your thoughts on this.
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The whole presentation is here: http://about.bnef.com/content/uploads/sites/4/2015/10/Liebreich_BNEF-Summit-London.pdf�
1/1/2015
guest Something is not right with these LCOE calculations. Already in the US we have PPAs for utility solar below $40/MWh. Even backing out the 30% ITC, this is $56/MWh on an unsubsidized basis.
I simply cannot trust an analyst that is making pro forma assumption so far off from actually current prices. These cost are easily off by a factor of 2 to 3. There are vested interests in trying to convince regulators, investors, and ordinary people that solar power won't be cost competitive for decades to come. So I suspect an anti-renewable bias here.
�
1/1/2015
guest Hawaii Regulators Shut Down HECOs Net Metering Program | Greentech Media
Wow, the Hawaii PUC just ended net energy metering. Residents can sign up self-supply option and receive nothing for energy sent to HECO. Or they can enroll in grid-supply option and get wholesale rates from 15 to 28 c/kWh depending on the time of export. In both cases there is an extra $25 per month to stay connected to HECO.
I think this gives SolarCity free reign to sell Powerwalls into the state. Either option or the third off grid option make Powerwall ownership economical. This move by HECO will also enrage Hawaiians. In all, I think HECO will prove to be a poster child for grid defection.
It just got real.�
1/1/2015
guest Fascinating, but also real spooky I would say.
I am strongly against full-scale real-world experimenting like this. People matter, more than corporations or utilities. They deserve better than to be used as guinea pigs or grease in a creaking cogwheel. (Here's cheering for a spectacular grinding crash for HECO)
The outcome will be interesting but the experiment is unethical IMO.�
1/1/2015
guest Interesting developments in Hawaii. But in the end, as they say, all roads lead to Rome.
(Meaning distributed solar+storage is coming regardless of regulatory framework, regulations can only somewhat affect the pace at which it takes over in places like Hawaii)�
1/1/2015
guest The sun is so reliable in HI that it would now make the most sense to have a solar array and large battery back to take you off grid. Kind of ridiculous to screw over the consumer this way in HI, but once there's a zero-down financed array/battery option it'll be game over. All they're doing is accelerating the momentum to move off grid.�
1/1/2015
guest Can someone help me understand what is it that makes these incumbents fight tooth-and-nail for maintaining the status quo in the face of overwhelming evidence that their customers are leaving them behind? Couldn't they instead use their existing advantages to claim the renewable market for themselves? Why don't they go into the distributed solar and storage business themselves? I mean, if I were a monopolist, I would try to maintain that monopoly with some fresh thinking, instead of bitching and moaning about technical difficulties while the little guys are eating my lunch. Are these guys so blind that they don't understand they will disappear, maybe not quite over night, but certainly over a few sunny years?
I understand why a GM or Toyota have trouble reorienting their ships, what with the dealer networks, engineering issues, and huge production capacity invested in old tech. But in the case of energy producers, there is nothing I can think of that's inherently stopping them from jumping on the bandwagon, other than their own arrogance. What am I missing?�
1/1/2015
guest No to your question, I couldn't explain.
One guess is that high-to middle management have a short time span in which to maximise their retirement or parachute package and disregard pretty much every other aspect. Also, they are trained into a certain way of thinking, which is being reinforced by a coherent pack/team/tribe because non-conformists are made unwelcome.
Again, I doubt anyone really knows for sure - and probably least of all those in the lead, who have the most to lose by rocking the boat; or they just don't want to know.
// Armchair psych�
1/1/2015
guest HECO basically has two assets: a distribution network and a fleet of diesel gen sets. Solar + batteries, even residential, beats gen sets quite handily. So the disribution nework is heir only asset with durable value. And yet they are pushing customers off their network and impairing the value of that network in the process. Instead they should be exploiting DERs through fair trade to minimize the use of gen sets and cut prices for everyone. That would maximize the value of the network, hense the longterm value of HECO.
They've got it backwards. They are trying to preserve the value of their gen sets at the cost of their network. I suspect that utilies may have the tendency to think of network assets as cost centers and generating assets as revenue centers. They need to learn how to reverse that.�
1/1/2015
guest That's exactly what I was looking for. This makes sense.
Edit: but why wouldn't it make sense for them to get into residential solar to replace/complement their existing generation assets? (Or, why do they think it doesn't make sense?) They could use the network effect, as it were, of their distribution network to encroach on the territory of their solar competitors.
I mean, they could be Solar City, but with a grid!�
1/1/2015
guest Naw. I see this as spot markets brought right to the cars, and the cars' software deal with the spot prices (by reacting to them to not charge when the driver doesn't want to pay as much). Money for longer commutes would be factored in by the driver automatically by their tolerance for higher commute costs. Localized high density solar for high density work parking wouldn't fit, as you point out, only meaning more is imported via grid. The change as jhm points out to 100% EV is gradual enough that the grid can be built out. This gets factored into the spot prices, and the driver also compares that to their own PV+storage costs, and finds a balance. Eventually, solar power going directly (either locally or via the grid) to the batteries of cars will become commonplace.
BTW, none of this portends your scarcity scare. Instead, it offers jobs, things to do, people to keep busy and happy, to shove those electrons around correctly.
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Yes, but a more efficient and humane way is to let the free market handle that. Government could be brought to make the free market work right, smoothing out standards for spot market protocols in software and grid operators who want to game the system and stuff, but mostly the drivers would decide. They'd program their car what range of prices to pay and speeds to charge, curves mostly, integrated with their home prices.
(as they do now with gas obviously. every driver would understand it intuitively. if u drive by turlock u fill up -- no dif for e)
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Just in California, a lot of people who control government (voters, special interests, media, gov't, etc.) are scared of spot markets and "deregulation", but since California is also near the forefront of PV installation, and might have some companies inside it that might have heard of storage, maybe the dumbness factor of government won't rear its ugly head here. I think whatever the outcome, it will be entertaining. I just hope it isn't the idiots that ruin it for all of the rest of my life while they sort out the truth which many of us already know, like you explained.�
1/1/2015
guest I would love to be HECO, with a grid, selling solar and storage to distributed points, and a legacy diesel generator system to fall back on while building out the power structure (grid, PV, battery). The diesel gen sets would essentially be temp power during construction, only.
I'd be like, how much can I rent your roof for? I'm gonna install some stuff on it if you say yes. Then, if you like the stuff I installed, there will be a buy-out option. Up would go solar PV, of course some space for solar heat (water, air, pool, etc.) whether done by me or not (it's plumbing so I'd kind of let it be plumbers). In the sheds, in cabinets, under ground, in various nooks and crannies, I'd be stuffing those batteries and new equipment. And all plugged into it would be spot market software that everyone can participate in for the items they own. I'd ease the difficult ideas to the PUC by starting with the simple stuff, and it would be fun as heck. jhm is right: the grid is the asset, and the diesel generators are the liabilities.�
1/1/2015
guest With relentless competion, there will be practically no profit to be made in energy production. The situation of a prosumer is that they primarily invest in energy assets to meet their own needs, beyond that they trade surplus power, surplus storage capacity and surplus discretionary load capacity. In trading surplus, you are offering these goods to the market below what would be required to make a profit. Trading simply enables the prosumer to make better economic use of their energy assets.
Moreover, battery, solar and wind are technology driven energy resources that keep getting better and cheaper. So investing in any power generation asset with the expectation that it will still be profitable ten years from now is dicey.
So once a utility realizes that there is no profitable investment to be made in power generation, they can take proper steps to minimize their exposure to this risk. The key thing is to recognize that the ability to trade surplus power, storage and load does have durable value. Utilities can become the marketplace of traded power. They can be the marketmaker.
Suppose HECO were to sell retail power at the cost of diesel generation plus the cost of distribution, i.e. at zero profit when running only gen sets. How coukd they make a profit under such a pricing scheme? All they need to do is cultivate a marketplace for surplus power that is below the genset cost. Thus, they would be encouraging all customers to find savvy ways to trade off surplus power, storage, and load. The more their customers trade, the less power must be produced and sold at cost from the gensets. Thus, the gensets become a cost center with zero profit. The gensets only exist as an expensive back up to the network. The utility makes more money by facilitating trade that minimizes the cost of the whole system. Notice also tha a lot of investment is borne by the prosumer. This is a lower capaital business model for the utility. And there is very little risk that new technologies wil put the utility at risk. Just the opposite, new generation and storage technologies will make the utility more profitable. In time the utility would be able to lower fixed retail rates even below genset costs. There is much less risk of load defection or grid defection in this model. Load defection happens when customers do not have access to lower cost power when available or when the can provide power at lower cost than the market. Competitive markets for surplus power and surplus load maximizes the amount of power traded, and the utility makes money on the amount traded between any two parties. Grid defection is almost entirely avoided because any off grid system is going to have excess capacity and the opportunity to trade that excess will keep the off grid capable on the grid helping to lower the cost of the system. The utility actually profits from the over investment mistakes of the would be off gridder. If they have way more batteries than they can utilize, then the grid gets cheap storage in trade. So the utility as a kind of energy exchange values the prosumer not just as a customer but also as a supplier. This is why a $25 monthly access fee is so wrong headed. It assumes customers only create value as consumers not also as suppliers.
So HECO has wholesale prices in range of 15 to 28 c/kWh. This is outrageously high. If they worked on facilitating trade of surplus solar, storage and load, they should be able to cut that range in half, 7 to 14 c/kWh. And moreover, they must do that because many residential ratepayers will soon get into that range in off grid mode all by themselves. The value of the network is that this potential can be harnessed to the benefit of all residents and HECO.
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You just said it in a fraction of the words it takes me. Who'd have thought we'd find a free market thinker in Aptos! I'm a UC Santa Cruz alum. Welcome!�
1/1/2015
guest Are we, then, in violent agreement? This is what I meant by "Solar City with a grid".
An incumbent utility should jump at the chance of transforming themselves in a market maker, as you explained so well, thus leveraging their network asset. Moreover, by selling locally generated power themselves, instead of letting Solar City do it, they could muscle them out of the market and continue to preserve their monopoly status. Why should they buy grid services from SC for load smoothing and let SC sell power to consumers, when they could sell that power themselves, at cost, and make money with their network, and in the process transition from centralized to distributed generation?
This is why I am confused when entities like HECO fight net metering. They should use it as the way to get on people's roofs and perpetuate themselves. If they did that, how could SC compete with them in the long run, if generation margins go to zero? But instead of doing that, they piss off everybody and drive consumers off their grid!
Are utilities prevented by the regulators from going into rooftop solar, or are they just miopic?�
1/1/2015
guest LinkI think we're on the same page. HECO can certainly try to beat SolarCity at their own game, but they do not bring core competencies around rooftop installtion and solar financing. Many utilities are trying this, but it's not their strong suit. I think for HECO a better path is to colaborate with SolarCity to move more quickly to a desirable end state. This ie what Kauai Utility is doing where for instance SolarCity will build out a dispatchable solar plant for evning power at 14.5c/kWh. Such a facitlity would substantially drive down HECOs wholesale prices while better buffering distributed solar. What may well serve HECO is to locate a couple of Powerpacks within each transformer area to buffer distributed solar generated within those areas. This could radically shut down any bidirectionality issues with excessive local supply. The stored power would simply be used in the evening. The transformer area would become in effect a microgrid and would draw from the grid only what is needed to orserve a certain reserve of stored energy. HECO could finance, own, install and maintan these Powerpacks if they like, but SolarCity could assist in any of these ways. Specifically, SolarCity can help site Powerpacks on customer properties and integrate this storage with Powerwalls within the area for an even more effective aggregated system. HECO could even pressure SolarCity and other installers to provide a certain amount of storage within each area so that more residential systems can be accomodated. There is a longterm goal of the whole state going 100% renewable. How about figuring out how a few transformer areas can go 80% renewable in 2016? It seems this would illuminate the way. Collaboration can help HECO innovate at a much faster rate.�
1/1/2015
guest While of course you're right in principle, what you're asking is difficult: a 50 or 100 year old power company/utility, used to a monopoly (or at least oligopoly) situation with lots of regulatory protection for decades, with profits more or less guaranteed by regulators no matter how efficiently or inefficiently the business is being run, should all of a sudden transform rapidly in to a modern, agile, company disrupting the very business model their whole value is built upon? I think if you look at it from this standpoint it's easier to understand why that which may seem so obvious to us is so unfathomable to them... Not much different really from how a proud and competent internal combustion engine expert manufacturer has a hard time accepting his technology is getting left behind, quickly. You have to think psychology here; Denial is not only a river in Egypt.�
1/1/2015
guest Yeah, you and Lessmog are probably right that it's a matter of monopolists being trapped by their old thinking. What jhm said with respect to core competencies is also true. Even though a utility could, in principle, acquire a solar installer, there are probably advantages to maintaining the separation of concerns.
But the fact remains that these incumbents show a tremendous lack of imagination. They are practically daring their customers to go off-grid. We'll see what happens when those customers call their bluff.�
1/1/2015
guest The thing that is so bizarre about disruptive technologies is that it always seems as if the incubents have every opportunity to get ahead of the disruption and turn it into a sustaining technology. The basic idea behind the Innovator's Paradox is that companies get captured by their high profit customers. Moving into a disruptive technology undermines profitability, while corporate culture reinforces business activities and rewards leaders that cater to high profit markets.
Specifically, I have advocated that utilities divest most of their generating assets, but I am not a product of the corporate culture that learned how to optimize earnings by navigating PUC rules that allow raising rate if such assets are built out. I'm sure I'd be escorted out of the boardroom even to suggest a divestment strategy. The lates idea around having so much underutilized gas and coal assets is that the utility can save money by switching to whatever fuel is chealer at the time. That is a fine rationale to sit on redundant assets and convince investors and PUCs that you are saving money. The fallacy is that if the utility were to divest those assets they would be owned by independent power producers, where the wholesale market would sort out which fuels are cheaper and absorb the risk of owning surplus assets. OR, these assets really are not worth what the utikity is telling investors and PUCs. If you can't find a buyer among IPPs, then the assets is probably not worth owning. So do you want to be the CEO who reveals to investors that the utility's generators are only worth half of book value. Of course not, you keep the lie going another year or two until crisis hits and you bolt in your golden parachute.
So one plausible explanation for utilities making poor long term strategic choices, like clinging to old gensets instead of embracing microgrids, is that utility executives already know that there is no long-term future and forestalling the inevitable crisis is they can must for their personal situation. So they'll keep pumping out dividends until bond investors come after them.
Another symptom of distress in the industry is consolidation. For example, Souther Company recently aquired AGL. Ostensibly they are getting much more direct access to natural gas production and distribution. But the price of natural gas is tanking along with oil and coal. So whatever trouble AGL was getting into just got covered up by being acquired. This defers the crisis a few years and makes the executives at Southern Company look like they've got a strategy. But does this acquisition really position Southern Company for the disruotion from distributed energy? They also raised residential rates by 7% last year. This makes it look like they've got the ability to grow EPS. However, I checked my power bill and found I am charged 15.5 c/kWh. If they raise rates just half a cent more, then they've got SolarCity jumping into their backyard. No, they cannot raise residential revenue anymore. So right now they've got analysts thinking they can grow this business, but the illusion will only last a few years.
So not long ago HECO tried to get itself acquired by NextEra, as this was supposed to solve their problems. The HPUC rejected the deal. So HECO is clinging to its old gensets like a forgotten cargo cult.�
1/1/2015
guest It is more than just corporate culture. Look at the punishment Walmart is taking from investors as it increases investments to compete with Amazon's disruption. NRG is one example of a forward thinking energy company that is trying to compete with new energy companies and also taking severe punishment from investors for that because, well, profitability is undermined as you said. So any utility trying to move into the space should naturally be afraid of investor punishment if they make any such moves. And so they have to try to fight the disruption as best as they can and the current CxOs need to keep the stocks afloat until they retire.�
1/1/2015
guest If the goal, then, is to let the market sort out the best way to generate energy, and have the grid operators act as market-makers/enablers, then the governments should break up the utilities into independently-owned and operated generating companies, and let the grid stand on its own, with the proviso that the grid operators cannot own generation capacity (but can own storage). In other words, a strong power generation neutrality policy.
As opposed to what they're doing now: eliminating feed-in tariffs and setting minimum rent for the benefit of the incumbent.�
1/1/2015
guest What's the reason for today's drop in share price?�
1/1/2015
guest Watch out for 2016 guidance drop at ER. Very different movement of stock when annual guidance given.
Hawaii is prepping for Solarcity solar+battery sales in 2016. Notice Solarcity has been silent on all this Hawaii news. Solarcity will be the only installer providing solar+battery leases, so their market will expand as fast as they can produce batteries.
california won't implement any new net metering decisions until 2017, so I expect a massive sales push for 2016. The caps will be met by 2017, pretty much the time gigafactory storage in running strong as well as silevo factory at 9-10k panel per day production.Again, the entire solar industry will slow except Solarcity due to their preparedness for the itc drop as well as various net metering changes in specific markets.
again, big 2016 guidance will do some damage to chanos and other deeply invested shorts. Might be coming very soon on the 28th.�
1/1/2015
guest High short interest is my guess, 62% of volume yesterday FWIW. Here's the sight I use to track it:
http://www.shortanalytics.com/getshortchart.php?tsymbol=SCTY�
1/1/2015
guest jhm just explained the future to us. The value is in the distirbution grid (network), not in power plants. bwa and Rhino joined in to explain how the utilities could do what Solar City does, using solar panels and batteries to produce electricity at a cost significantly below that of our peak generators. So, investors realized that this spells the end of Solar City.
�
1/1/2015
guest It's funny, Solarcity will only get stronger as the utility companies try to get into dg solar+storage. They can't rate base dg solar + storage by law, so they have to start a separate dg company and raise capital... Just like Solarcity does. So, utilities would have to enter Solarcity's world, and that's not going to end well.
Solarcity now has 14000 employees (aiming to hire 500 people in one day today) dedicated to dg solar and storage solutions. They are building a massively deep supply chain as well as finance infrastructure that would take a utility 5-7 years to develop to compete. Solarcity has an innovation centric culture that starts from a founder at the top aligned with Elon Musk's strategic outlook on the future of energy consumption and production. The synergies between spacex, tesla, and Solarcity may be never reproducable, which is a massive competitive advantage over any new entrant like a traditional utility.
if you think Solarcity is still going to get overrun, you may need to step back and evaluate the situation again.
Net metering conflicts are only a delay of the inevitable. Solarcity is already pushing through legistation in in various markets that is already replacing net metering with the net grid market system that prices various services and products moving forward.
utilties will provide the poles, wires and essentially traffic control as a service while Solarcity and the rest of the market competitors including customers will provide other services such as aggregation of firm power, etc... Utilties will make less local revenue but far more global revenue and profit from services based structure that can extend nation wide and globally if done right.
Update:
Solar firm blames subsidy cuts for UK exit | Environment | The Guardian
zep exiting England appears to be a contributor to stock going lower today.�
1/1/2015
guest This news helped me feel a little less depressed at todays action. I have 3,500 shares with a $50 cost, so I'm down for sure but hanging in there!
SAN MATEO, Calif., Oct. 16, 2015 /PRNewswire/ -- SolarCity SCTY, -5.44% the nation's #1 solar provider, will host an all-day hiring event on Wednesday, October 21 with the aim of adding 500 employees to its sales force across ten states. SolarCity, which provides more than one out of every three new solar power systems in the U.S., provides local solar sales, installation and service from more than 80 facilities. The company employs more than 14,000 in the U.S. and had been adding more than 500 new employees per month in 2015, on average. The new hires will help it meet growing demand for solar in the Northeast, the Mid-Atlantic and California--among the fastest growing solar markets in the country.
The simultaneous events will take place on Wednesday, October 21 from 8 a.m. to 8 p.m. in the following locations:
Interested candidates for East Coast positions are invited to pre-register online at https://solarcityeastcoasthiringday2015.eventbrite.com.
- Maryland � Clarksburg; Hunt Valley; Beltsville
- Pennsylvania � Norristown
- Delaware � Newark
- Nevada � Las Vegas
- New Jersey � Blackwood
- New York � Bethpage, Long Island; Westchester
- Connecticut � Hartford; Milford
- Massachusetts � Marlborough; Norwell
- Vermont/New Hampshire � Burlington
- California � Milpitas; Emeryville; Roseville; Orange County; Hawthorne; Riverside; San Diego
Interested candidates for West Coast positions are invited to pre-register online at http://westcoasthiringexplosion.eventbrite.com.�
1/1/2015
guest I don't think that it would be necessary for the government to breakup any utilities. Economic forces will take care of that. I just think the government needs to stop protecting these monopolies from competition. Once the utilities realize that they have to compete for customer business, they will either rise to the challenge and adapt or get sold to more capable hands.
Ironically this whole question of who's going to pay for the grid is rediculous. Utilities that cannot make money off their network assets are free to sell those assets to other companies that can make better use of them. That's who will pay for the grid.�
1/1/2015
guest Ha. Maybe that's how we'll one day have "Solar City with a grid".
I agree that it would be enough for governments to stop protecting the monopolies by shielding them from competition. The market would sort itself out. Unfortunately, when incumbents and big pockets like Koch and Buffet push back, it takes longer to get there.�
1/1/2015
guest Former Gov. Bob List tapped to lead energy group | Las Vegas Review-Journal
SolarCity teaming up with Vagas Casinos to fight political battle.
Note that Las Vegas is included SolarCity's All-Day Hiring event. Yup, they need more sales reps in Nevada.�
1/1/2015
guest Spoiler alert! Its 2 Gig at the top end�
1/1/2015
guest Win A Tesla Model S From Illinois Solar Energy Association | CleanTechnica
Neat opportunity to win a new Model S and support solar energy advocacy. Odds of winning are at least 1 in 2000. Good luck.
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I don't know. SolarCity is recruiting sales people at a massive rate. They could be gearing up for an even higher top end guidance.
The threat of ITC stepdown is a real marketing boon. Homeowners want to locking the tax credit before it goes away.�
1/1/2015
guest UK solar power industry proposes emergency plan to save renewables | Environment | The Guardian
�
1/1/2015
guest SCTY is losing 6.34% in pre-market (41.36 vs 44.16 at the closing bell). Why?�
1/1/2015
guest Perhaps due to this FUDish note:
http://www.streetinsider.com/Analyst+Comments/Axiom+Capital+Starts+SolarCity+%28SCTY%29+at+Sell/10980470.html�
1/1/2015
guest I have been out for a week or so. Couldn�t follow the developments closely. Looks like there is short term pain in Hawaii to residential installers, at least to the unprepared ones. I hope SolarCity has been preparing well in advance for this and the outcome is inline with their expectations.
Overall I have a hard time following all these regional battles and putting them all together in my head.
On a related note, I will caution readers that often times in this thread we discuss how things �should� be done (not just how things �are �being done). This can lead to confusion and potentially too optimistic of perspective. I am afraid of this phenomenon as I watched the GTAT thread at Contrarian Investor forum and saw a whole lot of people getting burned up pretty badly. I am saying this holding 7K shares of SCTY with close to $50 average purchase price. Be careful in dissecting what we all hope/expect to happen vs what is really happening.
Having said that, I repeat my old line of thinking. The best kind of aggregated information comes directly from SolarCity itself. They are not only waging these battles but are making day to day investment decisions based on what they see as potential future outcomes.
So I see the latest move to hire 500 people in one day to be an ultra-bullish indicator. As we all know, SolarCity hires full-time employees (not temp contract jobs). So this 500 people is a long term investment, maybe not just a ITC shutdown marketing opportunity hiring. I consider this long term bullish signal.
In the same press release, they also said they have been hiring 500/month in 2015, while they currently have 14,000 employees. So they have grown more than 50% in staff size just in last 10months. SolarCity is no where close to doom and gloom like these shorts believe. If so why make these monumental long term investments. Management is clearly seeing a strong growth path forward.
Also note they are not hiring in Hawaii as per that press release. That says something. They may need sometime to sort through the potential options.�
1/1/2015
guest According to Lyndon Rive, Solarcity has over 30 people dedicated to policy issues such as net metering, incentives, permitting and others. With that focus, I'm willing to bet they are keenly aware of all policy potentialities within their markets. This recent Hawaii development was most likely known for quite awhile since they have already initiated $0 solar+storage leases marketing back in May. Also, the governor is behind Solarcity and distributed grid as a priority, along with the entire state congress. Hawaii is in the process of exploring dismantling HECO and creating a municipal like utility heavily weighed toward distributed solar. Their are a lot of changes proposed for Hawaii, the tailwinds behind Solarcity's solar+storage.
Distributed Solar policy is in a time of transition as now it is becoming more mainstream and potentially changing the entire utility business model permanently soon. I see it like what happens during any and all significant contract negotiations such hat we see in entertainment or in unions, etc.. There is always going to be drama involved because everyone wants to get what they want and swings the pendulum as far right or left as they can. In the case of the utilties, they are really going hard to keep the current business model as long as they can against the inevitable transition to a more dg inclusive model that involves completion and and risk. Therefore, they will use their position to leverage policy makers, commissions(many made up of ex utility exes), and media outlets, including think tanks, non profits, and other methods to manipulate public perception. I see chanos and others riding this uncertainty until they see otherwise. My thought is they are betting Scty and others won't make any real advances in investor interest until itc and net metering are determined and a longer term outlook can be modeled more accurately. Until then, they feel they can prey on fear and jumpiness of current long term investors as well as short -long investors or anyone with a short term sell time horizon.
in chanos' mind, it doesn't matter if he's right or wrong about Solarcity, it only matters that he make money when he wants and at the target he wants. His business is making money off investor perception, not being right or wrong about a company as an investment.�
1/1/2015
guest The news this morning says a SCTY owned entity in the UK went tits up, perhaps that part of the impetus for the drop. As with all SCTY dips, this is simply a buying opportunity until I hear something that changes my mind on the underlying market dynamics.
Solar is the future.
The US is a huge market.
SCTY is building an insurmountable value proposition in the US for a least the medium term.
When something happens or someone better enters the market to change those factors, I will change my tune. Gonna be a wuss and buy shares at 41 rather than 2018 calls. I mean, $60 2018 calls for $5? How does one resist the leverage?�
1/1/2015
guest Benson, nice comment about focusing on what could or should be done to the exclusion of what is being done. With that in mind, let's consider the grid-supply option still available to HECO customers goiNG solar. This option charges $25/month for the privilege of selling surplus solar energy to HECO at wholesale prices. At first that may sound like a bad deal, and it certainly is not as good as NEM. But is it workable? I think the answer is yes. Wholesale prices range from 15 to 28 c/kWh. Some of this depends on the price of oil, but other depends time of day. Customers avoiding something like 35 c/kWh in residential rates. This is so expensive that the economics of adding batteries work out just fine. The question becomes whether you make more money selling surplus for as little as 15 c/kWh or using storage to avoid paying about 35 c/kWh. With that spead, Powerwalls are clearly cost efficetive. On the other hand when oil is high and wholesale hits 28 c/kWh, selling to HECO may be the better deal. So solar owners will want to be flexible. Starting out with a little storage may be good, and one can add more in the future as battery prices fall and residential rates increase. A lease model for batteries my be quite prudent so that one can make adjustments over time.
So I do not really see this new tariff killing SolarCity in Hawaii. It may slow them down a bit as consumers recalibrate expectations and as Powerwall production ramps up. So a year from now I don't really see any problem for SolarCity. Indeed the opportunity actually expands to offer bigger systems to families and businesses.
The company that has real problems with these tariffs is HECO. They are inflicting multiple self-wounds. To the extent that they are pushing customers out of their network, they are actually creating huge opportunities for the likes of SolarCity.
It will be interesting to see what SolarCity has to say about this. I suspect they need not say anything because they know they can build their business on HECO's missteps. Certainly they know residential solar+storage beats a network of diesel gensets. So what HECO could or should do to retain the relevance of their network is for their survival. What SolarCity will do is keep offering lower cost energy to Hawaiians.�
1/1/2015
guest How the networks blew Australias cheap energy advantage : Renew Economy
This is eye-opening. Australia is saddled with enormous overspending on network investments. In most states, the network cost exceeds the generation costs. This goes a long way in explaining when electricity rates are so high in Australia.
While this may not directly relate to SolarCity's prospects in the US, I think this illustrates the kind of excesses that government authorized monopolies can visit upon energy markets. Distributed solar is primarily competing with grid distribution networks. Without it, there is very little ratepayers can do to resist an overpriced grid.�
1/1/2015
guest jhm, foghat, You guys make excellent points about Hawaii. I expect plenty of discussion about Hawaii and other net-metering battles in the upcoming ER CC, which is only 10 days away. I suspect the guys who are selling today are all short term players. It really doesn't make sense for a long term holder to sell without even knowing what SolarCity's view on this whole thing is.
Totally nailed it!
It is quite very related actually. Where I live the distribution cost is 2X that of the energy cost (distribution is 66% of the bill). My understanding has always been that batteries in sufficient quantity eliminate/severely reduce the distribution. That is what makes DG+storage more valuable than utility scale solar.
People directly comparing utility solar with residential solar on a cost-per-KW basis entirely miss this point.�
1/1/2015
guest I try not to gloss over potential negatives like a less than 90 percent renewal rate and difficulties scaling up production at the factory in a cost efficient manner but It seems like so many bears clutch on to the disparity of price between utility/residential with no thought to why they are not apples to apples.�
1/1/2015
guest Sorry to interrupt a conversation between experts. The statement above implies that there's substantial reduction in distribution cost based on consumption. What's the ratio? I was assuming for residential the cost of having power to a house is next to fixed and sure won't be anywhere near linear with consumption rate.�
1/1/2015
guest Much of the distribution costs are fixed but some like energy loss in transmission is variable with consumption. Also depending on how the power is generated, most of the generation costs can be fixed as well, while fuel and some other operational costs are variable. Even so most residential rate plans allocate fixed costs to the rates consumers pay. The basic problem that many utilities face is that their fixed costs are pretty high, and as consumers find ways to consume less, such as improving energy efficiency or generating their own solar power, this cuts into the unit sale of the utilities. Faced with declining sales many utilities raise rates.
