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.
�
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.
- - - Updated - - -
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.
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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.
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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.
- - - Updated - - -
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
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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.
- - - Updated - - -
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
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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.
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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/
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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
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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.
- - - Updated - - -
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.
- - - Updated - - -
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
�
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.
�
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.�
1/1/2015
guest For reference, I have a top notch installer in Philly willing to give me $3.20-$3.35/W for a small flat roof install.�
1/1/2015
guest A Texas Utility Offers a Nighttime Special: Free Electricity
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1/1/2015
guest I am afraid a lot of discussions here are way too abstract and theoretical. The ship is sinking while management is rearranging the chairs on the deck.
The writing is on the wall. SolarCity has no means to survive NEM dilutions together with ITC step down. The whole talk of lowering the costs is simply not going to help or work.
I could write a *lot* of stuff based on what I found over last week. I have been debating if it will help or hurt if I write it here. Maybe it will help a few people. So with best intentions I decided to post.
To follow..
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In my earlier post I tried to put a number on Incremental NRV/W in Post ITC world. In subsequent discussions with jhm (both in the thread and outside) I discovered a hole in the model.
The Incremental NRV includes all costs, like R&D and CAPEX. But my savings only included guidance of savings that are part of EVC math (installations, sales, g&a).
In other words, I didn�t include any potential savings in R&D and CAPEX (on a per Watt basis). We have no precise idea what those savings will be.
Nevertheless we can still come up with reasonable Inc NRV/W estimates, or at least put an upper bound of what that will be.
Lets begin with the EVC style guidance of $0.60/Watt in post ITC world. This is from Q2 CC. Firstly I don�t believe this number is sandbagged. The very purpose of EVC is to selectively pick expenses and cashflows, and show a rosy picture of the operations. I can�t imagine they will use EVC but then sandbag the guidance.
It�s like makeup for a woman. The whole point of makeup is to enhance the beauty. A rational woman wouldn�t use makeup to deliberately make herself look worse, especially when making an all too important public appearance. Knowing Lyndon, he simply wouldn�t do it.
We don�t fully know all the gaps between EVC style math and Incremental NRV. But we figured two things so far, R&D and CAPEX. Looking at financials, there are these �other expenses - net� which might be contributing to some. There might be even others too.
Now lets pretend CAPEX drops all the way down to zero and R&D stays flat at $0.07/W and we ignore everything else all together.
We have the upper bound as $0.53/W as the upper bound for Incremental NRV. Keep in mind, this is quite an optimistic estimate.
**
There is another important subtlety here. The renewal porting of the RV can NOT be sold or mortgaged to raise cash, as it is un-contracted.
So effectively the entire operation needs to be funded by the contracted portion.
Lets call Incremental Renewal RV as �Inc RRV�.
Lets call �NRV - Renewal� as Net Net RV or NNRV.
If Inc NRV is lower than Inc RRV, it effectively means they would have to borrow cash against the existing/prior NNRV. There is a limit to this which is the existing NNRV of about $2Bil.
But much before they hit this limit, they will run out of financing options, you can�t possibly mortgage away �everything� you have and still expect good financing rates.
So it is very desirable or even *needed* to keep the Inc NRV above Inc RRV.
In yet another perspective, when Inc NRV becomes same as Inc RRV, all shareholders are left with is the �hope� that consumers will renew their contracts and that is the cashflow that comes to the shareholders. There is nothing in it for the shareholders from the contracted portion.
Now lets look at the Inc RRV per watt as it stands today.
Q2
Bookings: 395 MW
Incremental RRV: $141mln
Incremental RRV/W: $0.36/W
Q3
Bookings: 345 MW
Incremental RRV: $116mln
Incremental RRV/W: $0.34/W
Q2 + Q3
Bookings: 395 + 345 = 740 MW
Incremental RRV: $257mln
Incremental RRV/W: $0.35/W
In a nutshell they need to keep Inc NRV above $0.35/W for smooth running of operations but they seem to get at very best $0.53/W. As you see we are dangerously close here.
I will note again, this is NOT including �any� NEM dilutions. Add in the dilutions, it�s game over.
Believe it or not, based on guidance, the Opex/Watt is expected to go UP in Q4. Seriously, you can�t make this up. I mean after all the talk of cost savings in the call, it is just unbelievable. They are saying something but doing something.. In Q1 it will be even harder to show cost savings progress as deployment watts decline and many fixed costs will overwhelm. They seem to be on NO trajectory to reel in the costs.
SolarCity is effectively on the verge of shutting down. They will lose financing as soon as the big boys see this. I suspect CA NEM 2.0 announcement to be the catalyst that will unravel this company.
This will be quite a bad mark on Musk�s reputation, which is extremely valuable for Tesla and SpaceX. So I expect him to do something about this much before it unravels.
Of all the options, a more likely option is SolarCity will be acquired by Tesla and will be put under Tesla Energy operations. This will leave the existing consumers and financiers comforted and will slow down the unraveling.
Once acquired, there will be no obligation to report SolarCity�s finances independently. They will shut off from Residential operations for the most part and focus more on commercial and grid operations. This is the best that could happen to SolarCity�s customers, employees and financiers. I am not sure what will happen to the shareholders. It all depends on the sequence of events. Overall I don�t expect shareholders getting much more than current price because I expect the price to sink before a rescue (of operations) by Musk.