In the case of Australia, even as consumption has substantially declined, the utilities have continued to make big investments into network infrastructure based on rather optimistic forecasts of future demand. This has only exacerbated their problems. As the utilities added fixed costs to the system, they kept rates high. This pushed more people to get rooftop solar and otherwise reduced demand. But rather than scale back adding more fixed costs, the utilities plowed ahead and continued to raise rates even further. As in the US, Australian utilities are able to expand their regulatory profit limits by building out more energy assets. So they more fixed costs they added to the system, the more profit regulators allow them to take. This is a recipe for an asset bubble. It also leaves me personally quite skeptical of any utility claiming that it needs to raise rates because of fixed costs. PUCs really need to hold utilities accountable to reduce fixed costs when demand is declining. Moreover, utilities need to be reducing their rates. As long as utilities keep raising rates they will lose marketshare to distributed solar and batteries. They cannot continue to play the regulated monopoly game of added fixed costs and jacking up rates. While the regulators may let them get away with this for a while ultimately residential solar plus storage becomes cheaper than all the bloated fixed costs. So economic reality will sink in eventually. If utilities do not begin to cut costs now, they will find themselves in an untenable situation latter. Basically, it PUCs refused to allow utilities to raise rates to make up for declining revenue, then they would suddenly find it in their interest to cut fixed costs. The utilities will come up with all sorts of reasons why they must add fixed costs, but there are many new ways to maintain service levels without adding fixed costs. For example if an transformer area needs a transformer upgrade, it may be possible to add local batteries and solar to offset the need for a new transformer. SolarCity is willing to provide such services and finance them too. Thus, the utility could maintain service levels without adding any fixed cost, only variable costs. The willingness of utilities to engage such solutions in lieu of raising fixed cost is the essential issue. Microgrid and DER aggregation can lower rates for everyone, while utilities seem bent on making things more costly.
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SolarCity Corp Plunges on Chinese Growth Concerns, Shares Plummet by 4 Percent | News Watch International
Ok, this is bizarre FUD. It is imperative to note that SolarCity does not do any business in China. It seems this is intended to frighten truly ignorant investors.
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1/1/2015
guest Demand Flexibility s Value After End Of Net Metering
This is quite helpful.�
1/1/2015
guest This gordon guy from axiom has always been spreading short player perception "shade" for a long time now. He's just taking advantage of riding on chanos coat tails right now. Look at both these guys' arguements and you clearly can deduce they have no idea of what Solarcity is or isn't... It's clear these hedge fund managers thinking this is a good short to bump up their investors returns this year.
As as far as net metering, New York just lifted its cap tonight, rejecting utilties plea not to. This is a big deal for Solarcity since they are really accelerating commercial installs there at an astounding rate. I wouldn't be surprised if they break commercial install records in q3 and in q4. No longer will the commercial side be flat, it also is now on the compounding path with residential. I don't think people understand, Solarcity is becoming a major, major corporation with currently 14500(as of October 21) with an expected size approximately 16000 by year end. Home Depot have 21k salaried employees, so Solarcity is emerging as a major employer in the United States very quickly. Employee numbers count in politics as well, so any political headwinds wear very thin as Solarcity grows in tax base in various districts around the country.
More and and more studies are coming out that support the value of distributed solar to the grid and all rate payers of utility electricity whether they have solar or not. The supporting data continues to pour in. These "newbie" short on Solarcity hedge funds are stuck in the Wall Street data loop that they fail to see the actual empirical evidence in reality. Again, most retail investors pretty much listen to their brokers or watch/read the business, so they form their opinions by what these hedge funds put out there. So perception is all they have in between quarterly updates, but even then the spin room takes over soon after and pumps the fear factor/risk off attitude toward viewers/readers. It's like clockwork. However, like clockwork, Solarcity continues to grow at a compounded rate and develop a cost structure that will thrive in post itc world. Many of us here recognize that, and have accumulated/held for that reason and a many others.�
1/1/2015
guest Thanks for all the education folks, really appreciate it!�
1/1/2015
guest SolarCity really is bringing it on as a major job creator. 500 hires per month, plus the Riverbend plants is will soon start it's 6000 employee ramp up.
I noticed that Las Vegas is included in their hiring spree. So whatever hang ups the loss of net metering may have presented in NV, SolarCity is still charging ahead.
My hunch is that Powerwalls are coming into supply and this buys them some immunity to NEM caps. Moreover, it makes alot of sense to sell as many Powerwalls as possible in 2016 before the ITC stepdown. So having a supply of reasonably priced home batteries in 2016 is a huge advantage. Does anyone know what are the next best competitors to Powerwalls? I'm thinking there's no other Li-ion under $500/kWh.
So I expect 2016 to be a huge year for SolarCity and other installers. Creating massive numbers of new jobs is one way to influence the politics to ease the ITC stepdown. Politicians generally do not want to be seen as destroying jobs in an election year. Remember the RNC National Convention in 2012. It was all about glorifying the role of entrepreneurs as job creators in the US. Well, if they want to strike that note again, they are going to have to acknowledge Elon Musk. The Musk enterprises combined have been one of the largest job growth engines in the last 4 years. This is not to say that any business should be based on tax breaks or any other government incentives, but the case for easing the ITC stepdown is not to disrupt progress but to find a reasonable path to its elimination. For example, stepping down just 2% per year will keep growth intact while completely eliminating the support in 15 years. The key thing to fight for is market competition in retail electricity markets. So there are plenty of ways for conservatives to come around on distributed solar.�
1/1/2015
guest I'm thinking we should see SCTY pop up a bit today. It seems well oversold. Of course, shorts would love to test prices below $40. Let's see.�
1/1/2015
guest Although it does not change the conclusion that Solar is still viable with the new "grid supply tariff" the tariff does not change based on the time of day or price of oil. Instead it depends on which island grid the customer is connected to.
From HECO's website:
".... the proposed grid-supply tariff would credit customers� bills at a fixed rate, which the Companies propose should be established by computing �the 12 months ended June 2015 average Base Fuel Energy and Energy Cost Adjustment rateplus a portion of the contribution to fixed costs embedded in the retail rate.�278 According to the HECO Companies, this results in an effective credit between $0.180/kWh - $0.298/kWh for residential customers, depending on which island the customers resides (the credit for commercial customers would range from $0.162/kWh - $0.302/kWh).
Table 1. HECO Companies� Proposed Fixed Credit Rates for Grid Supply Tariff (cents/kWh)
Rate Schedule R:
Oahu 18.0
Hawaii 22.5
Maui 23.1
Lanai 29.8
Molokai 27.5
The HECO Companies further propose that the grid-supply tariff credit be fixed for a period of five (5) years,....."
GSP�
1/1/2015
guest I wouldn't mind seeing scty drift a tad lower this week as shorts push it down looking to close out profits by Friday. Need one more little dip to buy myself all the way in where I want to be.
Then let the fireworks begin! The squeezing may start as soon as next weeks earnings/guidance on the 29th or maybe it takes waiting until a couple quarters of earnings are announced in 2017 post itc stepdown. Either way, the checks in the mail! Winter 2017 will be spent in the BVIs lounging�
1/1/2015
guest download and read the whole paper from RMI�
1/1/2015
guest what I notice about this batch of hedge fund shorts is that they are really banking on interest rates going up soon. They assume Solarcity's bonds and abs will suffer big time as a result. However, what is happening is the stress tests rating agencies are doing reflect a low risk asset class and cost of capital rates are trending toward par with prime mortgage rates and then will be lower. The funny thing is rates may go up, and Solarcity may plateau or even go down more. We have to remember Solarcity has received 99.5% of all payments due to them since 2006. That's nearly a perfect payment history for nearly 10 years now. Now ask yourself, what business-- housing, auto, etc... -- with that type of payments collected over a decade period? Again, my feeling is chanos and gordon johnson and other new shorts are looking for a quick buck while this ITC/net metering transition is a speculative issue becuase as soon as the dust settles, we will not be seeing them around ever again. My only hope is their timing is off and they get caught with their pants down in the middle of a squeeze. They are big boys... Sometimes you play with fire you get burned. This might be that time for them.�
1/1/2015
guest Thanks, this is helpful information. The FiTs are even better than I expected. Even on Oahu, it's about 5 c/kWh above SolarCity's PPA.�
1/1/2015
guest Any thoughts on how this might vary from the German feed-in-tariff under the Energiewende ?
The simplicity of that system was wonderful. Is that the plan for HI? Set the prices and let the market handle everything?�
1/1/2015
guest It's important to keep in perspective that utilities are interest rate sensitive. As utilities raise rates in response to interest rates, SolarCity will still be price competitive. Moreover, SolarCity is still in the phase of earning credibility with bond investors, so even as risk free rates increase the specific risk premium spread may decrease. So the net effect can be muted. Meanwhile, utilities have enjoyed very high credit rating until recently. But I suspect this will decay as utilities face competition. Specifically the risk of load defection were utilities have retail rates above rooftop solar should give savvy bond investors cause for concern. Recently Moody's raised these issues. So going into an increasing rate environment, if SolarCity continues to improve its credit rating while this declines for utilities in their footprint, this may well work out to advantage SolarCity.
Of course, to your point, these shorts don't really care about the underlying business. They're just trying to score a few quick bucks in trade.�
1/1/2015
guest And here's the next dip. $39.50!�
1/1/2015
guest Looks like it's going down in step with TSLA.�
1/1/2015
guest bought some SCTY in this dip. Plan to buy more if going towards 35.�
1/1/2015
guest You, me and Elon!�
1/1/2015
guest To add, Elon bought $5million in Scty at ~$40 a month or so ago. $40 will be a floor in my opinion, only see below that for limited spikes so we'll see how far these below 40 prices are sustained.
Another aspect to utility credit rating volitility is retirement funds banking on utilties being solid. I think as Solarcity gains in bond world, we could see a massive influx of investment capital flood in as retirement funds look for Safe havens. This, to me, is another reason utilties are using every and all dirty tactics to preserve their revenue and rate base. What people don't understand, their is a gigantic battle going on behind the scenes. Utilties are paying for groups to knock on doors to conduct surveys as well as to obtain customer comments on their solar systems, suggesting solar leases will go under as well as "grandfathering" being taken away making their investment become a liability. This is happening specifically in Nevada, Arizona, and California right now. specifiocally in Florida, they have funded a group under the guise of "smart solar" and going around getting people to sign a petition that nearly mirrors the solar industries petition, however hiding its intent to reduce consumer net metering and securing utility control on power production and distribution. They are also directly contributing to puc commission candidates. Pinnicle west donated $3million to two candidates for commission election.... Yes, that's $3million for a commission seat when the historic amount that someone sends on a commission campaign averages in the thousands at most. How corrupt is it that a utility can contribute money to a commission that is designed to oversee it! And I can see why... The fact is now a super majority of independent studies have concluded net metering is a benefit to all grid users. And so does the vision on the inevitable future starting in three short months in ramping numbers... Not one study conducted thus far on energy storage + solar says it's not a transformative technology that will revolutionize the grid, further decrease retail rates and improve the grid beyond the likes we've ever seen before. Distributed Solar is here to stay and storage extended that indefinitely. In the face of these truths, we are in a state of defensive posturing by utilties, which they know they can't win through transparency, but through trickery and deception only rivaling the greatest con men and hustlers in history. When that happens, history tells us it's only a matter of time before the cards fall and the utilties have to break... The break will happen when true negotiations happen with the dg industry on a new business model. It's already happening in NY, it is going to happen across the country as well.
Lets staet some predictions on q3: I say they will book another record quarter at over 400MW. They will have amassed above 300k customers. They will have begun installing powerwalls with success and high demand, and have begun to ramp up the California aggregation pilot program that will demonstrate the significant value of dg solar aggregation to the grid within a business model that works effectively. They will hit over $9bln in contracts and achieve about $3.5bln in net retained value. They will improve all in cost to 2.88/watt or lower. Bonus, they will announce 2016 guidance of 1.6 gigawatts install goal. Also, may give guidance on powerwall+ solar numbers for q4(and possibly beyond).�
1/1/2015
guest The issues that crashed Yieldcos are so close to solarcity's financial model that there has to be collateral damage. Yieldcos showed even professional energy investors that they didn't fully understand the product.
Plus the chance that they will need to give back some of the juicy profit of the early PPA's sales.�
1/1/2015
guest That would just be awesome!
Don't mean to be a Debbie Downer but want to highlight that in general SCTY falls after ER, probably because the bots are coded to look at EPS. As we know more the growth, more negative the eps and bots think the worse the matters are.
Here is a list of 1-day price moves for each quarter after ER, latest first:
2.64%
1.43%
-5.76%
-5.33%
-7.26%
12.35%
-5.71%
-16.70%
-10.80%
-12.37%
-14.43%
I am just alerting you guys to keep yourself open to a downswing possibility. Not necessarily predicting it.
If 2016 guidance was released independently, just in terms of MWs and such, the stock will rocket. There will be a squeeze. But if they do it together with traditional metrics, I am not so sure. Because bots (and idiots) will have a say in it.�
1/1/2015
guest If the purpose of the feed in tariff is to subsidize renewables then this sort of step down in tariffs could makes sense. My own view however is that feed in tariffs are not subsidies, rather they are a means to trading power. When a utility has a monopoly on distribution, it takes a basic economic freedom away from all others. Specifically neighbors are barred from selling or even given surplus power from one to another. Thus, feed in tariff is a small accomodation for a basic abridgemet of economic liberty. Specifically, a feed in tariff is the only legal means an ordinary resident has to sell power to their neighbors or anyone else. From this perspective, when I sell power to my neighbor I should be able to receive whatever my neighbor is willing to pay for the power minus transaction costs. Since my neighbor is willing to buy power at ordinary residential rates, that should be the basis for the feed in tariff. Some utilities have argued that feed in tariffs should be based on wholesale spot prices. This would make sense if my aim was to be a wholesale power producer with all the efficiencies of scale that would entail. But as a homeowner with surplus power it is not my intention to transmit power long distances, rather my interest is merely to sell power to geographically close neighbors, where in the is only little distribution cost and not long distance transmission. My neighbor and I could set up our own powerline to accomplish this, if not for the monopoly laws preventing us from doing that. So the curtailment of economic freedom is not that we cannot set up transmission lines into the grid as power producer could if they wanted to sell into the wholesale market. They problem is that we cannot sell directly to our neighbors.
So that is my own view on feed in tariffs, but apparently few people in power see it that way. The political and legal framework is what it is. So people in Hawaii are lucky to get the tariffs that have been offered. Fortunately they seem high enough to be workable. People should continue to install solar and batteries under these rates.
The next sort of concern I have is that in reality distributed solar and batteries should be exploited to bring down residential power rates for all people based on trading suplus power and storage capacity. I am actually willing to sell power to my neighbor at below the utility rates. How can I do that given the distribution monopoly? Virtual net metering and community solar are such mechanisms. But the essential thing is that the utility needs to value my connection to the grid not just for what I might buy from my utility, but also what surplus I may be able to sell to my utility so as to achieve a lower cost of power for all ratepayers. There is a fundamental injustice in a system that puts higher prices on my neighbor, but prevents me from selling to that neighbor at lower cost. So again as basic accomodation within this monopolistic framework, utilities should have a social obligation to use whatever cost competitive grid services I can provide to reduce rates for my neighbor. A free micromarket approach would go much further, but as an accomodation utilities really should make good use of economic surpluses.
In the current state of affairs, utilities seem to want to raise rates on everybody. They fear defection through customer owned energy assets, so they want to put extra costs on customers with solar. This is an economic regime that cannot last. Defections will increase and utility rates will increase, even as solar and batteries decline about 14% per year. Either we figure this out, or we wait until crises happen to figure this out. HECO and Hawaii is well into crisis. There's no reason residential rate payers couldn't already be paying less than 20 c/kWh, but the utility is not even down to this price wholesale. Apparently this utility is really good at passing costs onto ratepayer, but really lousy at cutting costs for anybody. The fact that rooftop solar is actually cheaper than wholesale utility power shows just how messed up HECO is. But I fear that there is a little HECO in every utility. Any utility that is charging residents more than a SolarCity PPA is dysfunctional and passing too much cost onto ratepayers. They need to cut costs.
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Ha, it looks like we could set limit orders about 10% below to give these bots someone to sell to.�
1/1/2015
guest Just like with TSLA there will be a plateaus and downswings until the amount of people that "get it" hits a critical mass and overwhelms the efforts of shorts. It took a certain number of actual people taking actual test drives to start the TSLA short squeeze, it'll take a certain number of earnings announcements and revenue target achievements until we hit that critical mass for SCTY and reality becomes clear. Maybe it's next week, maybe it's nine or eleven quarters from now. Who knows when public sentiment will hit that "ah ha" moment.�
1/1/2015
guest Well, I guess I was well off the mark yesterday. We're still oversold. Are there any weak hands for shorts to shake down? I guess we shall see.�
1/1/2015
guest I'm starting to think Nov 6 calls bought on Friday might be the way to go if we stay below $40 they're cheap. There's gotta be room for at least a mini-squeeze, right?
Just thinking about investors reading articles the day after earnings/guidance and looking at this ridiculous price. 2016 guidance isn't necessarily on the same day as earnings? Is there a reliable date range estimate for that?�
1/1/2015
guest No guarantee at all that 2016 guidance will be released IMO. It could easily be q4 earnings call when they release guidance for 2016�
1/1/2015
guest Sure, there's room for a squeeze, but betting on when it will happen is not something I would do. For me, I see this as an opportunity to lock in a long-term investment at a fantastically undervalued price. This stock will be volatile for years but locking in shares at low prices makes it psychologically much easier to ride out the volatility.
I would also add that in response to a short attack I believe it is most helpful for longs to buy shares. I do not think that buying calls helps much in stabilizing the share price. But when strong hands buy and hold shares it creates a floor.
I've already got more shares than I need, but I have set a limit order around $35 to take advantage of aggressive shorting and to help set a floor.�
1/1/2015
guest Fair enough, and I'm not looking forward to watching share prices this time next year as I look to reap the rewards of Jan2017 calls, I just can't ignore the leverage opportunity when the price is right
I have zero interest in setting any kind of floor for SCTY or stabilizing prices, Elon's got all the money in the world to backstop this company so as far as I'm concerned the lower it goes the better!
Took a chunk of money and put 60% in shares then waited for good LEAP prices and am buying in where the EV seems +. The only annoyance is the 2017's are getting cheap, but I'd love to have more 2018 leveraged exposure at $80-90 or so. I guess they're hard to price given the risk of that much time.�
1/1/2015
guest Arizona utilities lost yesterday trying to raises solar fees. Won't be able to attempt again until summer of 2016. No cap on installs either. NY just lifted its cap on net metering. Utilities won't be able to change it until the end of 2016. Full retail rate too. any changes to retail rate net metering in California won't take effect until 2017. To add, Solarcity will have 14500 employees by the end of the week, and according to Solarcity exec. Jon Carson, they are now hiring at a rate of 300 people per week... That's 1200 a month... Hardly a hiring a hiring pace of full time employees that expects to slow growth.
These are not the conditions for today's scty downward pressure. Something's got to give. You can only hold the beach ball down so long...
my only critique of Solarcity is that they say eduction is critical for reducing acquisition costs, but don't put Lyndon Rive out on the media circuit or have him doing multiple news interviews a month explaining the realities of distributed solar today. Lyndon needs a Twitter account. Needs to engage America. Maybe bring out Ra with him, sponsor a national sporting event or popular skateborder, do a reality show on HGTV, etc...
Its time for Lyndon to step up and get out there. The cheapest way to educate is for him to become well known with the public. If Elon can do it, so can Lyndon. Come on, Lyndon... You're a damn underwater hockey player on the national team, can't get much better of an ice breaker then that!!!�
1/1/2015
guest A nice real world example of the topics being discussed in here about how the future of the utility sector will go. Seems like all these ideas in this thread will surely come true, just a matter of time.....
How Solar, Batteries and Time-of-Use Pricing Can Add Up to Value | Greentech Media�
1/1/2015
guest Looking through the devil's eyes.
Retained Value metric is not listed in the official 10Q and 10K filings. It's listed in the 8K reports. I wonder if retained Value type metrics get independently audited or not. I know the stuff in 10Q's and 10K's gets audited, in SolarCity's case by Ernst & Young.
If retained value is not audited, there is some legitimacy to shorts' claim that investing in SolarCity is essentially faith based. We trust management to tell us the truth while no one is/can verify these metrics. Not that I mind the trust but just stating it as it is.�
1/1/2015
guest This is the exact last thing they should think about doing. Yes they need to get someone out there more, but certainly don't have Lyndon do it.
Did you see him on CNBC the night before they announced the high efficiency panels? He was horrendous. Never let engineers talk, ever. All the anchors on CNBC seemed more confused than when the interview started and just wanted the segment to be over.
Efficiency will come on it's own. Customers will figure this out and leverage the Information Age. I'm working on a self-brokering app for residential solar installs. We can take care of these soft costs ourselves.�
1/1/2015
guest Does anyone know anything about this Schneider electric partnership?
http://cdn.solar.schneider-electric.com/wp-content/uploads/2014/12/conext-xw-case-study-solarcity_eng.pdf�
1/1/2015
guest just zero out all of the retained value except lease/loan payments.�
1/1/2015
guest All we need is for SCTY to have one good quarter in Wall Street's eyes. With 45% short interest it is the 10th most shorted company...
There's a huge factory being built with significant progress in NY
There's a lot of hiring going on
Solar Panel adoption will be picking up soon as well
I hope for an epic short squeeze because this stock has been brutalized as of late... for no particular reason,�
1/1/2015
guest Retained value has been around from first quarterly review nearly 3 years ago, so no mystery that it's not q10 because rules only account for basically money made, spent, invested, etc... Like dalalsid said just look at nominal contracts. Nominal contracts are massive. I'm estimating they around $9billion right now. That's money legally contracted to be paid to Solarcity over the next 20 years, not year one. Banks known this, real investment firms know this. As such, Solarcity continues to receive billions in capital as a result.
If you look at solar city's actual track record over almost 10 years now, they have received over 99% of all payment due. That is a fact that rating agencies understand and the sub 4.5% rates reflect that.
If chanos and gordon are the most astute guys with the inside info, they probably would be a hit at rating agencies and command big salaries much less stressful then spinning the hype game on CNBC. Yes, both of these hustlers are regular on CNBC, matter of fact, they may even be on call for interviews as stand by "experts" when CNBC needs them.�
1/1/2015
guest Yes, you are right. There is an entire section showing Nominal Contracted Payments in the 10Q.
I don't know who Gordon is. But I wouldn't take Chanos lightly. Based on google searches, he appears to be a Billionaire. Per wikipedia, he is apparently one of the early folks to discover Enron fraud. He must be some sort of an expert in financial analysis (with a cynical view of course). He fundamentally doesn't get SolarCity business model or he is willfully misrepresenting it. In any case it's worth listening to him. Whether we agree with him or not is a different story and we can decide that in step-2.
On a related note, do you guys know of any other company out there which primarily does Business through leasing? I mean there gotta be other companies where they can't book the future revenues but are forced to book SG&A up-front. I am just having a hard time dealing with this situation where Business is growing in one way but the market is responding in a completely different way.
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How about cable companies or satellite TV companies. Didn't they have to lay down mega investments upfront for slow gradual revenues that will come over many years? I wonder how their financials looked in the early days and how market responded to them.�
1/1/2015
guest According to this screenshot posted on reddit a week ago the yield on the 2019 bonds is 8%. Does anyone know if this is a paid service btw?
http://i.imgur.com/YSzf1Yu.png?1
Also you shouldn't underestimate the risk associated with SCTY, if the regulatory environment starts going against net metering SCTYs whole business model might become unprofitable and their existing contracts could become liabilities. Don't fall in love with a company.�
1/1/2015
guest Yes, that's a Bloomberg terminal screenshot. Expensive service, not meant for normal retail investors.
That bond you highlighted is a convertible bond. That trades very differently than normal bonds. What's more important is at what coupons they are issuing the new bonds yet. That's between 1.6 to 5.45 based on maturities of 1 years to 15 years. Not bad at all.
No offense but your comment about existing contracts becoming liabilities is nonsense. Even in the toughest battleground states, net meeting of existing homes is always grand-fathered.�
1/1/2015
guest For a bond to be convertable only makes it more valuable (potential extra profit if SP moves over strike). If those numbers are correct which I assume is very likely, then the market certainly puts a very significant risk on SCTY debt. If SCTY was to issue new debt with expiration in '19 the coupon would be 8% because that is the market price. I would like to see a source for your claim of 5.45% debt with expiration 15 years out, if the screenshot is legitimate then you are wrong, and it's not even close.�
1/1/2015
guest From SolarCity - Current Report
Title of Series of Solar Bonds
Rate?
1.60% Solar Bonds, Series 2015/C108-1
%
$
2.65% Solar Bonds, Series 2015/C109-3
%
$
3.60% Solar Bonds, Series 2015/C110-5
%
$
4.70% Solar Bonds, Series 2015/C111-10
%
$
5.45% Solar Bonds, Series 2015/C112-15
%
$
Date of Report (Date of earliest event reported): October 13, 2015
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Granted the ones I posted are solar-bonds, backed by consumer payments. The one you are referring to is not.
Nevertheless that doesn't change the fact that SolarCity can finance all it's activities through these sort of consumer-backed financial instruments (solar bonds, bank loans, etc). It can not only finance new MW installs but can actually grow the MW installs.
SolarCity wouldn't be hiring the rate at which they are if they are anywhere close to financing problems that you are alluding to.�
1/1/2015
guest There are lots of companies that lease things, REITs, banks, equipment leasing, vehicle leasing, shipping container companies, and more. But what seems special about solar lease companies like SolarCity is that they both install the asset and lease it. So it is a sort of hybrid company, and I think this is what makes the business model fairly confusing for some investors. Spinning off a yieldCo is one way to break down a complex hybrid into two simple business models: DevCo and Yieldco or PowerCo as SolarCity likes to call it. The income and balance sheets get much simple splitting a company this way. But I do worry that it weakens the capital structure and create conflicts of interest, i.e., how exactly do the two separate entities agree to a price for transferring asset? Another thing that makes solar leases tricky is that it is very difficult to transfer the underlying asset. Installed solar systems are not marketable assets in the way, say, a house or car is. So in an auto finance company the resale value of a leased car is a natural way to value the leased asset. Banks too can sell loans to other financial companies, so there is a market value. But mostly banks just discount the future payments and set reserves for defaults to value a book of loans. The loans are typically discounted by the yield curve. SolarCity could in fact discount according to the yield curve plus a spread for default risk as a bank would do. This would tend to inflate the NPV relative to the 6% discount they presently assume. Moreover, the NPV under the yield curve would change daily based. Personally, I think SolarCity's discount is quite conservative and avoids extraneous value fluctuations based on the interest rate environment. It's necessary for banks to manage that level of complexity, but would be overkill for a solar financer.�
1/1/2015
guest Before anyone gets worked up about debt financing putting retained value at risk, let's consider how big this debt is. As of the last quarterly report total debt is 30% of Gross Retained Value. Moreover, SolarCity has sufficient cash and cash equivalents that Net RV is just 20% less than Gross RV. I would also point out that all debt relating to PPAs and leases are paid off within the 20 year initial term. So whatever value renewal terms may have is debt free. So SolarCity is sitting with 80% equity in its Gross RV. This seems extraordinarily comfortable to me.
The real interest rate risk that SolarCity has relates primarily to the ability to take on more debt to finance new development. So if interest rates were to go up or SolarCity's credit rating were to decline, this could slow the pace at which the grow. It would not threaten the value of their existing book of business.
I honestly think SolarCity has an exceptional business model and capital structure. But one has to take the time to understand it. Shorts know they can frighten and confuse investors that don't do their homework.�
1/1/2015
guest
Guys, Solarcity is selling electricity to consumers. It's a commodity. It's not a car or a house. It's a commodity. If the system doesn't produce electricity, the customer doesn't pay. That simple when a solar lease is transferred. No one dime of capital is put into the actual system by the consumer. Therefore, they do not add value to the home and thus do not add this cost into the sale price. The house is cheaper for a prospective buyer, in addition to the cheaper electricity from Solarcity. In California specifically, if a person that's had Solarcity lease for 9 years, they are grandfathered the rate (and net metering rate) for the remainder of the original lease. Thus far, as I recall, Solarcity has had over 90% of lease holders successfully transfer the lease to new owners and they've thousands thus far. The rest purchase at npv discount and add it to the sale price. And only a handful have actually had the system removed, according to the CFO Brad Buss. That's pretty clear indicator Solarcity is not having much difficulty during home sales.
also, what actual bond rates are you looking at, because Solarcity is securing 100's of millions of dollars in ABS capital, averaging sub 4.5%. As I recall, they did convertible bonds somewhere around 2%. And as for tax equity, they are hitting rates around 8%, which is then packaged as ABS at sub 4.5%. Whatever you're seeing on your terminal has nothing to do with what Solarcity is getting. Nothing at all on what they have locked it. It's kind of ridiculous people actually believe unsubstantiated opinions and not the facts that are easily available to obtain.
Every single lease/ppa is a Solarcity revenue generating asset that's profitable year one. Think about that for a few minutes. Every single net "loss" is attributed to investing in the growth, nothing to do with sales what so ever. Every sale is a profit. Period. Read the quarterly.
Also of note, people seem to be forgetting Solarcity is already selling storage+solar systems. This not something that's myth or down the line m, it's happening now. They are evolving the concept of distributed solar power right before our eyes. The values added by storage are staggering. Solarcity not only will be establishing MWs of firm electricity for the grid, they will be linking to consumer products for the home like apple HomeKit, wifi enabled air conditioners, lights, mattress covers, door locks, windows, washer and dryers, home heatin systems, thermostats, electric vehicle chargers, wearable devices like Fitbit, Up3, and Apple Watch... The sky is the limit wig what Solarcity is at the center of. Not only cheaper electricity, but overall energy efficiency to save money like never before.
If someone has a counter arguement to the overwhelming evidence that Solarcity is not only in one of the most advantageous position to leverage these consumer sided market, but also the overwhelming probability that if they maintain even just a relative fraction of that position 10-20 years from now that current leasees/ppa customers would gladly stick with Solarcity and renew and or purchase/lease new products.
lastly, to say Solarcity is just a lease company is just patently stupid. My goodness, what do you call the thousands of crews putting these systems on houses? Bank tellers? Come on now, a little common sense on these chanos/johnson types out there. Just because the stock goes down doesn't mean they are right and the rest of the factual world is wrong.�
1/1/2015
guest Foghat, I'm not sure if you are objecting to something I said. I don't think we are disagreeing on anything.
The fact that SolarCity is cashflow positive quickly on a project basis is exactly why it can have 80% equity in its Retained Value while doubling the book every year. This is truly phenomenal. It speaks to both the huge opportunity rooftop solar presents and the level of entrepreneurship of this company.
Note that traditional banking might only have 8% equity in a loan or lease. SolarCity is at 80% equity. If SolarCity were just a finance company everyone would think they are ridiculously underleveraged. But what they are doing is feeding project cashflow directly into the next project. The funny thing is that in some number of years when solar has a much larger share of the energy market, the rate of growth may slow to say 35% per annum. And when the slow down their traditional accounting metrics will look much better. The company will be throwing off massive cashflow. This is presently obscured by the fact that they are plowing cash into new projects as fast as they get it. So their growth comes not by high leverage such as a finance might deploy but by actually installing solar panels.�
1/1/2015
guest
Sorry not aimed at you, just replied instead of started a new comment. My mistake.
i think Solarcity is responding to the Hawaiian puc decision through this statement:
TASC Files Lawsuit Against PUC | Big Island Now
it will be very interesting to see how fast the puc decision gets overturned. It's turning out to be the entire state against heco and puc commission. As I've said before, Solarcity et al are fighters and thus far have fought well against utilities efforts. I expect no different in Hawaii lawsuit.�
1/1/2015
guest Hmm, no cost-benefit analysis per legislation and a rush to decision without public hearing. That does sound like legal trouble for the PUC. I hope the court blocks this decision until these deficiencies are remedied. I do think their is plenty of opportunity to reduce FiTs a little bit from NEM levels and still grow solar at a fast clip, but this should be done with due process.
Poor HECO with their fleet of aging gensets! I guess NEM can be seen as a penalty for a utility charging retail rates above market prices. To wit, HECO is charging about 38c/kWh while SolarCity can offer 13c/kWh. So HECO is clearly charging well above market price. So they get stuck buying power at the same price the are selling. This is only a problem if they are charging too much. If they were selling at, say, 12 c/kWh, NEM would have virtually no impact on the utility. I think I may have just discovered a whole new rationale for net metering. Simply ask, is it fair that utility X is charging everyone a rate higher than rooftop solar? How is it fair for a monopoly with every economy of scale advantage to charge above market prices for power?�
1/1/2015
guest Very similar to the "new battery tech" doomsday warnings around the TSLA Gigafactory. If optimal battery composition changes, so shall the Gigafactory. If PPA becomes unprofitable, SCTY can just pivot to sales in whatever form they feel is most profitable. Solar is not going away.�
1/1/2015
guest Im guilty, I love this company and their giant insane retained value growth�
1/1/2015
guest jhm, The way I understand things, all these other entities like Banks, REITS etc get to book the entire asset value under Book Value. But SolarCity can't really put the discounted future cash flows (retained value) under assets in it's balance sheet. It's forced to, effectively, put the cost of the system as it's asset (as opposed to price). Given their insane 50% gross margins, much of the true shareholder value is hidden away from the book value. And so SolarCity was forced to come up with a new metric (retained value) to showcase it.
Chanos is cleverly making use of this opportunity when saying SolarCity should be valued at 1.2 to 1.3 times it's Tangible Book Value. In other words he is saying SCTY should be trading around $3!
I am a bit puzzled that only SolarCity (and a few other solar companies) are struggling through this sort of accounting misconception.
I really wish SolarCity has come up with a business model where they could put the retained value directly in the balance sheet. It seems like their thinking was - well money is money, business model first, accounting last. That ideology worked so far fine but is clearly not working anymore. If heavens forbid if they have to go to markets to raise capital, which is not backed by consumer solar payments, say to build a 5GW factory, they will be raising capital at really poor rates/terms. As we see now, conventional accounting matters, market perception matters, and share price matters. I hope folks in management are learning this and will do something about it.�
1/1/2015
guest few California factoids (apologies if previously mentioned "total size of the California energy market is $10.2 - $10.4 billion / year" "the historically highest amount of power on the California grid was July, 2006, at 50,270 MW. 50 GW " "In just PV alone, California has about 6,000 MW of solar in the form of utility scale / larger scale solar power plants. In behind-the-meter rooftop, CAISO estimates another 3,000 MW total. In aggregate, that is already --->>20% of the states generating assets.... CAISO estimates another 3,000 MW of behind-the-meter rooftop installed by 2020" CAISO is California Independent System Operators) OC Renewables - Home�
1/1/2015
guest I see a lot of high NPV numbers thrown around in this thread, but let's be careful not to overstate the numbers here. SCTY had a NPV of $2.4B in leases and $.5B under MyPower, that is a total of $2.9B if you can add the numbers like that, not 100% clear on their accounting. Their debt is $2B.
Edit; think I misread their balance sheet so removed some of my post.�
1/1/2015
guest Off Grid Electric secures USD 25m for distributed solar in Africa - SeeNews Renewables
Off-road (edit: off grid)electric is installing 10000 systems a month that is pretty awesome. I would love details on what percentage of this company SolarCity owns. would that info be available if I dug through the financials?
Solar city installing about 8000 solar panels on a landfill to be completed by the end of next year. It's great to see such strength in the commercial and utility sector. Once again it appears that Management was telling us the truth about strong bookings in q3 and q4 for the commercial segment. who would have thought?
Solar energy system OKd for Tonawanda Landfill�
1/1/2015
guest Something some are not paying attention to that is linked to solarcity and solar in general.... Most current republican candidates are climate change deniers, also aligned against EPA actions. Trump is quoted as saying climate change is a conspiracy started by the Chinese... so, yeah on the week Joe Biden drops out, Hillary Clinton is testifying for Bengazi (as well as is under investigation by the FBI), and Bernie Sanders, the rising candidate for the democratic party, being projected as a communist and getting black out treatment on all news media fronts attempting to snuff out mainstream support... you might say the perception among computer button traders might be the solar industry growth story is gong to hit a republican(trump) brick wall. Those vocal traders out there now, if it bleeds it reads, if it bleeds, people hit the sell button. So, spin baby spin and ride the slide down as long as you can.
But in real news:
Floridian liberals and conservatives get Supreme Court judgement which gives rooftop solar momentum for legalizing "net metering." Utilities losing.
Aggressive rooftop solar proposal clears key legal hurdle - LA Times
TASC sues Hawaii PUC; injunction on stoping net metering expected soon. Utilities losing.
Arizona utility denied rate increase. PUC says need cost/value of solar to grid, do it in the rate case in summer 2016. Utilities losing.
NY lifts net metering cap, won't stop until value of solar is established, which has until 2017 to be determined. NY utilities have cooperated for the most part and see the writing on the wall.
As noted by Blake, Solarcity investment in Africa is doing very well, aiming to do 1 million installs by 2017. International expansion is underway, global growth plan at the cutting edge of distributed solar.(Note Nancy Pfund is on Solarcity's board and is now the Chairwoman of the Board for Off-Grid Electric in Tanzania).
Solarcity demand logic is showing some outstanding results. The data speaks for itself, and the unnamed corporate customers (most likely one being Walmart) are saving big time. Just look at the charts, proof is in the pudding:
Energy Storage North America 2015: Storage in Action, Part 2 | Greentech Media
So, while the distraction seems to be working in the mouse click trading world, in the real world, Solarcity is gaining momentum and codifying its position in a transitioning massive energy marketplace.�
1/1/2015
guest Looks like some pretty sick Nov20 call volume today at $40 and $44. If I'm reading this right some guy bought options for half a million shares at each price point?�
1/1/2015
guest As an asset Solar energy system leased and to be leased net are $3421M. Also MyPower customer notes receivable are $237M. This seems in line with GRV at $3817M, which wold inude a curgent portion as well. They still have to earn it, so there are also deferred cost and deferred revenues on the balance sheet. I don't see any glaring gap here.�
1/1/2015
guest Aggressive rooftop solar proposal clears key legal hurdle - LA Times
Wow, this is a fantastic development, not just for Floridians, but as setting an example and changing the political discussion for all. This is the sort of market approach that will lead to the greatest economic efficiencies.
Thanks, Foghat, for posting this.�
1/1/2015
guest I bought a J18 $40 call for $10.50 today. Seems to me SCTY should be able to get back up to $50 in 2+ years. I would like to buy more but it's tough for me to sell any shares of TSLA when the share price is so low.�
1/1/2015
guest I would say it's far more likely to be at $150 in Jan 2018. $90 2018 options finally sank down to $2 today and I grabbed a bunch.
Pretty much done buying unless this price point is maintained for several months which seems unlikely to me. Now we wait for the squeeze.
I'm very excited about 2016:
The PA budget should be passed any day now with solar incentives to release our pent up demand.
The ITC stepdown should lead to a big push in sales(as it did in Germany) which will help the short squeeze.
Hillary or Bernie may very well promise to nix the stepdown to pander to voters.
Buffalo Gigafactory comes online.
New high efficiency panels allow for good sized arrays on urban flat roofs.�
1/1/2015
guest Yes, 2016 should be a really big year in anticipation of ITC stepdown. Already SolarCity and other installers are crafting marketing messages around locking in solar before the stepdown. Moreover all the installers are simultaneously trying to reduce cost structures in advance of stepdown while maximizing the MW installed before the stepdown. So while I would expect a big push in marketing and sales, but very little price competition. We know that competitors like to exaggerate how expensive SolarCity is, but as long as the company is able to grow by more than 80% per year, I see no reason to leave money on the table. So 2016 could be a feast year with high volume and high profitability. In 2017, margins could get thinner under two different scenarios. If ITC does step down to 10%, this would increase the after tax cost of the system, but SolarCity and others are prepared for this. Solar prices remain about the same for consumer, but margins compress for installers. Or if ITC does not step down, but remains over 25%, then cost competition picks up in 2017. Prices come down for consumers, as price competition squeezes margins for installers. Basically, if SolarCity is in a position to absorb the cost of an ITC stepdown that does not happen, it will be in a strong position to cut prices to go after a higher volume of business.
So my view at this point is that ITC does not really impact margins in 2017, but it does heavily impact volume. From a policy perspective, the problem with the threat of an ITC stepdown is that it create uncertainty that currently keeps prices artificially high as all installers have to hedge their prices against it. Once Congress acts to extend a high ITC level, consumer prices should start to fall.
I digress. 2016 should be a big year. So if you're going to price SCTY on the value of its book of business, NRV, then that alone gets us to something on order of $75/sh, assuming SolarCity stops installing anything in 2017 and beyond!
Another way to look at this. Current stock price is about $40 and NRV per share is about $32. That's a ratio of a bit 1.25. I thing this should hold at the bearish end of sentiment. If SolarCity reports a 20% q/q increase in NRV, that should push the current floor from $40 to $48. Pushing this logic out 4 quarters, I get to a floor of about $83. The only way shorts can break up this logic is to convince the market that the entire company is worth less than NRV, but this will be hard to do because Musk believes in NRV and will back stop the price. But the logic behind a NRV floor totally discounts the ability of the company to grow the book over time, so any kind of argument about installations slowing up some time in the future is beside the point. This is an extremely conservative way to value the business. So at the coming CC I'll be watching for value creation.�
1/1/2015
guest jhm, I looked at this a while back and didn't double check before posting that comment. But I am still confused.
When a Bank or a REIT owns a loan or a lease, how is the book value measured?
Isn't this the issue: The line item - Total stockholders' equity - in the balance sheet does not adequately represent the true value to shareholders. So SolarCity came up with the Retained Value metric. Why is this unique to SolarCity? or do REITS and such use/advertise such metrics?�
1/1/2015
guest With a bank loan or lease, they discount payments with they risk free yield curve and also account for features like default and prepayment risk. Banks use the yield curve because they are actively managing interest rate risk. They actually quantify the sentivity to changes in the interest rate environment and will trade in hedging instruments like fixed/floating interest rate swaps to manage this risk. Prepayment risk goes up as interest rates fall. So it is also important to model borrower behaviour around refinancing and other forms of prepayment. Interest rates also impact default behaviour, especially in ARM mortgages. Other macroeconomic factors like housing prices impact both prepayment and default behaviour. All these things are fed into valuation models which drive hedging, reporting, reserving and other risk management actions. (I happen to work in a bank group that does this sort of modeling and hedging, and I work mostly on modeling home prices.)
So banks essentially model the value of loans and other products. SolarCity is doing the same thing with retained value, but it is a relativity simple model using fairly robust assumptions. For example, discounting at 6% is very conservative and robust, until of course interest rates go above 6%. I expect they'll cross that bridge when they need to.
I certainly don't think net assets or shareholder equity is an adequate way to measure the value of any company with going concern. Value investors trying to value a distressed company will do a fair amount of analysis of the balance sheet. But that is pretty much focused on the value of a company at liquidation.
The value that I see in NRV is that it values the primary asset that the company is actually building. This asset is marketable. It could be sold to a yieldco for example.�
1/1/2015
guest Cuomo Bets on Solar Power to Get Buffalo on Its Feet
�
1/1/2015
guest How does one take the pulse of short interest into SCTY? Is there a site with the current stats? I'd like to keep an eye on it as we get closer to earnings on Thursday.
The hilariously fabricated "news" stories are pushing narratives of a probable miss on the 260MW installation goal, but they're probably right that cost reduction will appear on the surface to be going nowhere(if not backward). I'm liking the lowered expectations and hope it becomes the mainstream narrative prior to announcement. Cost will take care of itself as this model gets up to scale and really starts to run.
One more small 2018 options purchase I'd like to see execute and I'll be ready to kick back and watch the chaos unfold�
1/1/2015
guest This site indicates short interest is around 59%. (I have no idea how accurate that is.)�
1/1/2015
guest Doh Yonki beat me to it. Nevermind�
1/1/2015
guest Does anyone here follow SUNE? The recent spectacular fall in price has me thinking and rethinking how to value solar stocks. SUNE has well-known hedge fund backers and has been growing leaps and bound. Too much debt is questionable and recent acquisition in progress of Vivint Solar seems to be in trouble.
SunEdison (SUNE)/Vivint Solar (VSLR) Deal Up in Smoke, Shares Choke - TheStreet
It seems fundamentals are not at play. How do you value solar stocks in current situation?�
1/1/2015
guest SolarCity Corporation (SCTY) Short Interest - NASDAQ.com
NASDAQ is a good source. Days to cover is quite high, over 14.
The biggest variable in the cost per Watt is Sales and Marketing, but this is largely a function of how aggressively they want to grow. Seasonal factors can impact labor costs, but the cost of hardware overwhelmingly just declines. Q3 should be a good quarter for keeping labor costs down. So of course sequential growth is highest in Q3. Remember this business is mostly rooftop installation, and construction work is inherently seasonal. It see nothing here to suggest that guidance is too much a stretch.
Moreover, for shorts there will be the nasty surprise that revenue will be way up in Q3. They need to consult with a first-grader who can explain to them how there is more sunlight in the summer.�
1/1/2015
guest This is my concern about SCTY in general. I don't like that they spend on marketing, but at the same time I understand the info gap to consumers is the main headwind they need to overcome in the short term. I just hate to see an undeniably logical purchase "marketed", it's a waste of money. As I said, I think it'll take care of itself once everyone knows 3 people who are SCTY customers and info can pass by word of mouth. Germany has almost zero marketing or customer acquisition cost, hence the $2/W install price. That needs to be our goal.
Crazy that I've never even thought of SCTY valuation in this light. I'm so stuck on their future value that I forget they already have a ton of paying customers and the weather makes a difference.
If New York state has a particularly sunny 3Q in 2019, how difficult will it be for investors to bake that into revenue estimates? This is gonna be fun to watch.
Side business: A drone company that seeds clouds at noon in areas of high SCTY customer concentration? Might be a good short options for these hedge fund guys once SCTY is a major electricity provider.�
1/1/2015
guest I just picked up 20 Jan 2017 75 strike price options. Sit ting on my hands now�
1/1/2015
guest It's gonna be a great year(s) watching this stock grow.
The only other thing I'm pondering now is buying cheap Oct30 options on Wednesday, but I don't have interested in actually buying more shares and don't trust myself to be able to offload the options properly in that tight expiration window. Never bought an option prior to this summer and have never sold/exercised one.
I would imagine the intra-day liquidity is fairly close to inherent value of the call, right? If I bought $45 Oct20 calls it's fairly easy to take most of that profit with the stock at $47, right? I assume middle men can't take too big of a slice.�
1/1/2015
guest I certainly would not want SolarCity to waste money on ineffective sales and marketing, but the opportunity is definitely worth spending quite aggressively. Scale makes a big difference in future marketing effectiveness. We are trying to cross the chasm from early adopters to mainstream. Suppose a certain late adopter needs 3 positive referrals from friends who are SolarCity customers. So first off, it is important that 1 out of 3 families with solar are SolarCity customers. This means our late adopter needs about 9 friends with solar so that 3 of them are specifically with SolarCity. Suppose this late adopter has 90 to 180 families in their social network. Then, rooftop solar needs to reach 5% to 10% penetration before this late adopter will even consider. The point here is that it is essential to earn into a local market and assuring a solid share of that market helps enormously. SolarCity's market dominance strategy will accelerate the path to mainstream markets. Many extreme early adopters are willing to buy solar from small installers without much of a track record, but mainstream buyers will put their trust in reputable brands.
Remember back in the 1990s when Amazon was losing money on every book they sold. Their strategy was to establish a very large base of customers, and they were earning into that. That was a crazy time with the dot.Com bubble and all. However, the strategy did pay off for Amazon. It is pretty much the default online store that most in the US use on a pretty regular basis, and it has sucked the profit out of much of traditional retail. Now unlike Amazon in the early days, SolarCity is profitable with each customer acquired. But it needs to continue to grow as fast as it does to continue to gain market share and to move the whole industry to market penetration levels that takes rooftop solar mainstream.
BTW, NRG will be spinning off its residential solar business. Apparently it is finding out just how hard it is to compete in this market. Other utilities may try this path. Southern Company is. But I expect most utilities to find that it is just too hard to compete with leading solar installers. Alot of this difficulty lies in marketing and sales. Personally I would find it hard to trust a utility to lock me into a long-term contract for solar. It just makes sense to me to go with an installer that is bring serious competition to the market. It think this is also a problem SunEdison has with acquiring Vivint. That is, SunEdison clearly aligns itself with the utilities, so there is a tension between trying to serve the utilities while offering distributed solar as a grid alternative. The fact that Vivint was willing to be acquired by SunEdison may signal weakness. So I would not be surprised if Vivint and NRG started to lose some marketshare to SolarCity and Sunrun. It'll be fun to watch this race.�
1/1/2015
guest I was speaking to a SolarCity rep yesterday about scale, social networking and advertising. Totally understand it's worth the expense to get out in front and remain out in front at the early stages, but it pains my soul to see high customer acquisition expense when we know the main problem with getting to scale is soft costs associated to installs. I just hope it wears on Lyndon/Elon as much and they have far cheaper plans for medium term scaling in a more efficient manner.�
1/1/2015
guest I'd argue that as soon as the threshold of solar economics being a no-brainer gets crossed in more and more states the need to spend a lot on marketing will drop significantly, per installed kW. But as this happens it's important to be the established, go-to, dependable, full package installer. Marketing dollars spent now, early in the game, may be worth quite a lot later since this phase is where you position yourself for the very large businesses opportunities coming in the next decade or so.
To take a page out of Tesla's playbook, there's also a lot if free advertising to be had by playing the PR game smartly when it comes to net metering, solar installers on the side of the customer vs. the big, profit hungry, incumbent utilities. That's the narrative you want to push, very much like Tesla vs. established dealers.�
1/1/2015
guest The SCTY goal of $2.59/W just does not seem that ambitious to me considering Germany was at $2.24/W more than three years ago with far higher cost panels and a worse EUR/USD exchange rate. My concern as an investor would be installers getting down to $2/W and the 30% ITC being extended giving people more incentive to buy outright.
Depending on the rate of support for solar in the new PA budget, a 6kW system may net out to $1.25/W installed or ~$7,500. If financing gets easy and maybe tax credits become instantly transferable as down payment I'd be a bit concerned about the PPA model's current convenience advantage.
Fortunately, I think for the vast majority of people the SCTY value proposition of US made panels, a reliable company that's not going to disappear and not needing to do any of the maintenance is a HUGE market advantage that no one else can provide. I just wish we were looking at a rapid cost drop closer to what Germany experienced.�
1/1/2015
guest I think My power handles your concerns here. It is also worth noting that as battery prices fall more and more people will install solar + batteries which will push the low cost of solar back up�
1/1/2015
guest One will almost certainly flow right into the other and all the more reason to be "the most trusted name in solar". This solar burst we're about to see in the US will be quickly followed by people looking to have SolarCity setup(and maybe even manage) neighborhood microgrids. I know that's my plan.
Planting the seed with my North Philly rowhouse neighbors already. We have three empty lots on my block, we'll buy one and make a dog park/battery bank for 20 houses with interlinked solar. :biggrin:�
1/1/2015
guest Good old oil price correlation today?
Sometimes I wonder if net-retained-value (per share) will be able to put a floor to the stock or not.
If you think about it, some of the biggest banks like, BoA, Citi, Morgan Stanley etc. have a Price-to-Book of less than 1. People rationalize it saying that nobody believes what the banks are saying their book-value (shareholder equity) is.
Shorts have quite widely planted the idea that retained-value can't be trusted. It's a "black box" is their favorite attack.
So it is always possible that the price-to-net-retained-value will dip below 1.
Not trying to be an alarmist. Just putting out a cautionary note, so we are better prepared (even if it's just mentally) for further downside.�
1/1/2015
guest Someone just bought over 337k shares @ $38.05. That's about $12.8M. I wonder who that could be.�
1/1/2015
guest
I confess. It was me. Should have waited - now I could have bought at $36.94 and saved about half a million. Oh well...�
1/1/2015
guest My hero ! Way to shrug off a half million�
1/1/2015
guest Solar Power for Everyone - The New Yorker
Very nice article. SolarCity quoted it in a recent SEC filing.�
1/1/2015
guest Crazy divergent from broad market and extremely oversold going into earnings. Also, a major shareholder is hosting a meeting/forum the same day. Would SolarCity be doing a nation wide mass hiring event if demand was below expectations? Probably not.
This wreaks of a bear raid.�
1/1/2015
guest Just waiting for the bottom today. Didn't want to buy much more, but how can you not?
Wish Elon would have waited another day to drop his $13M pocket change into shares.
Edit: If Elon wanted to mess with the shorts and cause a squeeze, at what point does he run into regulatory issues? He can just buy as he pleases on any day he pleases, no?�
1/1/2015
guest Smells pretty desperate. The shorts just have a few more days to attack the price before the ER reset.�
1/1/2015
guest That's a great article!
Much needed on days like today to put things in perspective.�
1/1/2015
guest Great article, but come on New Yorker: "Before the makeover, from October of 2013 to January of 2014, the Borkowskis used thirty-four hundred and eleven kilowatt-hours of electricity and three hundred and twenty-five gallons of fuel oil. From October of 2014 to January of 2015, they used twenty-eight hundred and fifty-six kilowatt-hours of electricity and no oil at all."
How large does a number have to be to get you to use digits and commas?�
1/1/2015
guest I've been playing with SCTY since its IPO. At the moment I have 3500 shares that I bought at $50. I have a feeling this will be the first SCTY ER where the stock goes up as so much pessimism seems built into the current stock price. No worries.�
1/1/2015
guest Ha! I'm guessing their editors all have English PhD's and are so mathphobic that you literally have to spell out numbers so as not to offend their sensibilities.�
1/1/2015
guest Rooftop Solar and the Free Market – What the Taxpayers Protection Alliance Gets Wrong - Morning Consult
Lyndon is getting pretty good at making the free market case. Utilities get a government supported 10% rate of return on investments, but under a competitive market that would be less than a 6% rate of return. We've seen him say that before, but now he draws out the implication that the 4% premium is essentially a tax on ratepayers. Moreover the scheme induces over investment. The compounded impact of a premium rate of return and over investment can lead to quite a sizeable tax indeed.�
1/1/2015
guest 5 Hated Stocks You Should Love This Earnings Season: SolarCity (SCTY), Theravance (THRX), InvenSense (INVN), Heartware (HTWR), World Acceptance (WRLD), - Pg.2 - TheStreet
Someone from Wallstreet also thinking of a strong possibility for a short squeeze with a positive earnings report. With 50% of the shares short, a squeeze would be epic.
I have just begun to follow SCTY, are we expecting a beat on earnings?�
1/1/2015
guest Battery Energy Storage Caucus Launches to Bipartisan Support in Congress | Energy Storage Association
This is a very promising development. There is huge need for legislators to understand the potential for battery storage and to work on removing barriers. Be sure to read the mission statement at the end of the post linked to above.�
1/1/2015
guest I have thousands of shares spread out over solar cos of all shapes and sizes, from yieldcos to inverter plays and everything in between. Have just been buying more and more because it makes no sense what is happening. Have to admit am starting to sweat... Probably means I should double down. But this is more than just market play. I have been smelling a concerted effort by the powers that be. This feels like a coordinated rearguard action to destroy alternative energy. That's right, I said it. Call me a conspiracy theorist, but there is no conspiracy. Everything is out in the open. Oil powers still plan on burning every single last barrel that they have identified in their reserves. And if that means crushing oil down to single digits for a couple of years to demonstrate to all the greenies how stupid they are and simultaneously crippling the alt energy infrastructure that has been built over the past ten years, then so be it. They'll take their lumps and some small players will disappear. It is all good in the end for them.
I am not even sure what to do. They will fail in the end, but on a long enough timeline...�
1/1/2015
guest If high speed internet access weren't so widely available, I might be concerned.�
1/1/2015
guest again, 2016 guidance of 1.6GWs or higher will really hurt hedge fund managers short right now. Thursday might get interesting.�
1/1/2015
guest There certainly a lot of extremely powerful vested interests out there that are threatened by solar. So conspiracy theory is quite unnecessary to explain the resistance and hostility renewables encounter. And we should expect hostility to escalate. As Ghandi said, "First they ignore you. They laugh at you. Then they fight you, and you win."
How do we know if we will win? At one level, it does not really matter. If the cause is just, it is worth the fight. This is not exactly a sound approach to investing. But personally, I would rather lose money investing in a better world, than profit from the death of hope.
But at a much more practical level, it think that battery storage really is the missing element in renewable energy. Wind and solar already are cheap enough to route fossil fuels. But they are energy harvesting technologies, and they will get more efficient and economical. The harvesting is not complete without storage. Fossil fuels have as an advantage that they are stored energy. This makes them mobile, dispatchable and quite deployable. Batteries can be all that as well. So coupling batteries with renewable power makes for a complete energy system that can harvest, store and deploy energy. Morever, batteries are able to both buy and sell power which will impose tight arbitrage bounds on power market leading to economic efficiencies never before seen in energy markets. So as the price of batteries comes down and performance increases, we can be sure that the economic value of solar and other renewables will be better realized than ever before. So with the growth of the battery storage industry, solar too will rise in value. Both solar and batteries are declining in price per W or Wh by about 14% per year. But even as their costs come down, their synergy enhances their combined value too. SolarCity's proposed dispatchable solar plant at 14.5 c/kWh illustrates this synergy. This system can economically beat any new gas peaking plant by 4 to 12 c/kWh. The holdup on massive deployment comes down to scaling up battery manufacturing capacity. As this scale up happens, the price for dispatchable solar should continue to fall 10% to 15% per year. Thus, what is 14.5 c/kWh now could fall below 9 c/kWh by 2020 and 6 c/kWh by 2025. This sort of cost trajectory for dispatchable solar absolutely disrupts both gas and coal generation and the time frame is shocklingly short, just 10 years. What the fossil fuel industries are banking on is depreciated fossil generation assets that will not be replaced with like. So for me, the whole issue comes down to how fast can battery production be ramped, and I am encouraged this evening to learn that Tesla is enlisting LG Chem as a secend cell supplier.�
1/1/2015
guest http://salisburyindependent.net/wicomico-news/solar-hookups-helping-schools-ease-energy-costs/
Here is 1 MW of commercial solar that went active in q3
I seem to have read many articles like this one recently.
Here is an article pointing out some of the "powers that be" that are against solar.
The War on Solar - Energy Manager Today�
1/1/2015
guest Not to derail the SCTY thread on such an important Earnings Eve, but on a related note....
When we talk about solar/battery solutions and more to the point micro-grid solutions, what is the biggest current hurdle other than say financing the whole thing and getting neighbors on board. I see existing technologies such as these "aqueous hybrid ion" batteries as a perfectly fine solution as we generally don't need something compact like lithium ion for home powering where space is not an issue. I'd happily put a refrigerator sized battery in my basement even if I needed to vent heat.
So where is the main issue? Is it still too early for "smart micro-grids" with 20 very close proximity solar arrays to be interconnected to 4 or 5 large battery packs? In other words, if the 20 rowhouses on my city block put 5-8 kW arrays on our roofs and produced more than enough total juice for our needs, what would stop SolarCity from developing a micro-grid product to take us 99.9% off grid with maybe a single grid connection for emergencies? All the tech for that exists, right?�
1/1/2015
guest I think the central issue is the monopoly status in distribution markets. There are endless ways local power can be beneficially shared/traded, but only utilities have the legal standing to act on these. Even without batteries, there are huge advantages to neighbors being able to share solar power. Suppose you have a good south-facing roof and I a good west-facing. We can swap morning power for late afternoon power and get better coverage from our combined systems. Morever, SolarCity could install and connect both systems and address a much larger market. So the availability of fancy technology is not the issue. Legal barriers are presently undermining the total economic and societal value that could be created.
So this is why I am excited about the Battery Energy Storage Caucus in Congress. The focus should be on breaking down legal and regulatory barriers that stand in the way of the US from realizing all the benefits of battery technologies. I really do not think there is any real need for subsidies. What is needed is access to a free and competitive market in energy sharing. The problem for solar is not that it needs subsidies or NEM, but that current monopolized power markets do not allow it to trade trade freely. So ITC and NEM are only needed as compensation for an otherwise closed market. So the same for batteries, subsidies and mandated trading schemes are only needed as correctives to a closed market. When the distribution market is opened up, lots of technology and capital will flow into it, and utilities will have to lower their rates to be competitive.
Imagine the opportunity for a player like SolarCity to come into a neighborhood and deliver an integrated system for all neighbors who wish to participate. This would substantially reduce the sale cost per Watt and the installation cost per Watt. Moreover, the value of each component in the system would be optimized. So all the economics get much better when an installer has free market access.
Battery Energy Storage Caucus Launches to Bipartisan Support in Congress | Energy Storage Association�
1/1/2015
guest Lyndon Rive is scheduled to speak with Tim Draper at Stanford today at 7:30 EST. The event is open to the public. Any live blog or stream?
WEDNESDAY: Lyndon Rive, Solar City at DFJ ETL�
1/1/2015
guest Is there a set time for the earnings announcement on Thursday?�
1/1/2015
guest I hope Draper will be impressed. /tounge-in-cheek
The odd thing is Draper Fisher Jurvetson fund has been selling millions of SCTY each quarter. The fund sold throughout the year and as recently as in Q3, sold 1.3mil shares while the average price has been around $50. I am sure these VC funds always have something more interesting/younger to invest in. But makes me wonder if the stock is as valuable as we believe, will they be selling at $50? I just hope he is wrong. I also hope Draper won't be hyping the stock (while he is selling). Just sends a very wrong message.
On the other hand I like Nancy Pfund. She actually bought 1.35mil shares in Q3, putting money where one's mouth is.�
1/1/2015
guest This discussion should be interesting. I have doubts both of them would be hosting this event if they didn't have good news. Perhaps there is a reason the event is open to the public? Maybe we'll get a slightly early earnings release and clarity about how Solar City is doing, compared to the rest of the industry?
Regarding the valuation, I'll post this bit from an 8K filed August 25th, 2015. I encourage everyone to read the entire filing. This is only a snippet of it.
�
1/1/2015
guest If SolarCity installs a closed loop solar/battery setup for my entire block, where's the legal barrier? I'm talking 2 x 14 lots with open space in the middle where elevated wiring already runs for Verizon. If we own every square inch of the footprint and there's no connectivity run along the streets let alone to the grid.....who can tell us we can't power ourselves? Would we be talking permitting issues?
Exactly. All the houses on my block could squeeze 6kW of rooftop panels completely unshaded. Being in PA we have copious amounts of natural gas for cooking, heating, and emergency micro-grid power generation. Battery packs might be about $5k per house, but likely consolidated to 3 or so larger units for efficiency and simplification.
I don't see any reason why people won't naturally turn to this once solar hits a certain saturation point.
Per house rough net costs to SCTY:
Solar - $11k
Battery - $5k (minus eventual subsidy?)
Transmission Hardware - $1k
Backup Nat Gas Generator - $1k
$18k in materials per house as of today? In 5 years that'll be more like $11-15k. SCTY could make a killing managing that for 20 or more years. If we default, they take all their hardware back and redeploy. Customers wouldn't likely save much, but you could go 100% renewable with a phone call and your roof would last longer.�
1/1/2015
guest In theory, it would work great. But your local utility probably has an exclusive franchise to sell retail power in your block. It may be possible in a new subdivision to set up an independent microgrid before the utility makes any investments. But once the utility starts setting up distribution hardware, they own the territory. Your block would have to get permission from the utility to separate from the utility.
In some states such as Georgia, these laws were so tight that it was illegal for any non-utility to put solar panels on your own home and sell you the power. This was a violation of the utility franchise. Fortunately, the Georgia State Legislature saw fit to pass a new law that would allow rooftop solar leasing. I guess since I live on this state I'm extra sensitive to this issue. It makes me angry to know that I have no right to buy or sell power to anyone except Georgia Power. Moreover, they have the audacity to bill me about $20 per month for a couple of nuclear reactors that will not come on line until 2019 at the earliest, if ever. This is nothing more than a tax that the state government has empowered them to extract. Those nuclear reactors will never save Georgia residents a single cent. Last time I checked my average rate was 15.5 c/kWh. Any day now, SolarCity could come into this market.�
1/1/2015
guest Anne Lidgard ?@annlid 10m10 minutes ago
@solarcity will use Niagara Falls energy to make solar cells! @TimDraper interviewing CEO Lyndon Ryve #StanfordETL
�
1/1/2015
guest Looking for Q4 guidance of 330MWs or higher for installs.
400MWs or higher for Q3 bookings, which will put the run rate right now at approximately 1.6GWs/year. Also, Lyndon Rive stated in the q2 conference call he expects growth to be at least in line with the industry at large for 2016, which again gives further support to a 1.6GW 2016 guidance announcement(if it comes tomorrow).�
1/1/2015
guest Decent article out yesterday on SCTY, finally.
�
1/1/2015
guest It's easy enough to see how much cash SCTY has "coming to them" on these contracts, but where does the upfront cost land? How much of the install costs hit the balance sheet immediately and how much is spread out via bonds? Is there an easy way to track the amount of bond payments owed by SCTY along side the payments owed to SCTY from customers?
Sorry if this is an ultra-novice question.�
1/1/2015
guest I will let jhm answer the specifics. But my understanding is that their Retained Value slide from the quarterly deck captures "everything".
The few analyst reports I have seen directly use the retained-value metrics for their models. Nevertheless, Mr.Market doesn't seem to put much faith in analyst models. As of this morning, the average analyst price target is $72. The most bearish target (excluding the pure troll Axiom) is $48 from UBS. The most optimistic is at $105 by Credit Suisse.�
1/1/2015
guest SolarCity expansion includes warehouse in Lansdowne - Baltimore Sun
http://www.bizjournals.com/baltimore/blog/real-estate/2015/10/solarcity-opens-baltimore-county-distribution.html
�
1/1/2015
guest I'll be interesting to see who's the first one to bring up extending the ITC solar subsidy as part of these budget negotiations. Talk about a short squeeze! :scared:
Some hints today around R&D spending, etc...
US budget deal could ease uncertainty over science spending
�
1/1/2015
guest I think digging into the quarterly value creation analysis and available cash analysis may answer your questions. These should both be refreshed in the shareholder presentation. So let's wait until that comes out today. Then we can take the time to digest the new numbers while shoring up our understanding of the concepts.
Actually, the more I think about it, it may be useful for us to discuss the whole investor presentation deck slide by slide. They really load a lot of good information in it, and I find myself consulting it on an almost daily basis. One of the best things we can do as a group of investors is get a solid grip on this material.�
1/1/2015
guest results out:
http://files.shareholder.com/downloads/AMDA-14LQRE/757891988x0x857520/5E6BB45C-7746-4185-9AD4-6AA2F288CB16/SolarCity_3Q15_Earnings_Presentation_FINAL.pdf
Investor Relations - SolarCity
2016 Guidance: MW Installed: 1,250
From the newsletter:
"we are not targeting the same growth rates that have gotten us to our currentscale going forward. Specifically it is our goal to achieve positive cash flow by 2016 year-end and be insolid shape prior to the planned ITC expiration in 2017."�
1/1/2015
guest Any reactions? After hours down big - is it warranted?�
1/1/2015
guest Why is the stock tanking; is it the 2016 Guidance of 1250?�
1/1/2015
guest Install cost is what jumps out to me. Last 7 quarters:
2.44
2.28
2.19
2.09
2.09
2.13
1.92 <---- 3Q15 (I guess this is due to a higher % of commercial installs)
Stock tanking after hours. Massively.
- - - Updated - - -
Computers see earnings underperform and push the button.�
1/1/2015
guest I wish I could buy more AH. Hopefully this low price sticks around a few more days.�
1/1/2015
guest Yeah, that's the only thing I'm annoyed about, did not think it was physcially possible to push this stock down further and I'm pretty much invested to 120% of what I intended. Nothing to do but find a way to buy I guesses.
Can't imagine this $32 is going to stick around, that's a lower valuation than the current net retained value.�
1/1/2015
guest Well those shorters have got to be super happy now.�
1/1/2015
guest SPWR and FSLR up 10-13% after their earnings, looks like utility scale is winning.�
1/1/2015
guest Aaand it keeps falling. Now -18%!�
1/1/2015
guest Of course, it was a huge quarter for solar installs. Problem is, a panel maker gets all their cash up front, SCTY not so much.
I guess it's gonna take a few more quarters for people to understand the value.
Chanos is literally rolling in cash right now. So annoying.�
1/1/2015
guest how long until webcast?�
1/1/2015
guest Wait for the conference call. Less than 1 million shares traded.�
1/1/2015
guest We were told exactly what would happen and didn't listen, now someone else will be getting the bargains tomorrow. Bots react to EPS and we should be sitting there to take advantage. Grrrrrrrrrrrrrrrr
Nothing worse than mistiming a bargain.�
1/1/2015
guest I'm struggling as to why it's down. I'm going through the report and I'm seeing a few things that I like... we all know SCTY is a little bit more obscure to understand but at the end of the day in layman's terms it makes money via leases.
- Their customer base has an average credit score of >750 ... this is a great thing
- Their costs have decreased for installations (this is huge), their only thing that caused an uptick was SG&A which makes sense as they grow the sales force and expand
- Revenues are up
- Losses widened YoY but I feel this was a given because of the huge expansion in sales and company infrastructure
ANDDD this is why.
SolarCity Corp. (SCTY) said Thursday it lost $234 million, or 20 cents a share, in the third quarter, compared with a loss $70 million in the year-ago quarter. The rooftop solar-power installer said its revenue reached $113.9 million in the quarter, up from $58 million a year ago, thanks to "increased installations and high system performance in our seasonally strong" third quarter, the company said. Adjusted for one-time items, SolarCity lost $2.10 a share in the quarter. Analysts polled by FactSet had expected the rooftop solar-power installer to report an adjusted loss of $1.95 a share on sales of $111 million. Shares of SolarCity fell 15% in late trading Thursday after ending the regular trading day down 0.7%.�
1/1/2015
guest I don't get it. The bigger the loss, the faster they are expanding and customer payments go up. I dont like the renewal component of retained value because I have no way to value that. But the rest of it is valid IMHO and I guess SCTY saying they will slow down growth to reach profitability should have some impact on the naysayers.�
1/1/2015
guest Implied volatility is sky high. Anything could happen tomorrow. Patience.�
1/1/2015
guest Why can't you? I just bought at $30.95 in AH.�
1/1/2015
guest I read the Q3 Review and bought more at $31/sh.
Basically I see SolarCity reigning in their growth ambition for better profitability. They want to end 2016 on a cash flow positive basis, an interest rate hedge perhaps. I think in time the market will actually favor a slower growth SolarCity. Personally, I like seeing the company double every year, even if that makes for short term losses, but many investors may have been turned off by that stance. At 41% annual growth, they double every two years and keep their market share. That is still quite outstanding.
I bought immediately because I think this is an overreaction. When the market thinks through slower growth for better financials, I think they're going to like it.�
1/1/2015
guest Wall street doesn't grasp that. They also don't understand how quickly the panel factory is going up.
It's a $0.15/share miss with a revenue beat. All that the people who are shorting care about is the miss. There's ~43% short interest on this stock. They will drive it down and take the money and run (if they are smart).
Right now, the market cap is less than the discounted cash flow from the Powercompany. That's just silly.�
1/1/2015
guest Add shares @ 33 31.5 order in @ 30�
1/1/2015
guest Added shares at @30.53�
1/1/2015
guest Got 2018 leaps a few days ago with remaining cash.�
1/1/2015
guest Same here, added some more at ~ 30.80�
1/1/2015
guest $30 should act as an absolute bottom. If it falls below $30, I'm selling my entire stock position and buying a ton of calls. The market is basically assuming Solar City has a demand or cash problem and could go bankrupt if everything goes wrong. All Solar City said is they are slowing reducing "expectations for growth in 2016" until there is more certainty about incentives. SolarCity was very clear that panel costs, and installation costs are looking much better than Solar City guided for.
The new incentives will be announced in the next few weeks.�
1/1/2015
guest What incentive is that, the federal rebate?�
1/1/2015
guest Half my SCTY cash went into LEAPs that I still love, I'm gonna cry when I see prices tomorrow. Gonna go turn some tricks over the weekend to double-down next week. $70 2017's and $80-90 2018's will be irresistible I would imagine.
They mentioned today's solar "winners and losers" on CNBC and no one bothered to mention SCTY is a BUYER of panels up front. Even the analysts act like robots, they can't look one layer down to explain the obvious.�
1/1/2015
guest nice, an order in euro I set some time ago at about ~$32 got filled at tradegate in Frankfurt. adding shares to long-term positions at such huge dips are just fun.�
1/1/2015
guest I still long term holder and agree with their strategy to position the company to continue growth beyond 1.25GWs/year in 2017... But... They are consistently missing guidance. Hard to really put confidence into what they say when they miss this much. For over a year they've said they were every confident in 920Mws to 1gw for 2015. Every quarter they've said this. How all of he sudden, do they revise this down to below 900mws and then in the same breath saw they will grow at 40%? No you said 920 was your bottom, so you are not going to be growing at 40%. Same problem happened for 2014 guidance.
They need to to be more transparent with guidance flexibility... Make a wider range, do what is necessary to keep investor expectation guidance in check, because baffoons like chanos get ammunition to spin the story downward. Trust in guidance has to be there. Now investors will have uncertainty in even achieving 2016 guidance.
Now the only trump card to this whole stock valuation mess is if the ITC is extended and they up guide...�
1/1/2015
guest Oddly enough, they may be guiding 2016 on expectation that ITC will be extended at 30%. The ITC cliff was to be a huge motivator to lock in solar in 2017. But without the cliff, consumers are likely to hold back and wait for prices to come down.�
1/1/2015
guest It sure feels like a lemonade factory in here.�
1/1/2015
guest It is what they do.�
1/1/2015
guest What else are you supposed to do when the market gives you lemons?
I may have to reluctantly sell some TSLA to pick up some SCTY if it stays at this level tomorrow.�
1/1/2015
guest Folks, Market has for the most part been on the wrong side of understanding SolarCity's business model. Analysts get it, most of longs here get it. But market has had it's own view and quite frequently punished SolarCity's stellar execution in the past.
Having said that, being an ultra-long, I am seeing some cautionary trends in SolarCity's numbers.
Below are the details. I'm happy to take any feedback/corrections.
Using 2015 Q1 as baseline because that's the first time SolarCity differentiated gross vs net retained values.
G.R.V N.R.V Renewal N.N.R.V Shares Out N.R.V/Share N.N.R.V/Share 2015 Q1 3074 2718 800 1918 96.68 28 20 2015 Q2 3817 3057 941 2116 97.01 32 22 2015 Q3 4373 3256 1057 2199 99.38 33 22 Growth 1299 538
281 2.7 5 2
All numbers above in millions, except per share values (which are actuals).
Shares Out are fully diluted, from Statement of Operations.
GRV - Gross retained Value (as published)
NRV - Net retained Value (as published)
NNRV - Net Net Retained Value (NRV - Renewal portion)
Growth - computed over two quarters
IIRC, Retained Value is computed on Bookings (not installs, or deployments). So using that to compute the RV/MW numbers
Bookings in Q2: 395 MW
Bookings in Q3: 345 MW
Cumulative Bookings over two quarters: 740 MW
NRV Growth/MW = 538/740 = $0.73/W
NNRV Growth/MW = 281/740 = $0.38/W
Using Installs guidance below (because that is all we have)
Q4 Guidance: 290 MW
Q4 NRV Growth: 290*0.73 = $212 mln
Q4 NNRV Growth: 290*0.38 = $110 mln
2016 Guidance: 1,250 MW
2014 NRV Growth: 1250*0.73 = $913 mln
2014 NNRV Growth: 1250*0.38 = $475 mln
Extrapolated Shares Out Growth in Q4: 2.7/2 = 1.35 mln
Extrapolated Shares Out Growth in 2016: 2.7*2 = 5.4 mln
So here is the table with Q4 and 2016 priced-in.
In Summary:
G.R.V N.R.V Renewal N.N.R.V Shares Out N.R.V/Share N.N.R.V/Share 2015 Q1 3074 2718 800 1918 96.68 28 20 2015 Q2 3817 3057 941 2116 97.01 32 22 2015 Q3 4373 3256 1057 2199 99.38 33 22 2015 Q4 Est
3468
2309 100.73 34 23 2016 End Est
4381
2784 106.13 41 26
- The Retained Value/Share metrics are growing *much* slower than we may have imagined
- The Bookings dropped in Q3 relative to Q2, which is alarming
- The recent Retained Value/MW numbers are quite low, even before ITC
Given this, especially with net metering battles, doesn't make much sense to price in anything in 2017 or beyond.
So if you are looking for a *firm* bottom it is really in the $22 to $26 range. Anything above is sentiment driven. Not saying that stock should drop to that low. Just saying anything higher doesn't have strong fundamental support.
Please tell me I'm wrong.�
1/1/2015
guest I guess my point is to not jump through hoops to make every new data point seem positive, this is confirmation bias and bad if your goal is trying to achieve as realistic a valuation as possible of a company. It's important to accept when things don't pan out as you expect and adjust your model accordingly. SCTY is coming in under guidance for this year and next years guidance simply isn't what investors expected.
I'm not personally bearish on SCTY at this valuation, but if you are bullish on solar I think there are much better opportunities out there. I think SCTYs growth will continue to taper off and in just a few years turn to negative growth as the lowest hanging fruit has been harvested. I don't think SCTY will ever reach the highest hanging fruit as their ladder simply is too short compared to that of utility scale solar. You can see this play out in the growth rates, now this is going off memory but I'm pretty sure residential has been growing significantly faster than utility scale in recent years, but the tables seem to be turning next year with SCTY expecting 40% growth keeping the same mkt share. According to this source if you scroll down a bit utility scale will grow more than 70% next year
Utility-Scale Solar Reaches Cost Parity With Natural Gas Throughout America | Greentech Media
I have also seen numbers above 10GW for next year, which wouldn't surprise me at all given how cheap utility scale has become.�
1/1/2015
guest If they had performed "better" this drop might actually have been worse. Unless I'm using the wrong logic all their cost is up front, they sign up a million customers on a Monday all they have on Tuesday is a massive pile of expense.
I didn't initially like the PPA model, I'm a buy the hardware and pay for the hookup kind of guy. But once I saw a few married with a bunch of kids friends go through the deicsion process, it was pretty obvious SCTY as the most appeal to those who aren't "Tesla people". Most folks on here would run their own install or at a minimum buy outright, the "middle and high hanging fruit" wants zero up front cost, US manufactured panels, a company that won't disappear and zero maintenance. Who else is offering that?
I'm just angry for not seeing this reaction coming, in retrospect it's so obvious.�
1/1/2015
guest From Solarcity:
Continuing to set the stage for our growth in 2016, our sales activity outpaced our installations by a wide
margin with 345 MW Booked and 35,535 new net Customers added in the quarter. This represented a
decline compared to the 395 MW Booked in Q2 2015 owing in part to the implementation of a new
cancellation policy. Previously, we automatically cancelled uninstalled contracts that had been inactive for
120 days. We have updated the inactive policy to 90 days for two reasons: (1) as an efficiency measure,
so that our customer account management team�s processes will be focused on our active customers, and
(2) to better align the metric with our quarterly reporting period. This impacted MW Booked by ~35 MW,
and if we had maintained our prior cancellation policy, we would have booked 380 MW, up 65% year-over-
year. Bookings are tracking very well for Q4 and we expect to be at or near our Q2 high again.
�
1/1/2015
guest The middle and high hanging fruit isn't available to the residential solar market as utility scale is half the price and they are in direct competition. People wants the cheapest electricity and the only reason residential is viable is because of a legislative tailwind. Also I'm pretty sure the drop was mainly because of guidance miss and low guidance for next year.�
1/1/2015
guest How does utility scale solar price directly effect consumers?�
1/1/2015
guest Still a drop, unless there is some seasonality coming into play it looks like SCTYs bookings may have peaked already.
@electracity
Wholesale electricity cost is part of the retail price. The retail cost of electricity from utilities will go down going forward as renewables push down wholesale price and load balancing becomes cheaper through batteries. Residential solar will have difficulties keeping the price as it is today as net metering policies gets pulled back to a more reasonable level like we are seeing in Hawaii right now.�
1/1/2015
guest Yes. And I think we will taste the sourness tomorrow and feel the sweetness shortly after.�
1/1/2015
guest I have 3500 shares already. Think I'll do a bit more shopping tomorrow.�
1/1/2015
guest In US, new renewable installations 1,460 times more than new coal : Renew Economy
According to FERC, YTD installations of new natural gas capacity is down 50% y/y, wind up 50%, and utility solar is down 41%. Meanwhile SolarCity is up 83% YTD y/y.
Specifically, SolarCity installed about 600 MW ytd. If this is about 1/3 of the distributed installs, then distributed solar added about 1.8 GW while utility added 1.1 GW.
So it looks like wind is knocking out gas, while distributed solar is out running utility solar.
Of course, we can also speculate about how this my play out in coming year, especially with the contingencies around ITC. But we have learned this evening that SolarCity is pivoting its strategy from outrageously high growth to high growth, about 40%. This will save them on acquisition cost. Moreover, they intend to raise rates as much as an additional 1 c/kWh from their average of 13 c/kWh. Utilities have already raised their rates so they have some competitive slack to do this. So why raise rates and cut specifically marketing spend on buying leads? Lyndon clearly stated that they are positioning the company for the ITC stepdown. Their opportunity to gain share is post ITC stepdown. Competitors how lower rates in 2016 without cutting costs will be poorly positioned in a post stepdown world. So Lyndon is positioning the company to enter that world on a cash positive footing. I had not anticipated this strategic pivot, but am warming up to its logic.
I also suspect that adding batteries features into this slower growth strategy, but Lyndon did not spell that out. Lowering $/kWh while raising PPA rates could create enough slack for adding batteries. Slowing into a product shift like that seems prudent.
Oh, yeah, while MW installed may only grow by 40% in 2016, management is talking about growing revenue by 70%. So how will they pull that off? It sounds like they've got something up their sleeve.
As for utilities, they are going to keep raising rates regardless how cheap utility solar gets and regardless what happens with ITC. They may well choose to milk ITC in 2016 and ramp up utility solar. But if the stepdown happens, I think they'll go back to growing wind and shrinking gas, and utility solar at 10% ITC just won't have much of an advantage over wind. Wind, batteries and aging fossil plants is pretty much all a utility really needs. If wind and batteries can't lower residential rates, utility solar won't make a much of a difference either.�
1/1/2015
guest The clear reason for the purposeful slowdown in 2016 is 100% about the ITC step down. They have to hit 2.50/watt all in cost target by end of 2016. This has nothing to do with demand. Demand is out pacing installs by a huge margin right now, so this is a deliberate slow down just to be clear.
The acquisition costs are the primary target here. They recently dumped their relationship with with energy company because lead costs were too expensive. Now they are going to reduce those expensive "last few customers" cutting sales team growth in half while maintaining 40% install growth. If you look at install costs, they are nearly at 2017 $1.90 level right now, well ahead of schedule.
They also need to be more internally funded when ITC drops to 10%. By cutting growth spending in half, they will be able to do that and as Lyndon says will be able to grow beyond 1.25Gw/year in 2017. And clearly, many competitive operations will not be able to survive in that 2017 environment and Solarcity sees this as an opportunity to hire competitors skilled employees saving big on training programs and personnel development.
This, again, is all predicated on the ITC dropping to 10%. Lyndon said 2016 guidance of 1.25Gws is based on the ITC drop. You don't prepare for the drop on Jan 1 2017. You prepare well in advance of that. This guidance reflects that.
Now, everything changes if the ITC is extended. If the ITC is extended, Solarcity will up guide the 1.25GWs guidance. To note, Lyndon Rive did state he believes it will be extended.�
1/1/2015
guest Utility scale solar won't shrink this year, that makes absolutely no sense at all as cost is significantly lower than last year. So I'm guessing that either your source is wrong or what might be more likely, most of this years capacity addition will come online in Q4 (historically a huge quarter). So like I said; residential solar has been growing faster than utility scale for the past few years (this year too), but the tide seems to be turning next year. Residential has been riding the very generous net metering policies for the past few years but these are being tightened as we speak.
Cheaper renewables and batteries for load balancing will lower utility rates, there is no way around it. Utilities have a fixed profit margin, they can't just bank the savings and keep the rate as is, and the savings will be there unless you believe that the decade old trend of wind+solar LCOE falling every single year will suddenly come to a halt. And that batteries are not cheaper than peaker plants for load balancing (I know you don't believe this to be true). The reason why utilities haven't lowered prices yes is because batteries have just now become cheaper than peaker plants, when Tesla starts pumping out the first packs (I assume next year) to the utilities (that have shown interest) the effect will start to come into play. On the wholesale price renewables are still a low percentage of the generation mix and is also just recently come down in price to a level where it is significantly cheaper than FF. Utility scale solar is around the same price as wind today, some places like the windy midwest wind is cheaper and in Nevada solar is cheaper which is why Tesla plans to power the Gigafactory with solar entirely. And the thing is that utility scale solar is still much earlier in its maturation process than wind so the LCOE reductions are happening much faster so your argument about utilities sticking with wind makes no sense.
@Foghat
If anything an ITC cut from 30% to 10% in 2017 as planned will pull demand forward to 2016 as solar will be more expensive after Dec 31 '16, if the ITC will be extended the 2016 demand will go down if anything.�
1/1/2015
guest After getting a text from a fellow investor I realized I had been working and missed the shareholder letter coming out. I did a quick scan of it and was pretty upset they had cut guidance so much. After listening to the Conference call I feel much better. This was no a demand issue, it was a strategy issue.
I dont think this "Pivot" was really all about the ITC. Based on their answer to the caller who asked why they thought they were trading at 1 x Net Retained Value now vs 3 x Net retained value in the past. I think this is about getting the share price up. People who dont understand the business think they will never be profitable. As investors see them heading to cash flow positive the multiple applied to the retained value will increase. I think they need the stock price to be higher so they can do a secondary when they announce their 5-10 gig panel factory.
I would of loved a followup on how ramped up the 100 MW line in Fremont is. It will be really interesting to watch the Silevo/Zep tech develop over the next couple of years.�
1/1/2015
guest Perfectlogic, Solarcity customers pay $/kwh. It doesn't matter if ITC is 30%, 10%, or 0%. The only thing that matters if Solarcity offers a savings on monthly utility bill. So, if Solarcity can still offer an attractive savings on utility bill, then they will continue to have strong demand. If competitors can't offer the same value as Solarcity given the drop in ITC, then solarcity's demand becomes even greater.
The ITC, for Solarcity, really is a tax equity method to raise large sums of capital to fund extremely high growth. If that capital structure reduces, they have to make adjustments and 40% compounded growth as opposed 80% compounded growth is their answer.
70% of all residential solar is lease/ppa, so the mad rush to get the ITC before it goes down is just not happening with the majority of roof top solar customers.�
1/1/2015
guest I think you are misunderstanding the ITC. It doesn't matter if SCTY is leasing the panels to the customer, they still get the full 30% ITC if the panels are installed before the ITC goes to 10% in '17.�
1/1/2015
guest When this bullish article was penned (early August 2015) SCTY was still trading around $60. It has been cut in half just three months later.
I guess SCTY is severely undervalued now according to the author of that article. I already voiced my concerns in the comment section of that article:
Sometimes "genius" business models with heavy leverage fail because of something as simple as missing matching debt maturities...especially when/if credit markets turn sour.
PS: I'm not short SCTY but I think this example shows how difficult it is to value the company. Imho SCTY is more of a sector-specific leasing/bank operation (with very long-term assumptions and contracts very few retail investors seem to truly grasp) with an installation and service unit attached, not a solar company.�
1/1/2015
guest Solarcity is reducing their own all in cost so that they can offer a compelling product without taking advantage of the 30% ITC. That's the point. The Solarcity customer does not use the ITC, they pay a $/kWh. Solarcity uses the ITC. They attract tax equity investors with the ITC. Again, Solarcity customers will not be rushing in to take advantage of the ITC before it drops, they will be looking at bottom line utility bill savings at the end of the month.
solarcity has to offer a compelling product for a $/kWh that consumers like despite the drop in ITC. That's the game everyone in solar has to do by the end of next year.�
1/1/2015
guest nothing has changed with the business model. The facts are facts. Real world people don't have the cash to buy up front. That's why they lease/ppa. They see a monthly savings without a single dollar invested. Again, 70% of all rooftop solar is lease ppa. Buying solar will have to be very cheap to compel the average American to get a loan for 1000s of dollars or pay cash. That's just the reality and the numbers continue to support that. Solarcity now has over 1GW of rooftop lease/ppas making monthly payments. That's the real situation of rooftop solar. It is not in dispute. Your comments on that article are not any more true today then they were then.
The stock is down because of guidance problems. Guidance problems create more uncertainty in an already uncertain industry for he average investor to make sense of. You have a high short interest because revenues are monthly over 20 year time periods and that doesn't look good on paper with high growth spending, even in a 1% penetrated market of rooftops. Net metering issues in the press also hurt investor perception. There are a lot of spin forces in addition to that from utility competitors as well as utility solar companies. However, even in this media/perception environment, Solarcity is drvining compounding growth, receiving the highest BBB ratings, getting thoroughly vetted by multiple rating agencies receiving investment grade ratings on their securitizations... Not to mention they now have over 14,000 employees and 300,000 customers in a little over 9 years of existence... Pretty crazy that we are talking about rooftop solar company at these numbers/scale.
if you think they are just s finance company, what do you call all the crews installing these systems and the 90 operation centers? What do you call their zep product manufacturing operation? What do you call their silveo manufacturing arm? All the software engineers? Energy storage engineers? Are these just another form of a banker or finance department? Come on now... Let's be real here�
1/1/2015
guest If SCTY keeps their price the same in '17 after the ITC goes to 10% then sure customers wont care. But SCTY will still rush to eat as much of their backlog as possible as their margins will be higher in '16 compared to '17, they won't magically reduce cost 22% from Q4 '16 to Q1 '17.�
1/1/2015
guest Solarcity stated in the conference call they will start pricing commercial installs under 2017 ITC starting as early as q2 2016 and q4 2016 for residential installs. So, they're going to start post ITC pricing as early as 6 months from now. You have to remember, ITC stipulations say the project has to commence install to qualify for the ITC. So, if install is not in progress, then no ITC. This pushes the "rush" to now(and within the next 6 months), which is much earlier then many assume.
However, there is legislation to change that stipulation in congress right now. There also is legislation for extending the ITC, so we'll see how that goes as well. It is definitely an industry in transition which adds to the market uncertainty and makes for a ripe short environment taking advantage of the investor/trader uncertainty while they can.
by the way, Solarcity is already at 1.92/watt install cost which is already at the target post ITC 2017 cost goal. The biggest cost cuts will now have to come from sales and marketing team growth reductions which they've already outlined reducing by approximately 50% over the course of 2016. Look at the all in cost break down again.�
1/1/2015
guest Have you forgotten your initial claim? You said that installations for '16 will go up if the ITC is continued, you still haven't made a single argument to back up this claim. The change in pricing happening 3/6 months before the year ending has no influence on '16 installations as they will happen in '17.�
1/1/2015
guest If the ITC is extended, Solarcity can lower $/kWh sooner which opens up more households to sales faster given the 30% ITC continuation. They do much more tax equity deals and much bigger abs over the course of the extension which can turn out to be a years more. This would allow them to continue expanding at 80% growth given the robust pipeline of tax equity at 30%. So instead of selling 1.25Gws worth, they can do 1.6-1.8GWs, etc... If they can they can install 1.6-1.8, they can sell more product, thus if the 30% tax credit is extended, they will increase sales.�
1/1/2015
guest I'm not sure I follow your point. Look, it's pretty simple, say SCTY sells power for 13cents/kwh in '16 which is possible because of the 30% ITC. If the ITC goes down to 10% in '17 SCTY will have to raise rates a bit or take a significant margin cut compared to '16. If SCTY plans to raise rates in '17 (I believe so based on your posts) then SCTY will try to educate potential customers about the upcoming price increase to pull demand forward and otherwise just eat through as much of their backlog as possible while the 30% ITC is still in place. In short both SCTY and customers have an interest in getting solar on their roof in '16 if the ITC expires in '17, because it is cheaper for both parties in '16 compared to '17, which means that if the ITC expires in '17, the year '16 will be a rush to get as much business done as possible pulling demand from '17 if possible. If the ITC doesn't expire then no demand will be pulled forward and '16 wont be artificially big. I really hope we are on the same page now.�
1/1/2015
guest Vertical integration
Power storage
Annuitazation�
1/1/2015
guest This sounds good on paper, wholesale costs go down therefore retail prices go down. Problem is, you're forgetting the entire existing profit model of utilities. If solar is allowed to set the pace, how is any other source of electricity going to be profitable at the wholesale level?
Again, all we need to do is look to what's already happened in Germany. The marketforces of solar simultaneously zeroing out peak midday demand while at the same time essentially removing customers from the base has been waaaay too much for legacy utilities to handle. Their value is down 60% over the last few years and they're begging the govt to let them divest from ANY form of production.
Solar is an existential threat to utilities and you're acting as if they'll embrace it. They can read the news. Utility scale solar is super cheap and is going to be amazing for new markers like India/Africa, but in the short and medium term around here its residential solar vs the legacy utils for quite a while.�
1/1/2015
guest I noticed that SG&A is flat to high when demand seems to be huge. I would expect customer acquisition costs, advertising to go down but doesn't seem to be the case. Any idea why?�
1/1/2015
guest I'm the author of that article and yes SCTY is severely undervalued right now. And they are doing exactly what I pointed out would cause profits. Slow growth = profit. To quote the article:
"A simple way to look at SolarCity's future is that profits come when QCPs cross installation costs. But the problem with those lines crossing is that SolarCity is growing too fast for that to happen until growth slows."
So let's see of SCTY can actually do that. I wonder if it will stop bears from complaining. Solarcity is now at (Retained Value - Renewals) * 1.5. This is probably a golden opportunity to buy. I have some DITM 2018 calls but if the prices stick to low 30s, I might get some OTM calls.�
1/1/2015
guest Good strategy often attends to multiple purposes at once. So ITC preparedness is one purpose, but I certainly see shoring up the share price as another crucial purpose. And that was the reason I jumped at the opportunity to buy at $31 last night. Clearly, the market was not willing to give SCTY any value for its extraordinary growth rate as we have been discussing here for months. Indeed, I suspect that many investors saw the hypergrowth as more of a negative risk than a source of value creation. In hypergrowth, a company incurs too many scale up expenses in one quarter for things that won't pay for themselves for several quarters out. Thus, you operate at loss to sustain high levels of growth.
Buying sales leads is one of those expenses. The leads you buy this quarter turn into installations next quarter and start to generate positive cashflow a quarter after that. So if you're paying too much for leads in the first place, it is really making a mess of your earnings this quarter.
So the market has said it's not willing to pay for hypergrowth. Fine. Strategically SolarCity can step down into 40% growth with near term profit. I think the market will warm up to this.
The share price is important to the bond markets and lenders. So is is very important for SolarCity to shore up the share price. Moreover, without that, SolarCity would potentially find itself in a position where it has to do more equity financing to balance the debt financing. Short would have had a field day if SolarCity were to start doing secondary stock offerings just to sustain hypergrowth.
Lyndon is being very proactive here. It takes incredible discipline and foresight to dial back growth ambitions. I think shareholders are well served with this move.
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Actually, I think Foghat makes and astute point. The majority of potential lease customers are oblivious to the whole ITC issue. They are not making the calculation that if I don't lock in my lease this year, then next year leases will go up. Someone who is buying their solar system will probably be much more aware and concerned about ITC stepdown. So the pull forward effect is probably much stronger for those who would buy than those who would lease.�
1/1/2015
guest That's the customer demand side, what about SCTY's incentive to push as much as possible? Getting 30% off the up front costs of a 20 year investment is too good to ignore. I would imagine SCTY is going to ramp up installs as much as possible even to the point of just racking roofs without panels or wiring, just to get the install "started". I know I would.
Again, Germany. They installed 2GW in ONE MONTH just prior to a step down in FIT and that's a cloudy country 1/4 of our size. Your point about the consumer mentality is spot on, but SCTY can't ignore the extra savings(profit).�
1/1/2015
guest Let's be clear. SolarCity has found that buying certain sales leads has become too expensive. This has driven up the sales cost per Watt in the face of strong demand. This may seem hard to reconcile, but it is important to consider the competitive landscape. SolarCity has been gaining marketshare, and competitors are hungry to catch up. Moreover, in the face of ITC stepdown, many competitors want to lock customers ahead of it. This creates a situation where competitors bid up the cost of leads and the effectiveness of leads and media spend is diluted. So the whole industry could be overspending on sales and marketing on a per Watt basis. SolarCity may be exhibiting good industry leadership by de-escalating it's spending on sales leads. In the past, it has been good to acquire scale and presence in the market. This established a large base of customer referrals, which yeild the lowest sales cost per Watt. Competitors will scramble to get this kind of scale for themselves, which they need to do before the stepdown. SolarCity has the luxury of saying they really don't need to pay so much for a few extra leads.�
1/1/2015
guest Opening below $31, that's cute. Gonna cry looking at the 2017 call prices today. :crying:�
1/1/2015
guest This also suggests there is nothing unique SolarCity offers to customers and hence they have to fight to get customers. Generally, such businesses are hard to make money. This market has just too many competitors and no near-term profit. A lot depends on government regulations around the world. Valuing such an industry is not easy as one rule can make or break a company.�
1/1/2015
guest I suppose it goes without saying that no one is to feed to trolls. The conversation passed this point in 2012.�
1/1/2015
guest You can say that. Or, a complete failure on your part to understand the business model.
If a company has to spend more to acquire customers in a growing market, this means there is too much competition or your product is not unique. Seriously hard to make money here.�
1/1/2015
guest Just got long at $30.05. First entry into this stock. Good luck everyone.�
1/1/2015
guest It's not that they are not unique. It is the value of the "unique" is nowhere good enough to maintain the margins they had in the past. Their customer acquisition costs are rising, and their margins are shrinking on the sales they make (decreasing retained earnings).
They will never grow again at the rate of past quarters. Now they will slow down and cherry pick.
Their older PPAs have substantial value. How to value their panel factory is a big guess.�
1/1/2015
guest What do you make of the drop to $1.92 install cost for this quarter? Due more to a higher percentage of commercial installs or a real drop in residential install cost? $1.92 is not to far from the Germany levels I've been looking for us to achieve in the US.
Are these lead costs and recent hiring about facilitating a burst in 2016 installs to take advantage of the ITC until December? Logically you would then trim down ahead of slimmer margins in 2017 -->?
I just hope it's not reactionary or something like that. The residential solar install market has not been touched yet and the misinformed are talking about an end to low-hanging fruit. I don't see SCTY getting through the low-hanging fruit until years and years down the line, PA is the 6th largest state in the union and SCTY hasn't even started here. Am I nuts?�
1/1/2015
guest This could indeed become a big drag in case installations drop. The panel business is highly competitive, it's not possible to simply dump excess inventory at good margins.
SCTY could be forced to delay the build-out and future expansion plans....they kept talking about plans to expand to 5 or even 10 GW late last year (before getting to just 1GW for now).
At least direct competitors like SUNE/VSLR (if that deal really passes...who knows in this environment?) and RUN don't have this burden attached.
Vertical integration is not a magic panacea.�
1/1/2015
guest Delay the build out? They've actually accelerated quite a bit. The factory went up REALLY quickly in less than a year.�
1/1/2015
guest To make it clearer: SCTY could be forced to delay the build-out and future expansion plans....they kept talking about plans to expand to 5 or even 10 GW late last year (after getting to 1GW for now).
How does that add up with a slow-down in installations?
Solar panel technology keeps changing rapidly. It doesn't make sense to build out years in advance...�
1/1/2015
guest How difficult would it be for them to switch the bulk of their business from lease to loan?
Isn't economy of scale a significant advantage in marketing, sales, loan financing, panel purchase, installations, microgrid management, etc?�
1/1/2015
guest Why, is Sunpower cutting back? SCTY can undercut SPWR in high efficiency panel pricing for everything they don't need. All the other manufacturers (CSIQ, JKS, JASO, TSL etc.) are heading towards 5GW of production. SCTY heading towards the same goal will get them to be price competitive with those guys in overall system cost at least, if not panel pricing. I'm not sure if SCTY provided a timeline for the 5GW, lets say 2020? Can they get to that much demand by 2020?�
1/1/2015
guest That's where I thought the scale would help. But the numbers certainly suggest the opposite specially for marketing and sales which are sunk cost. Future interest rates would be a concern. Panel purchase, installations, and other tools they buy may be beneficial with scale.
What out of all this translate to uniqueness to end users? And if that's sticky, the sg&a should go down.�
1/1/2015
guest These other producers already have economies of scale today.
You compare a new, unproven entrant with existing huge players who survived the first solar down-turn and are very lean and able to work with low margins (otherwise they wouldn't be around today).
What is your new price target for SCTY since you recommended buying the stock near the 52W-high in early August 2015?�
1/1/2015
guest Loans don't really work with solarcity's sales pitch. Their pitch is "something for nothing". Even solarcity target market understands a loan is debt. A PPA masks the financial obligation for their target market.
PPA's created a product that could be successfully sold to low information consumers. Solarcity is de-accelerating at the point of maximum interest in solar because even smart b.s. has a limited lifetime in a competitive market.
What is good for solarcity is bad for customers. Their position only works long term with a monopoly.�
1/1/2015
guest Not really. We already have loans on our cars and house and don't want another one. What I do want is to go solar today (because I understand what's going on with our environment and solar is the better choice) and have the monthly payments the same or lower than my utility bill. I could care less who owns the hardware, I just want to get my energy from a sustainable source and it's obvious others think this way too. I mean, that's what it's all about, right? If SolarCity hadn't come along, the industry wouldn't be as far along as it is now.
Now, do I use SolarCity? No, I'm still unsure about the escalator in years 10-20, otherwise I would have already had them on my roof. So don't act like it's a ridiculous business model.�
1/1/2015
guest The MyPower product seems to be working. Also the high credit scores seem to contradict low information customers. How can lower power bills be bad for customers? Granted they could be even better with a smaller mom & pop installer but doesn't mean they are bad with SCTY. Lease retained value grew 16%, Mypower grew 10%, so customers still seem to be preferring leases.�
1/1/2015
guest I originally hated this SCTY business model, it seemed inefficient to me. I know what I want and I know what it costs, so I'm not going to pay more than the interest on a loan to get that product. But that's me, most people have multiple kids and are in the situation you described. They want to go solar, but don't need or want to get that deep into it. They want American made panels, they want to go with a market leader so they know the company will be around and they don't want to deal with maintenance or replacement if something goes wrong. Providing a unique service/product is what counts, nobody can do all these things today other than SCTY and I don't see how anyone else can provide that plus rate certainty any time soon.
Again, this is from a person who likely will never be a SolarCity customer and doesn't even like the model! Though feel free to listen to random shorts and their disinformation above.
What a frustrating day, I'm gonna go do some housework to disconnect.�
1/1/2015
guest Hey, electracity, I actually agree with you on this.
It is about targeting your marketeting spend. Some marketing efforts are more cost efficient than other. Passing on the marginally most expensive ones is just smart business.
Suppose I can generate 1000 leads per week for you, and you you know that you can convert 20% into sales with an average of 5kW per sale. That is 1MW total or 1000W/lead. So how much will you pay me for my leads? If I offer them for $100k per 1000 leads. That would imply a lead cost of $0.10/W, and that might just be super for your business. Then comes along a competitor willing to pay as much as $199k for an exclusive on my 1000 leads. Are you now willing to pay $200k which you can convert to $0.20/W? Maybe, but the margins are getting tight. Now suppose you are in fact SolarCity and because of your shear market presence at least half of everyone in the market for rooftop solar is already giving you a call before selecting their installer. So of the 200 new customers you might convert from this list, you would have gotten half of them even without buying the lead list. So your incremental $200k for leads is only netting you an incremental 100 customers for 500kW. So on a marginal basis to buy this list you are paying $0.40/W in addition to many othe sales coats. At some point this becomes a deal breaker. Note that competition drives up the cost of leads, while established market presence dilutes the incremental value of those leads. So it is rational for smaller players to spend more per lead than the market leader.
Conversely, the market leader benefits more on increasing the size of the market with "education", aka advertising, than from paying for exclusive leads. In this regard, coming out with Tesla Powerpacks should generate significant awareness and interest. The advertising benefit of Powerwalls should not be underestimated. Powerwalls will generate inquires and conversions. If you allocate some portion of sales cost per Watt to Powerwalls, i.e., interest in Powerwalls offsets some of the sales cost and maybe increases the size of the job, then SolarCity may be able to offer systems with Powerwalls at surprisingly little marginal cost to the customer. For example, if offer a Powerwall on a 5kW system offsets as little as $0.05/W in sales cost, then SolarCity could come out the same with a 14c/kWh PPA on a 5kW system with Powerwall as with a 13c/kWh PPA without battery backup. If they pulled this off, my guess is that uptake of the Powerwall option would be quite high. This imposes a couple of constrains. First, they would need to focus on larger systems. 5kW may be break even with this option, but 10 kW make the option quite profitable. So they'll need to target larger homes. Next, Tesla could well be supply constrained on Powerwalls through 2016. So again they'll need to be selective about where to offer the Powerwall option. It is plausible that the Powerwall supply constrains SolarCity to 1.25 GW in 2016 bcause it can only pair it wit 1.25 GWh of Powerwalls/packs. SolarCity is not tipping their hand so much if this is the case. We'll just have to wait to see how SolarCity markets systems with Powerwalls.�
1/1/2015
guest Where do you think Solarcity's retained earnings come from? People increasingly choose to keep the retained earnings for themselves.�
1/1/2015
guest Hey, it's great to hear that the stock could be attracting new shareholders. All the best.�
1/1/2015
guest Wish I exercised a bit more patience! If we make a new low today I'll load up on some calls as well. Stock appears rather oversold at the moment.�
1/1/2015
guest Come 2:30 we'll start to see covering and short profit taking. We already hit a 52 week low during the intraday.�
1/1/2015
guest Exactly. Might make a short term options play to exploit this. Will check on SP action throughout the day to see if I should pull the trigger. Dreaming of a rebound like TWTR's most recent ER swing.�
1/1/2015
guest There's no difficulty here. They already offer loans at 4.5% interest and make more retained value from them than the leases. It is entirely up to the customer to select their preference. So far the uptake of MyPower loans is about 15%. It makes no practical difference to the performance of the company.�
1/1/2015
guest Seems like SCTY got hammered harder than any major co that 'missed'. And that is after it had already taken a 40% haircut. Hard to make sense of this. Does their retained value figure mean anything? Buying calls at 37 seemed like a real bargain. Well... Falling knife and all that.
25% loss after they essentially eased up to do wall street's bidding. I guess let the big players load up at cheap prices. They'll probably pump to 50 in now time. Question, when is that cheap price. Hard to imagine this is a bottom.�
1/1/2015
guest This movement is just due to short term bearish traders. I was pretty surprised when I saw recent institutional movement. New positions are up significantly over those who left positions. To me, this is a pretty good sign. There will also be an investor conference on Nov. 10 at RW Baird where I suspect there will be much more intense deeper dive questions where the big money makes their decisions.
I interpreted the downward revision of growth as a quality control and company health play to avoid raising another round of capital. SCTY has been on "reckless growth" mode for a while and I think they are starting to realize the quality and quantity trade off and how important ramp up is.
SolarCity Corporation (SCTY) Institutional Ownership & Holdings - NASDAQ.com�
1/1/2015
guest In bold above is why I don't own Solar City. If I am unwilling to get the product the way most people are getting it, then I am hesitant to buy the stock of a company providing something that I wouldn't do myself. That's my bear case on Solar City and the reason I don't own it.
OTOH, at these prices, I'm starting to become more interested. What I want to know is how many of Solar City's customers won't care about the future price increases because they don't even take the time to realize how much more they are paying over conventional power, assuming conventional power has lower price increases than Solar City, and at some point in the future, Solar City's customers are paying more to Solar City than they would to their utility? Obviously, no one can give a definite answer to that. Only time will tell. But it sure does seem like you can buy a ton of "guaranteed" future cash flow for a really low price right now... Any further insight on how much of a discount the stock is right now in light of its future cash flows would be appreciated. I have not looked into Solar City very much at all, which is probably pretty obvious by this post...�
1/1/2015
guest Well, I'm long at 28.42.�
1/1/2015
guest wow�
1/1/2015
guest Can we get an explanation on this one?�
1/1/2015
guest seconded. I might have to use margin for the first time if electracity is long!�
1/1/2015
guest I'm the quasi-official forum bear.
But I'm not an idiot. I can see SCTY assets and available cash. There is no reason for this to turn into a disaster from 28. The market may now focus more on SCTY ability to generate a profit, which is substantial.
Their residential business is a crap long term model. But they already have a substantial long term revenue stream.
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If you assume I know what I'm doing as a trader you will be disappointed. I'm an investor. But I'm also a contrarian. I love a brutal selloff.�
1/1/2015
guest We'll make this your board signature in 2017! Congrats and welcome to the club.
Gotta say I wish I were a bear up until today, I'm missing out on all these bargains. You get a risk free ride courtesy of the shorts.
Here's hoping a I can get a hold of some cash over the weekend without resorting to prostitution. 2018 options may dip lower by next week(fingers crossed).�
1/1/2015
guest Ha, good one. I'm resonably heavy into solar and so badly in the red on most of those, that sometimes I wish I'd just put everything in some nice mutual fund. My top performing stock and the only green one in the account where I hold many of the solars is boring old Waste Management.�
1/1/2015
guest Wow, I'm impressed. I thought you were a bear at any price. I'm curious about you thinking on SolarCity's value at this point.
Best of luck, James�
1/1/2015
guest
Congrats. That is some measured investing. It is hard to see, as you said, how you could be in a disaster from this point. Did you buy your total position or did you reserve for more possible downside?�
1/1/2015
guest I'm out of the stock for the weekend. I'm such a crappy trader that I forgot it was friday. It looked like it is capped under 30.�
1/1/2015
guest Obviously, electricity is not an investor. He's already sold less then 5 hours of being long! Must be a bad day when he's getting involved in the scty board... and actual investors are listening...
everyone needs to relax and either hold through the ITC and net metering storm or not because traders rule the day with volatility during these times (day to day), not investors.
the facts:
14000 employees
300,000 customers
1Gw of deployed capacity under day to day management/ownership
highest rating on Better Business Bureau
investment grade rating by multiple rating agencies
#1 commercial roof top solar installer in the U.S.
#1 residential roof top installer in the US.
most effiecent panel in the world(supported by greentechmedia)
Lowest total cost per watt industry wide.
34% residential market share
8% commercial market share
itc expires year end 2016
california net metering rate decided by year end 2015
nevada net metering rate decided by year end 2015
hawaii pending injunction on net metering ending
new York lifted cap until value of distributed solar determined
arizona net metering rate decided summer 2016
arizona SRP antitrust case to be heard in 2016
2012 federal investigation to be ruled on by late spring 2016
if net metering is so obviously a cost shift to non solar customers why does pinnacle west pump more then $3 million into electing commission members to the commission that is tasked to oversee it? The most in the history for elections was thousands at most, why all of the sudden $3milliin. They also spent millions on anti net metering media adds in Arizona.
why are utilities sending operatives door to door to solicited negative comments on solar as well as give leaflettes saying grandfathering is at stake, did your solar provider tell you that? When this is false.
How come nearly all independent studies on net metering show rooftop solar is a benefit, yet utilities dismiss them and refuse to disclose their own spending to refute these studies? As a matter of fact, those "elected" Arizona commission members refuse to ask for the cost numbers from utilities siting it not in their jurisdiction to oversee how they spend their money. What?!?
This is just a taste of the irony of net metering opposition. If net metering is such a problem, then there shouldn't be a need to use such nefarious tactics and spin.
The he facts are facts and in the end when the dust settles, the business model will still be working and Solarcity will continue to be a leader in our energy transformation. If you invest, hold through he storm or wait it out on he sideline. Other then that, this is the time where hustlers and speculators rule day to day market activity
added:
and I'm tired of the spin that ITC and net metering are "subsidies". These are not subsidies. Building With no permits required to build an oil Derrick then being able to get tax credit if it doesn't produce is an absolute subsidy. A tax credit on an investment where jobs are created, jobs that pay income taxes/corporate taxes while actually producing valuable clean electricity directly to consumers to use ... that's exactly what it is.. A significant return on investment for tax payers, not a hand out oil and gas get.
Net metering is is not a subsidy. Net metering is an exchange of value in the form of a credit on your grid utility bill. That energy produced and put on the grid is a value to all grid users. The utility is not subsidizing the solar owner. The solar owner made the capital investment, not the utility. Also, there are many many non rate benefits that translate into community benefits like less fossil fuel use, less water consumption to produce energy as well as massive amounts of blood and treasure saved from environmental catastrophes due to spills, gas explosions, and nuclear meltdowns. Literally billions were spent last year in fossil fuel related accidents, not including the fracking quakes linked to billions of damage. If you don't think reducing and potentially eliminating all these billions spent, lives lost/harmed, as well as environmental improvement in air quality, heathy soil to produce goods, and potable water for drinking/use, and just availability of potable water when water is scarce(causing water prices to sky rocket) by valuing rooftop solar as a benefit to all rate payers then you're out to lunch with fantasy Molly and not living in the real world.�
1/1/2015
guest This, and that the short interest is over 40% of the float. I don't think this is a coincidence. In general, SCTY has been trading in ranges all year long, between 50-60, then 40-50, and now 30-??�
1/1/2015
guest Well the volume today was incredible, over 25M shares traded. To put this into perspect, there are 97M shares outstanding and about 26M shares held short as of 10/15.
So with a quarter of shares trading hands, I am hopeful ownership has been transferred to stronger hands.
Net retained value is $33.46 per share. I think that even in the midst of bearish sentiment the stock should trade at least at 1.25 times NRV, or $42 per share. That is pretty good upside to today's prices.�
1/1/2015
guest Yeah, but I spent those five hours sending emails of encouragement and support to the Rive bros.�
1/1/2015
guest
Are you kidding us?�
1/1/2015
guest Nobody say anything too positive until I can scrape together some more cash to buy options next week.�
1/1/2015
guest I'm dying to know. So, who won here? :wink:
�
1/1/2015
guest Won what?�
1/1/2015
guest The constant battle for your eternal soul between the forces of good and evil.
You're a long now or simply the price is now so low? Just curious how long you are I guess. No homo. I liked leaving my joke as vague and open to a variety of interpretations I could manage...thank you very much! :wink:
Let me rephrase and repackage...forgive my love for cheap, internet laughs. I'm honestly curious about what you meant regarding hating their long term model. I forget the exact post...but loved the joke it should be your signature tag line. Regarding long term business models, compare SolarCity to say these tectonic business interests back to back.
Oklahoma Earthquakes Are a National Security Threat - Bloomberg Business
Skip the video...I did. Just the strategy they lay out...in their own words.
Oil Producers Curb Megaproject Ambitions to Focus on U.S. Shale - Bloomberg Business�
1/1/2015
guest Well I bought in heavy (for me) today. I had quite a bit at $40. My break even is around $36.00. After that it's the gravy train.
Good luck everyone.�
1/1/2015
guest Still believe in SCTY but sorry to have missed the bottom by buying more on Tues at $37.�
1/1/2015
guest For those who don't like an escalator (I'm one of you), back in the day SCTY offered several packages without one. When I was shopping for solar I believe it was only the $0 down offers that had one. Putting some money in upfront dropped the escalator clause. I don't know if that is still the case, and perhaps it was regional, but my SCTY installation has no such clause.�
1/1/2015
guest I can't see why SolarCity could not offer customers their choice of escalors. For example, considering a 1 kW system that generate 1380 kWh per year, declining 0.5% per year. Assume also a 6% discount. The following options all have the same present value over a 30 year term, specifically $3177.29.
A. $0 down, 13 c/kWh, 2.3% escalator
B. $689.95 down, 13 c/kWh, 0% escalator
C. $0 down, 16.6 c/kWh, 0% escalator
So which one would you choose? If the renewal option is taken by the customer, it is all the same to SolarCity. However, option A places the most value in the renewal period, the last ten years, worth $668.94 to SolarCity. Option B puts the least value in the renewal term, $386.94, while C is in the middle at $494.27. For a customer that places high value on having the option not to renew, option A is the best choice. What is lost is exposure to an escalator is made up for by optionality. Coincidentally, the is the option that has least value to SolarCity because uptake of the renewal term is the customer's option. It is also the option that places the most risk of system underperformance on the installer. If the system degrades faster than expected, the installer has more to lose. For these reasons, I think it truly is the best option for SolarCity to give the customer.
Howerver, from a shareholder perspective, option B is best. With money upfront, option B minimizes the amount of working capital SolarCity needs and accelerates positive cash flow. Moreover, it minimize exposure to the renewal term option and system degradation. Given that SolarCity now wants to move to positive cash flow, it may want to consider giving customers the option to pay down an escalator. Some customers may well prefer this, in which case it would be a win-win for customer and shareholders. Moreover, giving customers an option to pay down their escalator can be offered to all lease customers not just new customers. Suppose a customer started a PPA 12 months ago and is about to step up to 13.3 c/kWh. For $647.64 the escalator could be permanently turned off and the rate kept at 13 c/kWh. If that is a bit steep, for $71.45, the escalator could be delayed for one year, keeping year 2 at 13.0 c/kWh, but escalating their after. These sorts of prepayment option do not reduce the residual NPV of the contract under renewal, but do accelerate cash flow and reduce risks for SolarCity. Such options can be presented in monthly billing statements and would incur very small cost to deliver. So I could see SolarCity having campaigns like this to systematically advance cash flow. If they should ever get tight on credit. These campaign could help the company sustain growth. Moreover, I think customers would like having options to better manage their finances.�
1/1/2015
guest I personally find the financing the most boring aspect of Solarcity's business. I view it as are they relevant to the energy sector and will their product and service continue to be in demand. Is their panel manufacturing component on schedule and progressing nicely with the HE panel design from what I can gather. They are streamlining the logistics and distribution and vertically integrating the supply chain ground game if you will. Their sales and marketing seem nimble and adaptable to a rapidly changing marketplace. Their value add with software controls, Powerwall and even integrating Nest could generate more sales from existing Solar customer base...who generally seem happy as well. It also doesn't hurt that their product doesn't pollute or have any harmful side effects. In every sense they seem to be the leader in the industry IMHO.
I tend to think of the financing on par with Comcast modem rentals. It was a terrible deal @$8 a month so I spent $75 and bought my own on Amazon. That was over 4 years ago and I think they are charging even more while the actual cost to purchase has dropped. I think I read that despite this a very high percentage of customers still rent the modem. It takes all kinds to clog the freeway I suppose. :smile:�
1/1/2015
guest Fluffy, I think you are being a bit harsh in your financing comparison. SolarCity is offering 4.5% financing for those willing to take the risks of ownership and 6% financing for those who prefer someone else to take that risk. This is very good financing. Certainly, a homeowner can refinance their mortgage, take a home equity loan or other bank loan and get better terms. But this is a pain in the butt. If one is somewhat inclined to do that, a perfectly reasonable approach is to start with the convenience of financing with SolarCity, and the the next time you refinance your home, just roll it into your new mortgage. There is no penalty for prepayment with SolarCity financing, and in fact the company would be better off if customers were to prepay. Thirty-year financing may seem like a big deal, but in reality it is only a convenient bridge to the next refinancing, which typically happens within 8 year timeframe for most martgages.�
1/1/2015
guest I only meant that when provided a myriad of financing options...people will make different choices for their own reasons and the business cases will change. Not attempting to compare any financing mechanisms...only human behavior.
http://www.buffalonews.com/city-region/solarcity-agrees-to-hiring-an-additional-1500-20151030
�
1/1/2015
guest Ok, I misunderstood. I'm a firm believer in giving options to customers and letting them choose. Financing is offered merely as a means to facilitate the sale, not as an end in itself.
What was the motive for bumping up hiring commitments in Buffalo?�
1/1/2015
guest Changing the size, equipment, or otherwise altering the quantity of panels to be manufactured. Otherwise, why would Tesla increase their obligation with no benefit to increasing a commitment to local hiring?�
1/1/2015
guest I have no idea for sure. My assumption was that they are still growing and taking up more site space. Soraa wasn't going to fit the new plans at Riverbend.
Soraa, once bound for RiverBend, is headed for Syracuse suburb - Business - The Buffalo News
�
1/1/2015
guest Here's how I read the situation. The City was going to lease Riverbend to both SolarCity and Soraa, but SolarCity wants all the Riverbend space. So to get the expanded lease, SolarCity is making additional hiring commitments to secure the portion that would have been leased to Soraa.�
1/1/2015
guest I think Tesla acquires Solarcity by the end of 2016.
Pure speculation on my part. But you heard it here first.�
1/1/2015
guest Hmm...yes, that could make good sense.�
1/1/2015
guest I don't think that will happen. Batteries are one of Tesla's core competancies, not solar panels.�
1/1/2015
guest Well if the stock continues to be undervalued by the market this would make sense. It is one way that Musk could retain control in the face of a competing take over bid. I would also not be too surprised if SpaceX is quietly snatching up the convertible debt.
It will be interesting to see how agressively SolarCity will market Tesla Energy products in 2016. I get the impression that some of the pull back in PV MW growth is actually making space for more Powerwall MWh growth. So concentrate on fewer customers but bull out bigger solar+storage systems per customer.�
1/1/2015
guest Recent SP action is ridiculous. Loaded up on short term calls.�
1/1/2015
guest Volume is very high. Shorts appear to be applying a lot of selling pressure as big movements down are accompanied by spikes in volume. I would wait until selling pressure lets off before buying. I want to see how low shorts are willing to go.
At this point it's a game of chicken to see how far shorts are willing to push the price and how many weak longs will get flushed out.�
1/1/2015
guest I know you are right but I can't help myself. Always trying to catch the falling knife. I'll double up if we approach 28.�
1/1/2015
guest I expect the buyers will come in again later in the day. But it has become such a popular stock with traders, who knows? The next earnings report will be absolutely fascinating. I expect great uncertainty for three months.�
1/1/2015
guest This. Outside of something crazy from Elon, uncertainty will reign in the short term.
If there's one lesson we should be taking from this week it's that market sentiment was/is nowhere near ready to flip on SCTY and start the major squeeze. I assumed that 3Q install costs going down and revenue continuing up MIGHT be enough to start a bit of a squeeze last week. That was obviously way off base.
All you have to do is look at some of the language out of believers on this board, even some diehards have moderated a their tone a bit over the weekend. Based on what facts I'm not sure, but if the bulls here are less than bullish at the obscenely attractive price of $29, then we have a ways to go before sentiment shifts and the squeeze is on.
TSLA reviews and purchases were on the street long before that squeeze, a certain amount of people needed to physically test drive the car before sentiment hit the tipping point and shorts got crushed. Who knows what it will take to make people see the light on SCTY, but the squeeze remains inevitable.
I'm doing everything I can to scrap together more cash for shares and 2018 options.�
1/1/2015
guest Yale University working to go greener in New Haven and West Haven
�
1/1/2015
guest I'm one of those ultra-bulls who have turned to a neutral stance. I'm worried that the sales model stopped scaling the way management hoped. Well, there is no news there. Management said as much. But it looks particularly stark when you take a close look at the numbers.
As you see the cost to procure a new customer jumped in 2014 Q4. Its slowly trended down but jumped back up in latest quarter.
2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 Sales and marketing 24,310 79,514 86,671 113,160 129,284 General and administrative 21,062 45,420 48,654 50,211 69,423 Research and development (R&D) 364 10,004 12,120 12,401 17,652 Total Operating Expense 45,736 134,938 147,445 175,772 216,359
Customers 27,305 21,318 27,938 44,900 35,535 Energy Contracts 27,116 21,406 29,971 45,165 36,401
Sales and marketing/Customer 0.89 3.73 3.10 2.52 3.64 General and administrative/Customer 0.78 2.12 1.62 1.11 1.91
I don't know how much to believe that they will grow the installs while growing the Opex at a relatively lower speed on a going forward basis.
In this latest quarter the net new customer count has actually come down! This is while sales expenditure went up!!
I'm afraid this gives credence to the bear theory that low hanging fruit is already picked up.
Next quarter is going to be make-or-break for SolarCity. If they don't show improvement in costs, I am worried that the stock will trade at distressed levels. I'm actually scared of the next quarter and the upcoming potential negative catalysts (California NEM 2.0, etc.).
I am finding it particularly difficult to sell at losses. But the logical thing for me to do is to lighten up. I am not sure what to do, feel stuck between hard and a rock place.�
1/1/2015
guest I had no idea this was a protected racket.
Challenge of NC law aims to open solar markets | The Charlotte Observer
I have assumed Powerwall is the killer app for Solarcity to exponentially increase sales going forward. When they can bring them to market and sell them is my question... seems like it is taking forever. Ditching the grid will appeal to many, many especially rural customers I believe. Otherwise I have no idea what is going on with the stock...but I'm not particularly worried about the company if that makes sense.�
1/1/2015
guest That's just the thing, real costs are way down in the most recent announcement. SCTY puts their install costs at $1.92 plus whatever admin fat they currently have. At $1.92/W it's game over IMO. That's cheaper than most any other form of electricity production, right? Marketing, customer acquisition, all that nonsense needs to be whittled away as much as possible to adapt to a potential post-ITC world and Germany has proved it's easily doable at scale. Those costs are up at SCTY in 3Q, but I'm assuming that's the expense of scaling their operation nationwide.
People always talk about net metering concerns and losing little day-to-day state subsidy battles.....who cares? Does the demand or value proposition for solar in Nevada get eroded if there's a temporary net metering setback? No, it just sits there and grows. Our gov't is corrupt, but it can't insulate the entire nation's utility sector from getting hit just like Germany's. There's no holding back solar anymore, so what's the worry?
It's all about execution at this point. SCTY has an undeniable value proposition and is selling the best product, they need 2 real good quarters of execution and the wider population will wake up. I don't see anyone scaling up like SCTY as of now, so hopefully they have a few years as the untouchable top dog. Think iPhones before Samsung got moving.�
1/1/2015
guest I think this is the central problem with SolarCity at this point: growing customer acquisition costs are putting too high a price on growth. Management has recognized this and have done an about face on spending too much on growth. I would rather see SolarCity try to optimize their growth subject to a constraint like 40 c/W on sales expense than to try to hit some high MW goal and back end into whatever sales cost per Watt gets them there.
So they are prudent to do a strategy pivot now rather than later. The problem with trying to grow at all cost is that they basically have to finance the acquisition cost which increases the leverage and cuts into economic value creation. For example, ECV was $239M, but sales cost per Watt was about 20 cents too high and this added about $40M in unnecessary upfront costs. It is plausible that pulling back on unprofitable marketing efforts would have save that $40 even if leaving less than 198 MW deployed, such that the net result would have lead to even higher EVC. So EVC should be optimized above concern for hitting MW numbers. Moreover, the ECV numbers do call for $251M in incremental non-recourse debt. So about 16% of the leverage used was blown on excess sales cost. So I am all in favor of using leverage to seize high profit growth opportunities, but not to waste leverage on marginally unprofitable prospecting.
FWIW, much of my own career has been in marketing analytics and targeting. I am a statistician who uses predictive modeling and financial modeling to target profitable customers. It is extraordinarily common for sales organization to chase after the wrong prospect and volume targets almost always lead to destroying profitability. This is absolutely nothing unique to SolarCity. They may simply lack the market analytics talent to improve their aim. (And yes, that is shameless self-promotion on my part.)
But here's the good news. There is still plenty of opportunity for SolarCity to go after. I believe Lyndon is correct in asserting that demand is not a problem. It is a matter of targeting the right customers in the right way. A failure to target says nothing about the demand in the market. It is just operational inefficiency, and that is something which can be improved.�
1/1/2015
guest The one really positive thing with respect to SolarCity is the book of contracts it already holds. The book doesn't disappear or lose value based on 'sentiment'. Hence I try to put a concrete value on the shares based on all disclosed info.
Here is my thinking: I don't think market will give any credit for 2017 or beyond. Maybe this will change as costs come down and there is increased confidence that SolarCity will be able to handle lower ITC and net-metering dilutions. But as things stand today, sorry, no credit for 2017 or beyond. So at best market will price up to 2016 year end guidance, if at all.
I made an attempt to estimate Retained Value (RV) per share at end of 2016 in post 2699. I am adjusting it to make it easier to read and hopefully invoke a discussion.
Results first: So here is the table with Q4 and 2016 priced-in.
All numbers above in millions, except per share values (which are actuals).
G.R.V N.R.V Renewal N.N.R.V Shares Out N.R.V/Share N.N.R.V/Share 2015 Q1 3074 2718 800 1918 96.68 28 20 2015 Q2 3817 3057 941 2116 97.01 32 22 2015 Q3 4373 3256 1057 2199 99.38 33 22 2015 Q4 Est
3468
2309 100.73 34 23 2016 End Est
4381
2784 106.13 41 26
Shares Out are fully diluted, from Statement of Operations.
GRV - Gross retained Value (as published)
NRV - Net retained Value (as published)
NNRV - Net Net Retained Value (NRV - Renewal portion)
My approach: The relavant guidance we get for Q4 and 2016 is in MWs. We need to convert the MWs to RV growth.
There are a few different ways to do it.
1) Use Economic Value Creation ($/W) metric. But I'm unable to reconcile Economic value Creation with q-o-q growth in RV. So I am hesitant to use this.
2) Use RV/Watt metric. But I couldn't find this for this recent quarter. I don't feel comfortable using the average of the whole book. Current dynamics can be vastly different from past history.
3) Take change in RV q-o-q and divide by MWs booked to comeup with a RV/MW number. Then use that to go from MW guidance to RV estimate. I chose this method.
The one issue with this approach is I use MW 'bookings' in step-1 but I am using 'install' guidance in step-2. I do this because Retained Value is based on bookings (pls correct me if I'm wrong on this one). On the other hand for step-2 we don't have guidance for bookings. So we sort of have to use installs. Depending on your perspective, this can be a bit of double-counting. In the CC, Lyndon said bookings and installs will converge as they de-emphasise sales and beef up installation crews. So I am disregarding this discrepency for the moment.
Some details that went into the estimates:
Using 2015 Q1 as baseline because that's the first time SolarCity differentiated gross vs net retained values.
Step-1: Computing RV/W metrics:
Bookings in Q2: 395 MW
Bookings in Q3: 345 MW
Cumulative Bookings over two quarters: 740 MW
NRV Growth/MW = 538/740 = $0.73/W
NNRV Growth/MW = 281/740 = $0.38/W
Step-2: Computing RV Estimates:
Q4 Guidance: 290 MW
Q4 NRV Growth: 290*0.73 = $212 mln
Q4 NNRV Growth: 290*0.38 = $110 mln
2016 Guidance: 1,250 MW
2016 NRV Growth: 1250*0.73 = $913 mln
2016 NNRV Growth: 1250*0.38 = $475 mln
Step-3: Extrapolating Shares Out assuming dilution in Q4 and 2016 will be at the same rate as past 6-months.
Extrapolated Shares Out Growth in Q4: 2.7/2 = 1.35 mln
Extrapolated Shares Out Growth in 2016: 2.7*2 = 5.4 mln
I believe shares are growing primarily due to employee stock options.
Another conclusion:
RV/Share metrics grow no where close to 40% mark, let alone 80% or 100% growth rates that many of us believed was the case. I don't know if this is due to having some sort of special case scenario last two quarters or if it's true in general. But we investors should really keep an eye on this.�
1/1/2015
guest Thanks for the calc, SBenson! I'm not sure I have the acumen to follow your pedagogical reasoning, but it strikes me as odd that the share is under $30 if existing contracts are worth $33. So I added a few more shares today between 28 and 29. Thanks again! :biggrin: (I hope ... :wink: )�
1/1/2015
guest Bookings are just order, not installed systems, and order can and do get canceled. So I think it is more appropriate to use installed or deployed MW. Alternatively, you could use incremental payments under contract as this is based on the revenue side of NRV.
Additionally, I believe that the real value of renewal terms is about 70% of the nominal value of the renewal terms. So writing renewal terms all the way down to zero strikes me as overly conservative. Last summer we had this debate about the value of renewals and I modeled it. My basic assumption was that rational customers would be willing to postpone getting a new system owing to the time valid of money and the expectation of further cost declines in solar systems. So the amount of money in present value that one saves by waiting 5 or 10 years to replace your system is a lower bound to what SolarCity can charge you for the renewal terms. So renewal terms certainly have positive value to the customer, so the question is how much. So I figure that the value to the customer is about 70% of nominal value. So SolarCity merely needs to reset rates about 70% lower in renewal to keep the customer. They also have the option to offer a new system if that would create more value.�
1/1/2015
guest So, thanks yet again. I am now a little bit wiser. And momentarily a dollar richer per share; not entirely your doing though, Luck played a part too�
1/1/2015
guest Yes, I agree, using bookings for anything is nonsense. I love to be corrected but all indications say that their published RV metrics include bookings (not just deployments and installs). IIRC in this very thread someone remarked in the past when RV went through the roof one of the quarters and then quickly discovered that was because bookings went up dramatically that quarter.
There maybe some issues with incremental payments under contract. Some of the funding comes from tax equity guys (or bank loans, ABS etc). We need to remove the outgoing payments. My understanding is NRV aggregates everything. It removes debt, tax equity, and adds back in un-used cash. So it is the most perfect way of valuing the overall book at any moment.
Renewal stuff: Yes, I agree that it won't be of zero value. Maybe their expectation of 90% renewal will actually come true, who knows? Maybe it's somewhere in between and 70% is a good estimate. The real question is can you price-in something that is NOT contracted?
Does anybody look at AT&T and say: At least 80% of customer base will renew their wireless contracts, so lets discount back all of the (potential) future revenues for say next 20 years and say that is the value of AT&T wireless business. Given that all the equipment installed, cell towers, etc. will work for next 20 years.
I don't know if people do that. My suspicion is people don't value companies like that.
On the other hand the contracted stuff is as real as it gets. It's a contract after all
So it's really a philosophical valuation question.
To be honest I don't know the answer. That's the reason why I estimated both NRV and NNRV in the table allowing people to take whatever they want or something in between.
�
1/1/2015
guest The thing that's lost on folks is that these are customer acquisition costs, not the cost to acquire customers. They see a figure for 3Q, divide it by the number of bookings, and there's your cost of acquiring each customer. But that doesn't seem to be nearly reality.
SCTY is building out a full scale nationwide operation. In PA for instance they've hired like crazy this year, had to build out regional facilities, train their entire workforce, etc. All those costs hit the books in 2Q & 3Q with nary a booking to be found in the state. These are huge one time costs with zero revenue on the books. PA will be passing our new budget any day now with solar rebates included, SCTY hits the gas, and off we go. Sales and revenue galore, unless of course there's a better distributed solar product out there....
This is an ugly quarter on the soft costs side and shorts are twisting it into the end of days. In reality we're not even fully past step 1.�
1/1/2015
guest Good to hear! On that thought I shall now retire to sweet dreams! Ta.�
1/1/2015
guest Not to mention that hardware from a breached contract could just as easily be removed and slapped up on a neighbors house one afternoon, it's not like all the costs are lost. Call that Net Re-Retained Value.
Awesome figuring, thanks as always.�
1/1/2015
guest Regarding the talk about SCTY being the cheapest option
SolarCity MyPower Loan — Payback Fine Print Not Pretty | CleanTechnica
SolarCity MyPower System Cost: $33,150
Lifetime payments (tax credit used): ~$50,550 (30 year loan)
Avg. Cost Per kWh: 17.3 cents (30 years)
Avg. Payments: $140 (30 years)
Typical Installer System Cost: $23,400
Lifetime payments (tax credit used): ~$22,310 (12 year loan)
Avg. Cost Per kWh: 9.3 cents (25 years)
Avg. Payments: $155 (12 years)
And with both the cost of electricity and load balancing about to make the rate from utilities go down it seems that SCTY is actually the most expensive solution there is.�
1/1/2015
guest I don't think you'll ever see SolarCity be the cheapest outright purchase option, and why should they want to be? Now this may change some day when they scale up their own American made panels to 6GW of production and get some poor desperate southern state to pay for it, but for now I don't see there being a lot of money in cheap installs. How would they differentiate themselves enough to make it worth going out of their way?
As an investor I like this. The PPA is their undeniable value and moneymaker, stick with that. It'll be the standard mode of solar "purchase" outside CA for the next 5 years. If someone wants to pay a premium for higher end installs or stretched out payments, they're obviously open to that.
That being said, if they're portraying themselves as "cheapest" I must say I'm not a fan of that since it's pretty clearly not true.
This is the one thing you're missing and it's the reason you'll never be able to value solar properly at wholesale/retail. A very modest amount of grid-tied solar destroys the entire profit scheme of traditional utilities. You have them producing utility scale solar as part of their portfolio and everything just being cheaper, but that could not be farther from the truth. Utility scale solar is as cheap as it gets, but it's not all apples to apples.
Once Germany got to 5% solar the traditional coal/nuke utilities lost 30-60% of their peak demand and the bottom fell out instantaneously. Wholesale prices shrunk to nothing because solar(residential and utility) was flooding the market at midday, but the retail price they'd have to charge in order to make a profit was astronomical. The utility companies of the 4th largest economy in the world lost 70% of their value in a 12-16 month period.
Think of the debt load these companies carry and the fragility of their balance sheets. When you have 5% of the total supply destroying the profit model of the other 95% you end up with chaos, not some kind of slightly less expensive version of today's marketplace. And if the Germans are having this much trouble, imagine what's going to happen here. It would be less painful(expensive) if we had a plan, but we almost certainly do not.�
1/1/2015
guest @TTM
I'm not sure if SCTY tries to portray themselves as the cheapest solution, but you did write yourself just earlier today that you thought SCTY is the cheapest; "At $1.92/W it's game over IMO. That's cheaper than most any other form of electricity production, right?".
Electricity is a commodity so to be competetive you have to be at least among the cheapest. It seems that a lot of SCTYs sales are more due to marketing efforts than an actual competetive product.
I don't know all the details on the situation in Germany, but a likely explanation as to why the utilities lost a lot of value could be that residential solar had a very favorable net metering arrangement which lets the utilities and the rest of the population foot the bill of the ones with roof solar.
There is really no way around the fact that if the utilities can generate power cheaper and balance their load cheaper then they will sell the power cheaper, it's simple logic.�
1/1/2015
guest That's their cost of install from the 3Q earnings report, not what they would charge a customer for a straight install. Germany as a whole leads the way in cheap installs at around $2/W retail. SolarCity looks like they could maybe get down to $2.45-$2.75 retail if they streamlined operations, just did installs and the demand for straight installs was there. They may end up doing that some day, but for now I can't see why they would want to try. You need to differentiate and provide clear value to justify a fat margin, they have that in their PPA.
Renewable sources get "grid preference" in Germany, but the feed in tariff rates are hardly even a force anymore they've been stepped down so far. I think residential solar pays $.12/kWh for juice fed into the grid and retail cost to that same consumer is something like $.28-$.30/kWh.
As I said, either you're not seeing it or you're willfully ignoring the only perfectly obvious real world example we have in Germany. They've already gone through this, fared better than US utilities likely will and they're in shambles financially. Germany's biggest power supplier EON is actively begging the government to allow them to get out of the electricity production business. They won't let them divest because the government knows EON will simply walk away from their stranded assets and focus on charging tolls to use the grid. They made a $2.1B profit in 2013 and lost $3.2B in 2014 after being forced to eat the cost of divesting. they'll likely never make a profit again until they can fully divest from production.
It amazes me that no one really talks about this in the US.�
1/1/2015
guest "That's their cost of install from the 3Q earnings report, not what they would charge a customer for a straight install. Germany as a whole leads the way in cheap installs at around $2/W retail. SolarCity looks like they could maybe get down to $2.45-$2.75 retail if they streamlined operations, just did installs and the demand for straight installs was there. They may end up doing that some day, but for now I can't see why they would want to try. You need to differentiate and provide clear value to justify a fat margin, they have that in their PPA."
I know it's their install cost, what is your point? You clearly said that you thought SCTY is able to produce the cheapest electricity, and I pointed out that on the contrary SCTY is one of the most expensive solutions out there. How do they provide value if they are more expensive than their competetitors? It seems that they just make money off people too lazy to research their options themselves. SCTYs customers have high credit ratings so it should be no problem for those people to get a loan, finance the panels themselves and save like 50%.
"Renewable sources get "grid preference" in Germany, but the feed in tariff rates are hardly even a force anymore they've been stepped down so far. I think residential solar pays $.12/kWh for juice fed into the grid and retail cost to that same consumer is something like $.28-$.30/kWh."
If residents can get paid $.12/kwh, not pay for grid infrastructure and just use the grid as a free battery then that is a huge liability for the utility that has to overpay for electricity and provide a free service.
"As I said, either you're not seeing it or you're willfully ignoring the only perfectly obvious real world example we have in Germany. They've already gone through this, fared better than US utilities likely will and they're in shambles financially. Germany's biggest power supplier EON is actively begging the government to allow them to get out of the electricity production business. They won't let them divest because the government knows EON will simply walk away from their stranded assets and focus on charging tolls to use the grid. They made a $2.1B profit in 2013 and lost $3.2B in 2014 after being forced to eat the cost of divesting. they'll likely never make a profit again until they can fully divest from production."
From what I can tell E.ON is also in the oil production business which makes it a terrible example, as oil is obviously having a pretty bad year. But let me just repeat what I wrote in my last post
"There is really no way around the fact that if the utilities can generate power cheaper and balance their load cheaper then they will sell the power cheaper, it's simple logic."
There is literally no way around this, try to push aside your obvious confirmation bias and think for a second.�
1/1/2015
guest This is where you are wrong. They are not more expensive than their competitors. Mom & Pop solar installers are not SCTYs competition because they do not provide 30 year warranties, power production guarantees, monitoring etc.
You keep repeating this every few weeks. Repetition doesn't make it true or possible. Renewables have been increasing very fast as a % of power production. Also coal is being replaced with cheaper natural gas. However, I'm yet to see a utility drop retail electricity pricing. It is just not going to happen. Or we would have already seen it. There is no way utility scale solar drops retail pricing. Think for a second. Here is how the grid is changing (data from last year and the trend is still continuing:
The American Power Grid And The Economics And Greenness Of Tesla's Luxury Electric Vehicles - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha
Why have our costs not dropped already?? Give me a single example across the entire country where a large solar/wind/NG production source caused retail power price to drop.�
1/1/2015
guest "This is where you are wrong. They are not more expensive than their competitors. Mom & Pop solar installers are not SCTYs competition because they do not provide 30 year warranties, power production guarantees, monitoring etc."
You get a warrantee from the module manufacturer. Now try to think for a second, where do you think SCTYs fat margin comes from? Install cost doesn't differ that much and cheap financing is also available to the customers as they have a very high credit score (which has been repeated a few times). Also the customer has to pay for SCTYs G&A and customer aquisition cost. So basically customers are paying SCTY a fat markup for no reason.
As you can see renewables are still <10% of total capacity with a lot coming online a while ago where there was no significant savings compared to FF. Electricity cost is also only about perhaps 40% of the utilities total cost so clearly this effect have been very small so far. It will accelerate going forward though as solar has now become very cheap and continues to reduce LCOE quickly. Reducing load balancing cost via batteries is something that will be possible I expect from next year when the Gigafactory opens. So the measures of cost reduction I describe haven't really been influential yet, but will come into play in the coming years.�
1/1/2015
guest
Before I go long, one thing keeps bothering me and longs here think this is a non issue.
If SolarCity is cheaper and the best out there, why does it have to spend MORE to acquire customers?
If SolarCity offers the best guarantee and peace of mind, why does it have to spend MORE to acquire customers?
The advantages SolarCity has must translate into sales (with cheaper sg&a) to see value. Otherwise, it can be compared with Groupon where they kept on increasing sg&a to gain customer base as there was nothing unique they offered.�
1/1/2015
guest Solarcity is not cheaper compared to buying your system from someone else. For example, my system cost $2.50/W about half of Solarcity but I dont have the kind of warranties/guarantee that solarcity provides. I paid for the system outright. No financing though I have heard that it is not a big deal getting financing. But I had the money and I hate filling forms
Also Solarcity until the last quarter was spending more to acquire more customers (MW booked/acquisition spending was fairly stable AFAIK). My guess for the last Q was that they spent more to start acquiring more commercial customers. But I could be wrong about that. What I liked about the last Q was the install costs were already almost at the 2017 target. And the slowing growth will help them get the SG&A there too. I think they will get there faster than expected.�
1/1/2015
guest The thing to try to get are issues surrounding the ITC. The ITC is worth a lot of money and is due to expire, after which time margins will be lower, assuming that they have to offer the same price to the customer before and after expiry.
It's OK for the company to spend extra to accelerate installations before the ITC as long as they can easily cut off the fat when the margins are reduced. The question is then how much of the customer base comes from the high spend, and how the underlying growth will be affected.�
1/1/2015
guest Solar is the least important major appliance in the household. The items you list are unimportant. Do you sign a twenty year contract with a cold air provider instead of buying a refrigerator? Of course not. That would be a silly, uneconomical choice. Solarcity uses a complex financial product combined with targeted marketing and selling to established a buying criteria that you have swallowed whole.
The entire price justification of SCTY is based on the economics of retained earnings that can be retained by the homeowner. Let's look again at the sane Australians in an efficient solar market:
About STCs
STCs accounted for a price reduction of approximately 78c/W for Zone 3 cities (Sydney, Canberra, Perth, Adelaide, and Brisbane), and around 60c/W for Melbourne & Tasmania.
Residential solar PV price index - October 2015 - Solar Choice�
1/1/2015
guest Added more to my core holdings @ $29.75�
1/1/2015
guest Just popped up on my thinkorswim news feed.
�
1/1/2015
guest How do you spell relief from Chanos and minimize distractions? - ALPHABET. Total speculation, but would be nice. They already have a Billion in SpaceX and $500 Million or more in SCTY financing. What's another few Billion to take it private and use the new manufacturing capacity in Buffalo for Google's commercial needs? Just a thought.
$280 million in 2011, an additional $300 million in 2015.�
1/1/2015
guest What happens to LEAPs if it goes private?�
1/1/2015
guest The stock will be worth what Elon or whoever takes it private pays for it. So if Elon bids $35/share for the company and the bid is accepted then $35 and above calls are worthless.�
1/1/2015
guest It is good to read through the definitions in Appendix F of the Earnings Presentation. Booked means a system and related cashflows are under contract. Deployed means the system is fully installed and has passed all inspections. The gap between booked and installed is called backlog. Economic Value Creation is based on just booked MW, it excludes backlog. Nominal Contracted Payments Remaining and Gross Retained Value are based on all remaining cashflows expected under contract. So these exclude payments and other cashflow that have already occured. Both booked and backlog are included. Both financed system and direct sales (prior to receipt of payment) are included.
One implication of these definitions is that if contracts are cancelled in backlog (prior to deployment) this can decrease retained value and contractual payments. So there is a gap between the quarterly change in NRV and EVC. That gap depends on the value of the backlog. the change in backlog including cancelation of backlog. So if backlog cancelations are in excess of new backlog, you can definitely have a situation where NRV does not increase by as much as ECV. The issue with cashflow that occur withing a quarter is that while this reduces contracted payments remaining and likewise NRV, that cashflow is immediately redeployed for new value creation. It basically offsets the need for incremental forecasted debt. If we were in a situation of paying a dividend, things could be different, but for now all available cash is redeployed.
So this quarter NRV increased by $199M, while ECV was $239M. I suspect that most of the $40M gap has to do with changes in the backlog. Unfortunately my visibility is very dim. I am not sure how much of that $40M is due to cancellation, and how much last quarter's backlog may have boosted this quarter's ECV. And there may be other effects like having to more financing at above the projected rates which can impact NRV. Under this sort of situation, the next time an ABS is issued we should see an extra boost to NRV due to improved financing. We're going to need to ask better questions of management to know how NRV tracks.�
1/1/2015
guest Can someone clear up renewals for me? Is SCTY putting a value on people renewing after 20 years?�
1/1/2015
guest Well that would suck. I last bought in at $48. That would pretty much wipe out my gains for the year. :crying: I'd take shares of Alphabet though, but that probably won't happen.�
1/1/2015
guest This floated story is just an f you to the shorts who've been floating nonsense for months.
I don't see a Musk company retreating, that's why they're so good with pushing new tech into the real world.
A fat personal investment from Elon would be nice if Goldman ever stops working with SCTY to raise funds. Maybe he could offer to bankroll all the hardware for 2016/17?
On another note, I saw a couple articles on yieldcos imploding recently. What's that all about?�
1/1/2015
guest I really don't think shareholders would settle for an offer that low. I'm all in favor of Musk accumulating shares at these low prices. He may need to accumulate near a majority of shares to take the company private. But in the process of accumulation, every share he buys will reduce the shares available to be shorted, and it will drive up the price. Essentially, I see this rumor as a threat to shorts.�
1/1/2015
guest Yes, SCTY is putting quite bit of value on renewals. Infact the renewal value is growing in proportion to the rest with time.
See my table in Post 2801. All the Q1, Q2, Q3 numbers are directly coming from SolarCity.
You can look at numbers directly from their investor presentations, shareholder letters from here Investor Relations - SolarCity But you will have to dig around and put it together in a spreadsheet to see percentages and trends.
- - - Updated - - -
Thanks for the additional color. I have a slightly different view of NRV but not much different. I was wondering if you would be interested in modeling in 2015 Q4 and 2016 guidance into RV metrics. The way I did it may or may not be the best way. I look forward to any other ways of doing it. I think it is a worthwhile exercise because I firmly believe those numbers form the trading ranges (until there is greater clarity over NEM battles and how well SolarCity will survive ITC step-down together with NEM dilutions).�
1/1/2015
guest Thanks, I just wasn't clear if this was after 20 years. To me, I hope renewals have almost no direct value as far as consumers re-upping to the same program at the end of 20 years. Ideally, SCTY would be well into installing single home batter/solar and microgrid solutions by then and the value would be in the foothold they have with their massive customer base.
So I understand them wanting to show value after 20 years as I believe it will be monstrous and wildly valuable, but we have no way of knowing what the landscape will look like in 10 years, let alone 20. What if Germany gets fusion right next week?
This exercise has been great. Sometimes it takes a punch in the nuts from irrational doubters to make you think about every single aspect from every angle.�
1/1/2015
guest Part of the reason renewal value is growing as a percentage of NRV is that leverage is applied to the initial term but not the renewal term. In other words, the system is paid off in the first 20 years and the rest is gravy for SolarCity. So SolarCity is taking equity risk in the installed system, while the customer gets to avoid this risk when leasing.
The value of renewal to the customer depends on the cost of replacing the system. So SolarCity cannot charge more for this power than the local utility rate as the customer would face no switching cost to buy utility power at that time. So the value of the renewal term is bounded above by the price of utility power. Secondly, the customer would have the option to install an new solar system. Let's suppose they would buy that outright. There is value to the customer in delaying the purchase of a new system. Moreover, if they delay 5 or 10 years system costs will likely decline. Thus, there is a price per kWh that the customer is willing to pay so that they can delay buying a new system. I estimate that the value of delaying 10 years is about 70% of the nominal value of the renewal term. So if new solar is still cheaper than utility rates, SolarCity only needs to lower their rates about 30% in the renewal term to induce the customer to continue with their existing system. Moreover, even if the customer wants a new system, SolarCity stands a good chance of getting that sale. So all SolarCity really needs to do is lower rates on a fully depriciated system enough beat out any competitor's new system or the utility. Since the system is fully paid for SolarCity can go as low as needed, even down to 1c/kWh and still make money off the renewal term.
To put some numbers on this, suppose you get a new system this year on a 13 c/kWh PPA with a 2.3% escalator. In 2035, your scheduled rate is 20.5 c/kWh. I figure that if your rate is dropped to about 14 c/kWh, you would still be pretty happy to keep your old system. Will the utility be able to offer you a better rate. Your utility is presently charging you 16 c/kWh. Will they really be able to drop the rate 2 cents over 2 years nominally in spite of two decades of inflation? If inflation is just 1% per year for utilities over this time frame then their rates are at least 19.5 c/kWh. But for utilities to beat 14 c/kWh, they actually need to be deflationary. I just don't see it happening. What of solar? Sure Solar equipment keeps getting cheaper, but ITC is gone in 20 years and labor costs through out the solar industry continues to keep pace with general inflation. So let's assume that without ITC rooftop solar is about $4/W fully installed and that this cost declines about 2% per year over the next 20 years, and this is bucking inflation in labor costs and raw materials. Then in 2035, installation costs are around $2.67/W. By delaying installation by one year, you can save about 5% in financing and another 2% in declining costs. So you can save about 18.7 c/W by delaying one year. That Watt would have provided about 1.4 kWh over the course of the year. You break even on delaying if SolarCity charges you only 13.35 c/kWh. So if SolarCity offers you a rate close to that, you have now financially motive to face the inconvenience of replacing your old system. At this point replacing your solar system is as exciting at replacing your HVAC system; you put it off. Additionally, you've put off refinancing your home for more than 20 years too, because, had you refinanced, you would have bought out your PPA and rolled it into your new martgage.�
1/1/2015
guest http://www.forbes.com/sites/christopherhelman/2015/11/04/walmarts-everyday-renewable-energy/
�
1/1/2015
guest <irony>
Well there you go: Multi billion dollar profitable corporations are just as stupid and gullible as your average Joe homeowner. Why on earth would anyone want to pay no money down to be guaranteed electricity cheaper than from the utility, for many years to come? Just as absurd as getting a fixed home mortgage rate for a number of years, at a small premium, for predictability. No one would buy such a product from a bank.
</irony>�
1/1/2015
guest In fairness, many buyers can afford to pay down their solar installation at the outset, whereas very few first-time home buyers can afford to buy their house without needing a loan.
However, I do agree with the greater point that the market is full of examples where customers are happy to pay extra to get predictability and a zero-hassle experience.�
1/1/2015
guest Yeah that was my main point. And it's not like Walmart couldn't buy the system up front, yet they choose SCTY's model to deploy their cash differently. And I'm assuming Walmart didn't get as big and successful by mismanaging their assets?�
1/1/2015
guest Peter Rive on SolarCitys All About Customer-Acquisition Costs | Greentech Media
Peter Rive gives more color on the strategy to moderate growth and become clash flow positive.�
1/1/2015
guest This is true, and in an effort to become cashflow positive. SolarCity ought to give customers flexible options to prepay a portion of the cost other system. The standard 13c PPA with 2.3% escalator is worth $3.17/W of revenue in present value. If the customer is willing to pay $0.69/W upfront, SolarCity can set the escalator to 0% with no loss of NPV. Some customers would like take up such an option because they value this as a hedge against inflation. But for SolarCity the advantage is huge the $0.69/W upfront would offset the need for incremental debt. This last quarter ECV analysis revealed a need for $251M in new debt issuance. This is about $1.26/W in leverage. A customer willing to prepay the escalator to 0, would need only $0.57/W leverage. This gets us much closer to cashflow positive just by giving an option to customers. Also, the renewal term is much more competitively prices and holds a much smaller share of the net retained value. So renewal risk is reduced. Moreover such an escalator prepayment option could be offered to all existing customers. Any prepayment money that comes in offsets the need to issue debt. In fact, the whole point of issuing debt is to pull forward the customer payment stream. SolarCity has many options to get customers to pull forward these payments at lower cost than issuing debt.�
1/1/2015
guest Exactly, SCTY can be a broad provider with options suitable for both those with lots of available liquidity to those with very little liquidity. This way your addressable market becomes almost any household (poor to rich) and any business (small to big). Solar makes just as much financial sense to someone poor as someone rich.�
1/1/2015
guest We don't know the details, WMT may very well have made the wrong choice, it's not very significant to their business anyway. Try to explain how SCTYs product can be the best option for the customer when literally 1/3 of the price is sales and G&A that adds no value at all. On top of that you pay SCTY a profit margin. That is why SCTY is double the price of letting the bank finance (also 0 upfront cost) and getting a different installer. Like someone else pointed out if SCTY really had a great product that is better than competitors they wouldn't have to spend a whopping 22,5% of their total cost structure on sales alone.�
1/1/2015
guest Career training spurs overhaul of failing schools
�
1/1/2015
guest Another demographic dimension to consider is age. A young couple may prefer an aggressive escalator because they expect their income to increase over time, but do not have much savings at first. Conversely, an older couple nearing retirement may have substantial savings,but no longer expect their income to increase. So prepaying to reduce an escalator may make sense. Finally, a couple living off of savings in retirement does well to pay cash. Buying the system outright is like investing in an annuity that pays 6% or more per year in electricity, and it is immune to inflation and not subject to taxation (in most places). In fact when I think about retirement, I'd like to have my home paid for, two Teslas paid for and solar plus batteries paid for. The practical return on that is much better than most income investments. As good as that may sound, it important to understand that the issue confronting younger families are much different. So no money down on a lease might be a really smart mlve when you're starting out and have negative net worth, but as you accumulate wealth prepaying starts to make more sense. So it is that giving customers opportunities to prepay years into a lease makes sense.
Another angle on this for SolarCity is that prepayment programs may prove to be a good tool for combatting higher interest rates. As interest rates go upleverage for new value creation will become more expensive. However, repayment programs could generate cash comparable to 5% or 6% financing. So in the present low interest rate environment 4.5% ABS looks pretty good on a revenue stream with 6% discount. Indeed SolarCity is earning upto 1.5% net interest income on the spead, but if interest rates go up 2% so that the can only issue an ABS at 6.5%, then prepayments are going to look quite good to them. However, at just such a time customers will not be so enthusiatic about making prepayments. So it is not such a good idea to wait for higher interest rates before enouraging customers to prepay. Rather SolarCity should take those opportunities as the come to move the business to a positive cashflow basis as this will minimize the need for new debt when rates do rise. One wonders if part of the strategy pivot is motivated by concern for rising interest rates.�
1/1/2015
guest Sunshine revolution
Paywall link:
sunshine revolution - Google Search�
1/1/2015
guest That link doesn't go to the article if I don't sign up for a subscription.�
1/1/2015
guest jhm, We were talking about EVC vs RV-growth. I think I may have uncovered another factor which is creating the discrepancy.
EVC does not necessarily account for all cash-flows but RV-growth does. For example take R&D expenses, these are outgoing cash-flows that need to be paid for somehow. In RV perspective either the cash that is generated from customer payments pays for this or greater debt raised against customer contracts pays for this. Given that RV is a snapshot of "everything" all cashflows get automatically accounted for. On the other hand, given that EVC is a theoretical number (based on forecasts), management chooses to include only cashflows that they deem relevant.
Does this make sense?
(This has some deep implications for the entire investment thesis actually, especially in post 30% ITC world. Will explain more once I have enough clarity)�
1/1/2015
guest Yes, that would make sense though it is hard to know exactly what is included in ECV. R&D I think should be included in G&A per Watt, and so flow into ECV. But NRV should do a better job tracking over longer periods of time. For example from Q1 to Q3, NRV increased $538M while ECV for Q2 and Q3 combined was $435M. So in Q2 the change in NRV was $339M while ECV was only $196M. So sometimes the ECV will exceed change in NRV and sometimes not. I don't think we have enough insight or experience with these metrics to understand why this flips around from quarter to quarter. Management prefers to show how ECV is growing progressively. I can tell if that is be cause it is a better metric or Management is just putting their best foot forward. In any case I think NRV is the one to watch for longterm value. It is essentially a valuation of the PowerCo, while ECV is just a pro forma of what the DevCo is queuing up.
We should give some good thought to what is going on with R&D. It has been accelerating. I think this is largely due to getting Silevo panels production ready. This spending hits G&A this quarter, but will reduced cost of goods for years down the road. It would be really nice for SolarCity to separate out their "FabCo" to put a spotlight into the value that Silevo and Zep are creating. It is perfectly reasonable to take on debt as an investment in creation of new products and capacity for their manufacture. SolarCity is really 3 companies in 1, not just DevCo and PowerCo.�
1/1/2015
guest Thanks for the perspective. I didn't notice that EVC and NRV-growth are flipping around.
AFAIK none of their slides on 'cost' include R&D. At one point, I guess when R&D started becoming significant, they said that is expense which will be paid off by future revenue and thus they will not include in their cost calculations. My suspicion is EVC doesn't include R&D. The biggest problem I have with EVC is, how are we supposed to correlate that with anything? In a way NRV is proxy for book value. Is EVC supposed to be a proxy for Net Income or Earnings? Ultimately the question is how are investors supposed to draw a relationship between EVC and market-cap (or enterprise value).
In any case, I think we both agree that NRV and trajectory of NRV is much more important to understand the valuation of the company.
I agree that SolarCity is three businesses in one. Nevertheless, I believe market's way of looking at it, the DevCo and FabCo are just means to get ever increasing assets (NRV) in the PowerCo. Increasing NRV is their sole purpose. So if we were to put a trajectory on NRV then come up with a valuation for the overall company based on that, it doesn't quite matter if it is 1 or 2 or 3 companies underneath.
So if I were to tell you that NRV will be flat for extended future, as far as we can see, will you give the company any more valuation than the NRV itself? Does DevCo and FabCo get any valuation. My sense is no, they get no valuation.
Does this line of thinking make sense?�
1/1/2015
guest You might want to look at the Cost Calculation Supplement. It makes clear that R&D is not included in the cost per Watt. So it can't flow into ECV.
Clearly R&D competes for available cash, so it adds to debt in NRV.
Also Equity Awards are not counted in cost per Watt, but dilute equity.
I do agree that all the subdivisions of the company are driving growing NRV. So that's what tracks long-term value creation and what the company should be optimizing. Net Asset growth would also be a good value tracking metric. On that basis they are up 44.3% Q3 y/y or 9.3% sequentially. Meanwhile NRV is up 6.5% sequentially, and has not been around long enough for y/y.�
1/1/2015
guest Another thing is any CAPEX will have an immediate impact on NRV (either cash will go down or debt will go up). But CAPEX wold not have an immediate impact on EVC I believe.�
1/1/2015
guest That makes sense.
Just to note:
NRV went up 6.5% q-o-q
NRV-per-share went up 4% q-o-q�
1/1/2015
guest Latest Thesis
Here is the thesis that will affect what I will do with 8,000 shares. I request people here to correct me if I am going wrong anywhere. I have no agenda but to figure out for myself what to do with the position that is painfully underwater.
A note on Net Relative Value (NRV)
By now it is very well established that NRV and the trajectory of NRV is the most important valuation tool wrt SCTY. Probably this is the only tool available.
None of the traditional financial metrics apply properly to SolarCity's Business model. This is widely established.
In addition, the newer Equity Value Creation (EVC) metric released by SolarCity looks too theoretical for me to trust too much. See past few pages in this thread to get a sense for it.
The few analyst reports I have read in the past directly referred to Retained Value for valuation and valuation projections.
Impact of ITC step down:
My understanding is that SolarCity prices their systems at around $5/W. As ITC goes down from 30% to 10%, that will have an impact of about $1/W.
Unfortunately SolarCity cannot merely pass it on to consumers as they are ultimately limited by utility rates on a Cents/kWh basis. If SolarCity prices higher, consumers will simply not choose to get a system.
So this $1/W needs to be overcome somewhere on the cost side or else it will run into lowering (or even creating a negative) incremental NRV.
Management discussion of ITC step down
In Q2 call ITC impact was discussed to some degree. Here are the snippets:
Brad Buss: "Applying the expected impact of a 10% ITC in 2017 with our 2017 cost goal, we would still maintain healthy unlevered IRRs of approximately 7.5% and an equity NPV of roughly $0.60 per watt."
Lyndon Rive: "We believe that our cost structure will allow us to thrive post-ITC reduction and generate $0.60 per watt for equity value"
Lyndon Rive: "for most of the projects that we were deploying, we will continue to just install and have a $0.60 per watt economic value creation instead of over $1 but, yes, we'll just continue."
Lyndon Rive: "It's a combination of cost reduction and less cash going to the (01:00:58) investors. That gets us to the $0.60 a watt."
Now here is the real kicker. All of the above snippets relate to EVC and NOT NRV. To know that for sure you would have to read the whole of Bard Buss comment. Here it is:
"Economic value creation is a key metric we introduced last quarter, and it captures the total value creation to equity using our actual Q2 installs and cost for the forecast for debt. Our EVC increased 33% from Q1, driven mostly by deployment growth and lower cost. The Q2 unlevered IRR was 12%, up nicely from 11% in Q1. The NPV on a per-watt basis was approximately $1.14 per watt, suggesting a range of approximately $1 billion-plus of annualized equity value creation in 2015 based on our megawatt guidance.
If we run this very same model applying the expected impact of a 10% ITC in 2017 with our 2017 cost goal, we would still maintain healthy unlevered IRRs of approximately 7.5% and an equity NPV of roughly $0.60 per watt."
In a nutshell if you are looking to put valuation on SCTY through NRV and trajectory of NRV, unfortunately, all of this commentary is not relevant.
That leaves the problem of figuring out NRV trajectory to ourselves.
Current state of incremental NRV
NRV is based on bookings. We only have NRV data from Q1 2015. So we can assess the incremental NRV for only two quarters.
Q2
Bookings: 395 MW
Incremental NRV: 3057 - 2718 = $339 mln
Incremental NRV/W: 339/395 = $0.86/W
Q3
Bookings: 345 MW
Incremental NRV: 3256 - 3057 = $199 mln
Incremental NRV/W: 199/345 = $0.58/W
Q2 + Q3
Bookings: 395 + 345 = 740 MW
Incremental NRV: 3256 - 2718 = $538 mln
Incremental NRV/W: 538/740 = $0.73/W
Impact of ITC stepdown on Incremental NRV
As discussed earlier, ITC step down causes a reduction of about $1/W revenues. On the other hand shareholders are currently only getting $0.73/W.
So as you see now, IF costs were to remain the same, with ITC step down, incremental NRV will be NEGATIVE $0.27/W.
In other words, for every new install, shareholders will be losing additional money off of existing NRV!
Cost Savings in preperation of ITC step down
Obviously the team is working very hard to lower costs. Let�s take 'their' guidance on cost reductions.
As per the latest deck, the targeted savings are $0.34/W. See page 5.
It doesn't appear that Silevo panels are included in these savings. Guidance on Silevo panel savings is $0.25/W. This is from the latest CC: Tanguy Serra: "The number that I have been using is relative to today's costs and it's about a $0.25 [a watt of panel]"
Note though these panel savings will not affect all installations. Because production is going to be 1GW in 2017 but installs are going to be more than 1.25GW. So just prorating a bit, let�s call the savings to be $0.20/W.
These are projected/targeted savings. Nobody has a crystal ball. But lets be optimistic and use the number as it is.
So we seem to have potential aggregate savings of about $0.54/W (0.34 + 0.20).
Now lets look at the potential Incremental NRV
ITC step down impact: $1/W
Potential savings: $0.54/W
Impact on Inc NRV:0.54 - 1 = -$0.46/W
Current Inc NRV: $0.73/W
Inc NRV after ITC step down: 0.73 - 0.46 = $0.27/W.
Conclusion
Incremental NRV will be $0.27/W if all goes as planned.
This is so razor thin, that if you discount away some of the renewal RV, you might as well hit 0.
Keep in mind we didn't even touch net-metering dilutions here. Any dilution will effectively cause SolarCity to pull back from the state or operate on losses. Then what's the point. The more they install, the bigger the losses will be.
Tesla batteries are of no help. Infact they hurt. Because SolarCity will now have to bear the costs of the batteries while still keeping the price per kWh the same. So no revenue, only cost.
In summary NRV will remain flat or worse start trending down starting 2017.
As per my previous post here, the projected NRV/Share at end of 2017 is $41. Effectively $41 is the max the share price will go for foreseeable future (several more years).
Unless SolarCity's business model fundamentally changes, I really see no solution here. The business model is broken. It will not work.
To me it feels like management is using all sorts of accounting gimmickry to come up with brand new metrics like EVC to hide the facts. Come 2017 Q1 ER, there is a good chance that NRV will reverse trend (say if the Buffalo factory doesn�t start on time, or is not as cost effective as hoped). Management might cleverly try to hide the slide and say we no longer publish NRV because we don't internally track the Business that way. In that case investment community will be left with 'nothing' to put a value on the shares. The stock will plummet either ways.
P.S
How come I haven't done this analysis before. How did I go so wrong as to the extent of buying a whopping 8000 shares?? I have been thinking about this myself. Will post a post-mortem here once I have final thoughts. But of course, I need to make sure, my latest thinking is in fact correct before I pull the trigger and sell at losses.
P.P.S
I'm happy to send a screenshot of my account statement to any doubters.
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Based on above you can easily conclude that current price around $30 is actually a very valid price. Scary to say.�
1/1/2015
guest Bensen, wow, I had no idea your position was so large. No wonder you're so concerned. For the record my position is around 1200 shares.
I'll add comments here as they occur to me, not all at onece.
First, I do not believe that $5/W is representive of SolarCity's retail pricing. There average system is equivalent to a PPA with 13 c/kWh, 1380 hours/year and 2.3% escalator. The present value of customer payments over 30 years is just $3.17/W. Now this is an after ITC figure. The pre-ITC equivalent would be $4.53/W. By 2017, SolarCity aims at a cost of $2.50/W, but the conference call hinted that the may be looking at $2.30/W. But let's be conservative ant say they get their cost to $2.50/W. They can continue to offer the above PPA terms, worth $3.17/W. So the value they retain including 10% ITC is now $3.17 - 2.50 + 0.45 = $1.12/W. This is equivalent to the current net retained value. So essentially, SolarCity needs to get to cash flow positive to avoid leverage and their target cost of $2.50/W to sustain the same unit profitability they presently enjoy. I think they can trim an extra $0.20/W off the target which will give them a little wiggle room for some leverage.
I think this lends insight into their change in strategy. The are positioning themselves to have the same NRV/W in 2017 as present if ITC stepdown happens. Many have criticized SolarCity for not being the low cost leader in the industry, but in the context of ITC stepdown, survival tomorrow is more important than offering the lowest price today. So they should not lower prices before the stepdown. They should cut out wasteful market expenses. They should their target cost. And they should cut the use of leverage. If the do that, they will transition into 2017 nicely. It's all quite necessary.
I think your ChgNRV/W of $0.73 is pretty good. The gap of to EVC/W of $1.14 is about $0.40/W. We have determined that this includes things like R&D and Capex. Such things compete for cashflow and so added to leverage. I suspect an awful lot of this is Riverbend and expansion related. If so, they can continue somewhat down this path in 2016. But post-ITC steodown, they will be very tight on money for expansion. Let's suppose they've got Riverbend in hand an halt expansion of their footprint. Perhaps they can install 1750 MW.
Additionally, I think MW installed is probably a better driver of growth in NRV since I suspect shrinkage in backlog. Over time backlog that cancels drops out of change in NRV. So in the last two quarters, 431 MW were installed. This implies, ChgNRV/W (installed) is $1.24. This is a bit surprising since it is so close to ECV/W deployed.
So I think the cost savings opportunities are good. Silevo panels are a big win. The big problem is just not being able to produce much more than 1 GW in 2017. So one of the advantages of limiting MW growth is keeping the average cost per Watt down as you point out. So your aggregate savings per Watt, gets in range of the targeted $2.50/W. I'd also point out that the stepdown will be hard on suppliers and solar workers as well. So there may be a little more slack for cost cutting.
I do think that management was sandbagging to suggest only $0.60/W EVC. I think it will be more than $1/W whether looking at EVC/W or ChgNRV / W installed. Moreover, I think 2016 will be a little higher than 2017. So I'll just go with $1/W. Thus, I am looking at
2015 Q4 NRV Growth $290M, NRV $3546M, 99M shares, $35.82/sh
2016 NRV Growth $1250M, NRV $4796, 104M shares, $46.12/sh
2017 NRV Growth $1500M, NRV $6296, 110M shares, $57.24/sh
Additionally, I do not expect market sentiment to always be this negative. In a bearish market I would expect the price to be around 1 to 1.5 times NRV, in a neutral market 1.5 to 2.0 times NRV, and anything over 2 times NRV is bullish. So I think $70/sh is a pretty good PT for end of 2016, and that is close to analysts consensus. By that time I think we'll have a much better feel for how the new strategy is playing out, how prepared the company is for 2017.
Moreover, with any luck we may just see some extention of ITC, Just stepping it down gradually like 2% per year would make a huge difference in impact. In fact, I think in the shortrun, the stock may be mostly just this political bet. Even though we're looking closely at the stepdown scenario, if legislative effort fails, I'm sure the stock will take another big hit. With that in mind it's not a bad idea just to lighten ones position and hold cash. If the political outcome is bad, you should be able to buy back pretty cheap. Even if we have a full extension, the market is so bearish it probably would response pretty slowly, slow enough to buy back in before the high growth strategy is turned back on.�
1/1/2015
guest Op-ed: Nevada power markets need more competition
�
1/1/2015
guest I like how the author speaks of NEM as selling power to your neighors. I wonder if she has been reading my comments.�
1/1/2015
guest Thanks for adding another layer of phenomenal analysis. This short induced crash has been a great chance for everyone to think about this company and industry from every angle imaginable, not just the rosy idealist's perspective.
As for your concerns above.....remain calm and buy low, sell high. Solar is the future and you can buy stock in the US industry leader for pennies on the dollar right now. That is a GOOD thing.
The profits will sort themselves out, solar is undeniably cheap and I have faith that a Musk organization will have no problem making billions selling the next-big-thing with their unique value proposition and newly implemented scale. Install costs are down to $1.92 for god's sake, you should be leaping with joy!�
1/1/2015
guest Pretty sure there are 3 US companies with higher GW deployment rate (FSLR, SPWR, SUNE) with FSLR and SPWR leaps ahead as a panel producer.�
1/1/2015
guest If panel producers had been bringing high efficiency panels to market at a low enough cost, SolarCity would have never bought Silevo. SolarCity remains a net buyer of panels, and seriously needs panel makers to step up their game. SunPower pretty much had high efficiency panels to itself. With Silevo's 22% efficiency announcement, Panasonic is now aiming to bring a high efficiency product to market and I expect others to follow. Hopefully this competition will drive down the high efficiency price to the point that it is cheaper for SolarCity to buy them in lieu of building out a second panel factory. The value to SolarCity is in driving down the cost of installations, not in being a big panel producer.�
1/1/2015
guest Panasonic had a press release literally 1 day, or a few days after SCTY with a finished product, didn't have anything to do with SCTY. I don't agree with the idea that the industry was stagnant until SCTY came in and saved the day at all. Solar modules have been improving as a product much faster than any other means of producing electricity. Efficiency gains have been around .5%points/y for a while, that is a 3% efficiency gain with cost/w also coming down insanely fast.�
1/1/2015
guest Panels are done. They're efficient, reliable and cheap enough that they're no longer nearly the most important factor in geting our domestic solar industry to scale. Anyone can make panels, it's going to take vision and execution to get solar integrated expeditiously.�
1/1/2015
guest I would rather say that anyone can do what SCTY is doing but I guess we will just have to disagree about that.�
1/1/2015
guest US giant enters Australia market to take suburbs off the grid : Renew Economy
Mule, you'll like this one. I hope to see SolarCity get more engaged with microgrids.
Imagine the opportunity of coupling a residential microgrid with a commercial microgrid. This would smooth out the load through the day and make more timely use of solar.�
1/1/2015
guest Theoretically, anyone can build electric cars far superior to any ICE vehicle and a fast charging network to power them. You don't see many folks doing it though, do you?
It's all about vision and execution and I'll bet on Musk for that every time. Once SCTY is fully to scale, they'll be too far ahead to be caught.
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Get to 5% solar overall, then worry about household battery packs, then worry about microgrids. That's the logical path I'm hoping to see from SCTY. There's gonna be a LOT of chaos between here and there.�
1/1/2015
guest All I'm saying is that if suppliers want to earn SolarCity's business, they've got to offer better products at lower prices than what SolarCity can do in house. As far as SolarCity was concerned, there was a growing gap between what they needed and what panel makers were supplying.�
1/1/2015
guest Not to mention we're so deep into trickle down economics that states are willing to pay for and build entire manufacturing facilities just to attract jobs.
I actually think there's a good bit more value to SCTY making their own panels than just cost savings and higher efficiency panels. As we move into the next couple years and solar becomes mainstream across the nation, people are going to want American made panels from an American company. SolarCity's positioning as an end-to-end full service trusted American firm that isn't going anywhere is what will tip customers off the fence.
Having your own US manufacturing plant alleviates one of the major customer concerns and therefore speeds up the sales process. It's all about making the PPA efficient and undeniably advantageous so installs just snowball by word of mouth as they do in Germany.�
1/1/2015
guest "Now we are actually going to be increasing our pricing in Q1 next year, but we have small increase depending on the state we'll increase roughly 0.25 cents to 1 cent a kilowatt hour in our leases and PPAs, and essentially matches the escalation of the utility rates." -- Lyndon Rive, CEO
This is fascinating. What Rive is really saying is that they will concentrate their sales efforts on the clueless subset of their increasingly sophisticated prospect population.�
1/1/2015
guest Yes, I get that path. However, there are some exceptions. Specifically new housing developments offer a rare opportunity to avoid building out expensive grid infrastructure before it exists. So there is an immediate savings to the developer, a near and long-term savings to the homebuyers, and an avoidance of utility cross-subsidization beneficial to utility ratepayers. So everybody wins except the utility that misses a growth opportunity. I think this is part of the answer to the situation where utilities are pushing too many fixed grid costs on to ratepayers. In those edges where new grid service is being added, the utilities can be forced to compete.
I see an interesting parallel here with gas peakers. With the low cost of Powerpacks and competitors, Sierra Club can now argue an economic case against a utility trying to get approval for a new gas peaking plants. Batteries win on economics, and this will shut down the pipeline of new gas peak capacity. So how do we shut down new grid infrastructure? Argue the economics of a microgrid. A microgrid can stand on its own, so if the utility wants to connect to it, they can pay to do so. But that is on the utility, not the developer and homebuyer.�
1/1/2015
guest Lots have tried, vslr, nrg etc.�
1/1/2015
guest Vivint has done well afaik and recieved a buyout bid from SUNE at a relatively high valuation. SPWR is also doing well with what I believe is primarily a build to sell model which probably gives the customer a much cheaper solution. I don't think SCTY is guiding for market share gains going forward, which is kinda bad given their size (should be an advantage as many of you also believe) and their very high sales spend.�
1/1/2015
guest Well, that would be your cynical take on this quote. The way I see it is they are going to focus on converting customers from utilities that just raised their rates by a cent or two. It just makes sense to go where utilities are charging 17 c/kWh or more and pass over markets where the utility is below 15 c/kWh. So in a 17 c/kWh market they can offer competitive rates at 14 c/kWh, which will improve their average rate.
Of course, other installers can offer competitive prices too, but the are all competing with the local utility. So if they have to come in at 1 cent below SolarCity to get the sale, then they too are pricing at 13c, where SolarCity is 14c and the utility is 17c. Likewise, they would be offering 11c in a place where SolarCity is at 12c and the utility at 15c. Basically, it makes sense for all installers to charge more in higher priced market and to allocate more sales and installation resources in those markets. Moreover, any installer that can get the sale for the same price as SolarCity is offering would not leave money on the table by underbidding. The only reason to underbid SolarCity is if you cannot book enough sales otherwise. SolarCity is saying that it is willing to pass on certain bookings when it is not sufficiently profitable to pursue. It would be super if competitors can make good money on these passed opprtunities.
Having a strong market presence means you can charge higher prices and still retain marketshare. So we'll have to see if SolarCity can raise rates and still hold share. If so, then shareholders will know they've got a strong franchise.�
1/1/2015
guest Much like the rooftop vs. utility argument, you can't just look at it from the perspective of which is cheaper/better. There are a thousand and one other factors that go into it.
It's two very very different markets and products. Buying panels outright(what I would do) is obviously the way to go, in 2015 an argument can't possibly be made against it. Problem is, that works for you and I and folks who are "sold" on the tech, can research the product confidently and have the means to buy/finance. 70% of potential solar customers don't have the time, know-how, resources or DESIRE to go the route of purchasing. They'd rather outsource at no additional cost/risk to what they're doing today.
To me it looks like SCTY will essentially own the PPA-style residential market for as long as it's valuable to consumers. In my estimation that's only 6-12 years until the industry in the US is so scaled, efficient and trustworthy that it doesn't make sense to pay a premium. By that point SCTY has a huge portfolio of customers paying them monthly and is moving into batteries.....
I see the market for residential solar customers being split roughly 50/50 purchase/PPA over the next few years, so long as SCTY can keep the payments at grid parity or below. That should be no problem once they get a tiny foothold and wholesale bids at peak start to plummet.�
1/1/2015
guest SolarCity vs SolarEdge
Ok, folks, we've all have invested considerable energy investigating SolarCity and the solar industry. Let's see if we can use that to make better investment choices wrt over solar investments.
So here's my challenge: SolarCity or SolarEdge, which is the better investment for the next two years?
I own both and would love to get other investors' views. I do have a particular leaning right now, but I'd rather not say. Thanks.�
1/1/2015
guest Clearly the short-term investment is in simple panel manufacturers/installers who make all their profit on the spot. The risk is to miss the SCTY squeeze which could end up dwarfing TSLA if things go well.
I like my $80 & $90 Jan2018 calls in SCTY. They're probably cheaper right now, jump on those.�
1/1/2015
guest Solarcity lawsuit against Arizona utility to go forward: pv-magazine
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1/1/2015
guest
I'm doubling down on my SolarCity investment as their manufacturing plant and optimizations for install will reap huge margin improvements. I see their business model scaling better overtime as compared to SolarEdge due to their Flextronics partners.
This fact sheet appears to a bit old and I wonder why they haven't updated it? Maybe because they aren't the leader for installs currently?
http://www.solaredge.us/files/pdfs/se-fact-sheet-na.pdf�
1/1/2015
guest Tempted to buy a ton of January $50 calls, then sell all my shares. I think this allows me to write off the loss and realize the gains when (if?) the stock rises to $60 or higher by then. Is this correct? Anyone have any thoughts on this strategy. At $30, SolarCity is very undervalued. The main headwinds are being caused by uncertainty about the entire market and tax incentives.�
1/1/2015
guest I think that violates the wash rule.�
1/1/2015
guest Thanks. What is your concern about Flextronics?
The fact sheet is old. It is missing latest developments in HD Wave technology and an inverter optimized for Powerwalls.
I think I agree about SolarCity scaling well into the future ten years out and beyond. An inverter maker like SolarEdge may in fact lose its technological edge. This is what SolarEdge is doing to Enphase right now. So there is risk of technological obsolescence.
That said, for the next two years, it looks like SolarEdge can keep taking marketshare from Enphase and other inverter makers even as the global solar market grows. They've been growing profitability at 72% for several years and look to keep that pace for a few more.
So this leaves me to wonder if it would be better to ride out ITC with SEDG for a year or too and then jump back in SCTY. So that is the sort of play I am trying to weigh out.
If ITC is extended and SolarCity takes off again, SolarEdge will take off too. Currently, a quarter of SolarEdge's sales are to SolarCity. But if ITC is cruel to SCTY, SolarEdge has broad international exposure to rooftop and commercial solar and should be able to weather the US residential solar downturn better than SolarCity. So this trade seems to be a sort of hedge against specific US risks.�
1/1/2015
guest When shares are this massively undervalued, just buying @ $28 on a mini-dip is hard to beat with fancy strategery. I believe I said the same at $38. That being said, I was overjoyed to buy Jan2018 $90 calls for $2.10 a month ago, since nothing has really changed since then logic states paying $1.34 today would be more better. Wait a month or two til the volatility cools down and buy them even cheaper.
Nothing will happen by January 2016 that's significant enough to move the needle of investor consensus, so why take the risk on Jan16 options? I'm all about timing this inevitable squeeze with leverage through way out-of-money calls, but the timing is looking highly improbable for the next 6 months. Now, January 2017.....that could be a whole different story. Imagine SCTY is fully scaled, efficient, churning and cash positive......then Bernie Sanders wins. Yikes. Instead of a mild squeeze to $80 or $100, you're talking $150 and beyond.�
1/1/2015
guest So you're betting on Sanders? I guess at some point we need to figure out how presidential race factors into solar stocks. With any luck we may get an ITC extension this year and campaign politics will have less impact.
I tend to think that when it come to reach carbon emission goals, ITC is one of better policy levers. I think it is too late for a carbon tax, and that just pushes costs onto consumers. A carbon tax that funded ITC and other renewable energy incentives could be revenue neutral and rightly focused on solutions, not just taxing the problem. In all this, we at least need a government that is willing to address the issues.�
1/1/2015
guest I think it only violates the wash rule if I buy calls after I sell shares, not if I buy them before I sell the shares. I think it might also violate the wash rule if the calls are dated less than 30 days out. Is this correct?
I think this is a technique hedge funds use to "accrue losses", to offset gains in stocks they want to be long and are bullish on, that have experienced a significant sell off.
I think this is one of the reasons stocks that experience a significant sell off, justified or not, sometimes remain relatively flat for at least a month before picking a direction.�
1/1/2015
guest No, this is a Hillary lock. Probably a similar reaction when Hillary wins, but if Bernie snuck in you'd have to think he'd extend ITC forever and add even more subsidy elsewhere.
I'll take Hillary and a 2 year 30% extension with 2 point annual step downs thereafter.�
1/1/2015
guest There is growing pessimism about the ITC renewal, which is probably part of the selloff. Consider SC with 13,000 employees and no ITC. Yikes. The PPA companies without installer employers are better positioned for the ITC ending. They will have a large pool of skilled installers bidding on their sales.�
1/1/2015
guest As always distorting the facts. In-house installers are the cheapest way to get panels installed. You do not cut costs by adding a middleman�
1/1/2015
guest Hey, you are talking to the only successful SC investor in this thread.�
1/1/2015
guest I don't see them holding onto enough profits with Flextronics (good at what they do and sometimes too good in that you won't want to leave once in bed) in the mix as well as staying on the leading edge of innovations like SolarCity.�
1/1/2015
guest It doesn't matter if you buy before or after: it's 30 days on either side (assuming that you are talking about paying taxes in the US and not somewhere else).�
1/1/2015
guest Hypothetical Example) I own 500 shares with an average cost of $40. I bought 10 January 2016 call options, with a strike price of $50, and sell all my shares. If I sell the 500 shares after I have purchased the 10 calls, I will have a loss of around $5000 as of today.
Using this hypothetical example, what specific part of the "wash sale rule" says I can't write off the loss if the calls were purchased before the sale of the stock?
I thought the wash sale rule only means you can't realize a loss if you buy back shares sold at a loss, or something substantially identical, within 30 days. Am I missing something?
Tax Loss Harvesting - Fidelity�
1/1/2015
guest Is this their contract manufacturer? They are actually building out their own fab in Mexico. They have also fully automated their power optimizer line. They will be looking to replicate that in other settings.
For example, I could see the Riverbend plant including an optimizer line. This component would then be directly installed on their panels. Additionally, their may be some opportunity to include an inverter line in the Gigafactory. That is, certain Powerwalls could be built with integrated inverters. For SolarCity it would be very cool to source their own panels with optimizers and pair them with Powerwalls with integrated inverters. This would minimize installation time in the field and overall logistics.
They definitely have bigger plans than just using a contract manufacturer. However, optimizers and inverters do not make a very broad range of products. So it is hard to see longevity.�
1/1/2015
guest That's precisely why it's more like an 80-90% chance of straight renewal. There's legitimate regional political pressure to extend this and keep those people employed. The German economy stalled out the minute Merkel slammed the brakes on their feed in tariff.
Something will be done. Best case scenario is an extension with a longterm locked in step down. That's what really ratchets up the installs as people hustle to get project in each year before the subsidy steps down again.�
1/1/2015
guest I would like to see a 5 point step down per year (25-20-15 etc). That would provide an incentive each year to buy, but not so much to ruin the next year. There's no reason to maintain 30% in my opinion. It was dumb to set up a cliff.�
1/1/2015
guest Do you think that solar developers can keep driving down the fully installed cost about 5% per year so that there is about 0 inflation? Fasted decline, slower? I'm just curious about your outlook.
My impression is that 5 point steps down would leave just a little bit of inflation so that consumer prices go up about a point each year. This would allow utilities to keep escalating their rates, and it would knock out any advantage in waiting a year to get solar.
Personally I think I would prefer a 2 point step down over 15 years. I think this is a little more in line with the time it will take to get deep penetration of renewables in the grid. But certainly in the long run I want ITC to go away. I think most of us agree on that.
In any case I'd be content with a 5 point step down over 6 years.�
1/1/2015
guest 100% agreed, but since when do we do anything logically in Congress? I'll take 5 points every 2 years with DoE install targets to pause the step-down as needed.
The German feed in tariff model was so elegantly simple. Give solar and wind grid priority 24/7, start at paying consumers $.68/Watt for feed in juice and drop it down as rapidly as possible. Now they're at $.12 and people are moving on to batteries, they'll be off coal before you know it. It looks like Hawaii is doing something relatively similar.
Just took a peek to see where wholesale year-ahead electricity prices are at for Germany and they're under EUR30 per mWh. 5 years in a row of plummeting wholesale prices while retail prices remain high(though down 1% this year). The two largest legacy utility power providers are down 33% and 48% this year after an even worse 2014, they're essentially never going to make money again.
Anyone who says grid power costs to consumers in the US is going to go down due to cheap solar has their head in the sand.�
1/1/2015
guest Yeah, Flextronics does their manufacturing, but if they are getting away from that, awesome. Where is this info?
Didn't see it in their earnings: http://investors.solaredge.com/phoenix.zhtml?c=253935&p=irol-newsArticle&ID=2106761�
1/1/2015
guest Thats not true and the real long term winners will be holding scty in the future imho�
1/1/2015
guest Mild-mannered Moderator here -
Keep to the investment angle. Keep personal digs and personal boastings out; they've got absolutely no belonging here. In fact, come the end of the weekend, a fair number of the prior posts might be found only in snippiness.�
1/1/2015
guest It came out three months ago FQ4 2015 shareholder presentation.
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http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTkyNjM5fENoaWxkSUQ9MzAwNzY5fFR5cGU9MQ==&t=1
Actually, there is very little discussion in this. I believe the discussion was in the conference call.�
1/1/2015
guest Let me see if I understand this. Wholesale prices are so low that power producers cannot cover their fixed cost. Meanwhile retail power is still quite high as grid operators seek to cover their fixed costs. The retail price is still high enough that consumers are induced to defect load. The spread between feed in tariffs and retail tariffs is so high that those with solar are flocking to buy batteries so that the can virtually grid defect.
That is quite a mess. Because utilities are not making retail rates competitive with distributed power this is isolating power generators from the retail market. The high cost of T&D is killing the producers. Meanwhile, grid defection is shrinking the base over which T&D costs are spread. So residents pretty much have little choice but to defect from the grid.
This is a really horrible situation. The value that the gird creates is to facilitate the trading of power which can improve the economics for all participants. But when the grid is priced too high, that is it is priced above the exchange value it can create, then it destroys all possibility for trade. That is the transaction costs for trading are too high and this kills trading volume. Imagine trading stocks on an exchange that imposed a 100% transaction cost on every stock traded. The trading costs would overwhelm the value of the trade and no one would continue to trade in that exchange. That seems to be the problem when network costs are too high.
So how can Germany get out of this mess. One approach is a free market approach. Allow other entities to set up or buy their own transmission lines. This would introduce competion in the T&D space. First competitors would enter and start transmitting power at prices the market is willing to bear. Next, the incumbent network operators would have to take a loss on certain assets and begin to offer competitive rates. This would open up makes for presently stranded power produces so the wholesale market become viable again. Retail consumers would then benefit from affordable power and not be pressed to get solar. And finally those with solar would find buyers of their surplus power at prices potentially above the feed in tariff. Thus, they would not need so much storage while their neighbors would get cheaper power. Microgrids could be connected and trade with each other.
Another sort of solution would be to nationalize the grid and have the government subsidize a sufficiently low cost of transmission, like 1 c/kWh and allow virtual net metering for all parties. This approach would essentially tax the public and give greater benefit to the large power producers. So it would effectively be a subsidy to coal producers and the like.
So I tend to prefer the free market approach. Yes, it would impose losses on the incumbent network operators, but they have an untenable business model anyway. The soon they move to facilitate trade the sooner they can get to a sustainable business model. The price of transmission simply cannot be set above the cost of local generation, otherwise transmission fails to be an economic option. Power producers need to be particularly wary of this trap because it will leave them stranded from demand.�
1/1/2015
guest EIA - Electricity Data
Looks like the utility rates actually have gone down y/y. Don't tell potential SCTY customers.�
1/1/2015
guest Were they already moved? Because I don't' see a single post worthy of being moved to snippiness. Other than this one of course....(not really, but I'm expecting it).�
1/1/2015
guest Mine upthread was but I self moderated�
1/1/2015
guest Precisely. They're trying to push renewables aggressively to get out in front of the industry as it expands worldwide and to save money since they have no substantial domestic source of energy, but the impact to legacy power producers is far worse than expected so they're stepping down the FIT rates as fast as possible. They've gone so far that there's no incentive to go solar in Germany(you could argue disincentive) and installs slowed to something like 1.5GW in 2015. Now the FIT rate has been frozen and they're making plans for the next phase. While they do that, it's very likely that consumers will take things into their own hands and go off grid.
EON, who was the largest energy producer a few years back, has tried to focus on just managing the grid and shifting renewables around, but the gov't won't let them divest from the production side of things. It's gonna take a while to sort this out, but the moral of the story is that solar destroys the profitability any and all forms of electricity production once it hits 5% of total demand or about 40% of peak midday demand. The reasons why should be clear and the idea that we should have a nationwide gameplan should be even more clear. Solar cannot be stopped now, so politicians are going to need to wake up and do their jobs.
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I guess you didn't bother taking a close look at your link. Every state with a significant solar foot print is up. New Jersey went from $16.00 to $16.65 and they're probably the state where SCTY had the largest ramp up from 2014 to 2015.
This is not opinion to be debated, it's obvious fact. Solar cuts total demand drastically at midday AND removes midday residential customers simultaneously, utilities make all their money at midday. Where's the confusion?�
1/1/2015
guest And why do you think the prices went up in those states? Because of cheaper wholesale electricity, or because of footing the bill from residential solar customers, aka grid freeloaders? Obviously only of the two is able to raise the prices, that is the facts. When net metering gets scaled back then utilities will get a, in some states, significant load off their back, and SCTY will have a very hard time.�
1/1/2015
guest That link is not a comprehensive discussion of the wash sale rule - it is just recommending a strategy of waiting for 30 days before buying back, which is fine. They don't discuss your approach of buying calls before selling shares.
You can find many detailed descriptions of the wash sale rule around the net, but of course the definitive reference for any tax issues should always be the IRS itself. As you can see here, it applies when you buy a replacement security within 30 days either before or after the sale:
https://www.irs.gov/publications/p550/ch04.html#en_US_2014_publink100010601�
1/1/2015
guest I can't believe we have to plow this ground again, but I guess when the stock is down, the spin creeps back into this thread...
solarcity does not mandate an escalator. Customers can choose from 0% - 2.9% and everything in between. It all depends on the price point people want to pay. The current average escalator is about 1.7%, so clearly people are choosing a middle number. For those saying he escalator is an issue need to be informed with how the escalator really works.
secondly, Solarcity is pricing well. They are very competitive so to say people are dumb for choosing them is not true at all. Take a look at this authors current article in Computerworld: My big fat rooftop solar installation | Computerworld He evaluated four different offers and chose Solarcity. Hard to argue this individual as not informed or naive. So that spin some keep bringing back here over and over again over the past two years is getting really really old.
lastly, energy storage combo Solarcity offers currently falls under PURPA for aggregation services. In California, that rate is actually more valuable then net metering. To not recognize the tremendous competitive advantage Solarcity has in aggregation services is to ignore the entire future of rooftop solar industry. Currently, Solarcity is the only rooftop solar company to be conducting a deep aggregation pilot program. The only one. They are very far ahead of any competition. This will really be a boon come 2017 and beyond. It would be advisable not to dismiss this advantage in raising post ITC capital as well as continuing to have compounded growth even in there worst case scenario of complete abandonment of net metering. In addition, most big competitors will not be able to sustain current install rates give ITC drop next year. Solarcity will reduce acquisition costs by hiring those companies employees which will have the fundamental training already. At the lowest cost per installed watt in the industry, Their are a lot of advantages Solarcity will have come 2017.
The bottom line with the market is that they can't model a future price no matter how aggressive Solarcity is growing. The ITC drop down and current net metering changes provide too much uncertainty. Think about it... A broker has to give a recommendation to its clients based on models, so it you don't know what's going to happen next year, let alone 2-5 years, it's not easy to recommend to retail let alone bringing in new institutional money in large numbers. In such a speculative environment, traders and short sellers rule.
However, I sense a lot of money on the sideline waiting... Waiting for ITC decisions... Waiting to see how net metering plays out in the big solar markets.
Others are making the bet now Solarcity and the industry will come out well after all this transition, taking advantage of these prices.�
1/1/2015
guest Interesting?
Very interesting thread. I live in Sacramento Area with the utility SMUD reducing my base price of electricity to eight cents as I gave them my vin number for my new X. After working with solar city for over a month the best they can come up with was $.12. Then of course, there was the factor that the price went up 2.9% per year, each year.
They also were unable to quote or provide any information on using a battery for time shift of electricity. That does not bode well for the stock, in my opinion.
�
1/1/2015
guest "Buying a rooftop solar system for my home would have cost upwards of $35,000 for a system similar to the one I chose."
LOL. This is for a 6.2 kwh system.
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1/1/2015
guest I was going to link that article Foghat. It does a good job going through what is involved in the solar installation process. I wish he would of showed the aluminum
sheet they used to repair the holes in the roof their safety harness makes.
I can see why many people would pay a large premium to have all of this work under warranty by the residential leader vs a local installer.�
1/1/2015
guest I had Solar City install a system about two years ago. I noticed that every last person on the roof had to be harnessed. When the city inspector came around when all was done, I asked him if they did a good job and his reply was "Solar City always does a perfect job, I never have to call them out to re-do anything. Most of the other have to come back again".
Now as I write, my neighbor across the street has the local Ventura Solar installing a system on his roof. There are 7 guys up there hopping around. No safety harness on any of them. Hard to watch without cringing.�
1/1/2015
guest Super! The average US resident gets to save 0.09c/kWh, a reduction of 0.69%. They're still paying 12.93 c/kWh.
Meanwhile the price of a thousand cubic feet of natural gas dropped from $4.24 to $3.22, a decline of 24.06%.
What do you suppose the residential rate would be if natural gas was absolutely free to utilities? Do you think we could see residential rates as low as 12.66? Wow! That would be dreamy!
Don't tell the coal industry!
U.S. Natural Gas Electric Power Price (Dollars per Thousand Cubic Feet)�
1/1/2015
guest I just wanted to prove the point that the rates actually go down when the utilities lower their costs, I remember someone who didn't believe that was true. I agree that it is a small reduction but utilities have also had to deal with the growing liability of residential solar customers which has negated some of the cost savings.�
1/1/2015
guest It seems to me you guys are somewhat in agreement on the principles, just not on details such as scale. :wink:
Which may be the all-important one.�
1/1/2015
guest I do agree that if net metering isn't scaled back then utilities will have a hard time. But I don't expect that to be the case, net metering is already starten to be tightened which also makes sense, there is no reason to play favorites when utilities are also quickly moving to renewables. More than 50% of new capacity added was renewables last year in the US and it won't be long before that moves to 100%. In other words residential solar shouldn't recieve a bigger subsidy than other solar projects just because it's on someones roof.�
1/1/2015
guest Where? Grid retail prices have gone up in every state with any significant solar footprint, take a look at your linked data.�
1/1/2015
guest Prices go up in states where there's significant solar because it displaces a ton of demand at peak where legacy power producers make all their money. I feel like we're rehashing a lot of 2009 topics that aren't really in question anymore.�
1/1/2015
guest Don't sweat it. The upside for us longs is not only some on this forum have these thoughts, but a very large part of the energy industry and its investors/financiers STILL think like this... Just wait until the banks who have financed those NG peaker plants built in the last 5 years understand the very thing you suggest smart people had already caught on to in 2009.... Ooops... Or as Jim suggested up thread: it wouldn't really help much if the price of NG dropped to $0.�
1/1/2015
guest Doing the math on this PPA, the buyout price would be $20,288 for this system. On a pre-ITC basis this would be $28,982 purchase price, substantially lower than the $35,000 top end price noted above. I do wish the author had given details about each of the 4 offers.�
1/1/2015
guest Alot of utilities have fuel price pass through mechanism. That is they simply pass fuels costs onto ratepayers. So natural gas, coal and oil have all substantially fallen in the past year. Hawaii in particular runs on oil which is why rates came down significantly. Once you account for fuel prices, there does not seem to be any indication that utilities are trying to price competitively to fend off distributed solar. And basically they can't. Their profit margins tend to around 10% as limited by the government. So a utility charging 16c/kWh in the face of SolarCity offering 13c/kWh would be hard pressed to drop their rates to just 14c/kWh as this would make them unprofitable and unable to pay a dividend to shareholders. The loss of market share to rooftop solar is small. So they have insufficient motive to make themselves unprofitable to avoid less than a 1% reduction in revenue in a year. Instead, they will attempt to recapture revenue by raising the non-fuel portion of their rates. It is too costly to pivot to a long-term strategy of scaling back fixed cost structures. They will seek to perpetuate business as usual for as many years as possible. But until crisis forces abandonment of BAU, they will continue to raise base rates year after year.
Ironically, it may be beneficial for SolarCity not to grow so fast as to put utilities into crisis. If they moderate growth, the utilities will cling to BAU, and solar installers can get away with raising their rates as well. The utilities would be content to drag this out for decades.�
1/1/2015
guest That's a better price, but a good price some people are getting is a in the $ $3.10-$3.50 range. So it is still a $5K - $10K premium for Solarcity.
$5K-$10K covers the total purchase price for most residential installs in Australia. Or put another way, Solarcity's profit/retained earnings per job in the U.S. meets or exceeds the total purchase price per job in Australia. That is not sustainable pricing for Solarcity.�
1/1/2015
guest Solar energy costs continue to plunge across the world : Renew Economy
Given our discussion of natural gas prices in the utility space, this article is very interesting. Note the chart in particular. Recent utility sclae solar PPAs look to price power below the fuel cost of NG generation. This is serious trouble for natural gas, coal and even oil. When the cost of new solar is below the cost of fossil fuels, even depreciated fossil plants become writedowns, and the price of fuel is forever capped by the price of solar.
Look carefully at that chart. It show a refernce case scenario for natural gas and a wider prediction band. It also overlays the PPA prices for solar contracs originated in 2014 and 2015. First off the 2015 curve is much lower than 2014. Likely future PPAs will cut an even lower curve. So far so good. What concerns me as an econometrician who works on scenario generation is that the reference scenario is not at all consistent with these solar PPA curves. Any realistic scenario for natural gas needs to be at or below the PPA curve at least in the long run. Basically gas producers will have to lower their prices to keep pace with solar or gas will lose substantial demand. Moreover, every MW of solar that is added to production implies a permanent loss of demand for fossil fuels. I cannot underscore what a serious error this AEO reference case is. Austrailian utilities, governments and the gas industry are misallocating resources based on unrealistically high expectations. They are making bad investments under bad assumptions. This is the sort of forecast error that leads to economic disasters. It is a bubble in the making.
For example, in the US, Southern Company has recently acquired AGL Energy for their natural gas production and distribution assets. They believe this will give them an avantage in generating power. But what happens when large scale solar installations are cheaper than the gas used in power generation? They will have to writedown gas network assets even as they write down fossil generation assets. They are making a huge mistake to become so capital intensive around a commodity that will become worthless for power generation. I think a much smarter strategy would have been just the opposite, leave other investors to hold the risk of the collapse of gas prices. Southern Company and other utilities are making themselves long on gas when they should be short.
I would note that natural gas is cheaper in the US than in Australia, so we may not be as close to solar eclisping the fuel cost of gas in power production. This just means it will take a little longer. But the main point still holds, natural gas prices are bound above by solar. Current gas prices are around $2.4/MMBtu, I doubt the can ever return to prices above $5, even if the US stopped drilling for gas altogether.
Note that NG combustion turbines (peakers) use 11.371 MMBtu/MWh. So Solar at $40/MWh is cheaper than gas at $3.52/MMBtu, and this is ignoring all other costs associated with financing and operation a gas generator which can be in excess of $150/MWh for a plant with 10% utilization. But the average utilization is less than 5% which leads to $300/MWh plus around $30/MWh for fuel. What is abundantly clear hear is that a utility really does not want to be using gas peakers while the sun shines, the wind blows or a battery holds a charge.�
1/1/2015
guest Fair enough. Are there any notable names offering residential installation in that range? Or is it just really small outfits? It would be nice to beable to look at their business models and see how they do it, how profitable they are and how well they grow/scale.
SolarCity now has a $1.92/W installed cost. If they were content with a 40% gross margin, they could offer systems at $3.20/W cash, or 45% GM at $3.49. I wonder if it would be worthwhile to do so. Essentially they could offer systems with financing based on a pre-ITC price of $4.50/W and direct sales at $3.50/W. The logic here is twofold. There is an shareholder cost and overhead cost to offering financing. So the financed price really ought to be a little higher. Second, for those willing to lay cash, they really do have other installer they can go to for better direct sale prices. So when SolarCity fails to convert a sale to someone looking to buy outright, they incur marketing and sales cost, but lose the sale. Combining the two point SolarCity could reduce SG&A per Watt this was, while improving cashflow. The 45% they net from a cash sale would get immediately used to finance the next sale. So SolarCity could decrease the use lf leverage.
One curious point, using the PPA assumptions in the current EVC and adjusting to remove ITC, I get $4.54/W as the lresent value under 6% discount rate. If I change the discount to 10%, I get a present value of $3.10/W. SolarCity's cost of debt is around 4%, but most of the capital is coming from equity which is likely expecting more like a 20% return. Thus, a discount of 10% would come closer to the WACC and be a more suitable discount rate upon which to track performance. Cash up front would be much mkre highly valued in pricing under a higher discount.�
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