P.S: I could be all wrong with this whole thing. I have been wrong many times before (a prime example is actually getting into SolarCity in the first place lol). In any case, I will pay for my errors and I will accept it which ever way things unfold. Research on your own and decide on your own. Use my analysis as a random internet poster�s ramble. Maybe there is value in it. Maybe there is not.�
1/1/2015
guest Wow Benson. I will read and re-read your posts before deciding how to act myself.
Thanks for taking the time to lay out your thesis. It's also brave as time will show if you're correct or not.�
1/1/2015
guest Thanks Benson for your write up. Very interesting indeed. Could this be linked to the rumors of Musk acquiring SolarCity? If so, does Tesla become burdened by a failing SCTY model (if your thesis is correct)?�
1/1/2015
guest Solar panels will boom in the first half of 2016 - Fortune�
1/1/2015
guest Smart inverter market grows on rise of virtual power plants | PV Insider
It's good to kept an eye on developments in the VPP world, within which SolarCity is but one pioneer.
Smart inverters are key, and they are presently more expensive than standard inverters. So SolarCity may be spending as much as an extra 10c/W installing smart inverters in anticipation of VPP and other aggregation schemes. We know that Musk is forward thinking on installing advanced hardware in Tesla vehicles so that features my be turned on with software upgrades downstream. Could SolarCity be deploying this strategy as well? If so, that can help explain higher prices now, but bigger unexpected opportunities later. It's a hardware option for a software upgrade, and options have value, even if they are hard to value.�
1/1/2015
guest I counter that article with this one. I was reading the one you posted and I'm tired of people writing about the "certainties" of what will happen if the ITC is brought down to 10%. Could/will sales go down a bit, possibly, but no one knows how much for certain. Glad I found an article with a more positive voice in the industry.
Sunrun CEO: Saying the ITC Won | Greentech Media
Edit: She seems like a smart cookie:
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1/1/2015
guest Hmmm....I am down by 35% on $200,000 worth of SCTY. SBenson's post is a good one and gives me much to think about. But, then again. I am heavily invested in TSLA and had a lot of Tesla stock around the time of the f*res. I saw all sorts of previous bulls jumping ship and selling out, many at a loss. I held my TSLA and I am very, very, happy that I did. Might this be one of those times? Better to hold? Why did Elon buy $5,000,000 at $40. Would he not have better knowledge of the situation than us? Further thoughts, it took some serious brainpower to build up a company the size of Solar City and be the #1 installer. So, these guys aren't stupid. I'm going to hold tight for now, I just can't stand the thought of selling now and losing $75k. I'm just sharing my gut thoughts with you guys.
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Thanks ggies07, really she is right! Why do we assume the ITC will end? Is anyone really expecting a Republican president to win? Any of the democrats would be on the side of solar.
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Call your senators to extend ITC. This came minutes ago in my email: Call your Senator: Extend the ITC�
1/1/2015
guest I think you will see OPEX/watt improve next year. They will greatly reduce hiring, reduce capital costs, and further tighten the types of leads they pursue. I would only be concerned with bankruptcy if they don't do mass layoffs at the point the ITC extension fails.
I think Musk probably has little interest in having SC be part of Tesla. It's a business with very different characteristics. An acquisition would introduce all sort of new risks in how Tesla is judged.�
1/1/2015
guest Something I remember Lyndon saying: Elon would tell them in meetings to hit the pothole now to avoid a bigger problem later....I wonder if this whole ITC debate/debacle is the pothole and the market can't see what they are doing in the short-term.�
1/1/2015
guest Yes, if the ITC stepdown goes through and net metering grinds to a halt, SCTY will have difficulty making money. Fortunately those two things are not happening, at least not both of them. When the stock is doing well people are overoptimistic, now that it's down people are thinking about residential customers never again being allowed to sell their excess capacity tot he grid.
We're talking about the #1 installer in an industry that we know is the next big thing for the US and has just recently gotten to scale ahead of almost everyone else. The only valid criticism at this point is that the model is flawed. I'm 98% sold that it's the way to go, but opinions vary. Other than that, pretty much every market force appears to be in their favor vs the grid and vs the competition. So long as you see value in the model.........
We shall see!�
1/1/2015
guest Just for clarification, I was NOT trying to suggest that SolarCity will declare bankruptcy.
All I am trying to say is that the residential business model does not work in post-itc, diluted nem world. It doesn't in the sense of it doesn't provide any shareholder value for each new install, if anything it will start eating into already accumulated retained-value. SolarCity will be forced to wind down business in many states, CA will be a very important one of them. That winding down will cost money, which too will come off of NRV. In a nutshell, NRV will go down, potentially rapidly, and thus the share price. As it becomes apparent to the market the stock price will continue to go down much ahead of the business fundamentals move that way.
CA NEM 2.0 announcement will be a major catalyst on the down side. Did anyone do proper (un-biased) research into it? All the potential outcomes are already public info. The proposals are posted online. There is only one proposal, which is put forth by SolarCity type group of companies, in which SolarCity will be able to survive. Even a nominal reduction of net-metering (lower fit price) will kill off SolarCity margins entirely in post-ITC land.
Quite very oddly there is no press or analyst freaking out on this. But at the same time nobody made a big deal out of ITC until after SolarCity made adjustments based on impending ITC.
I don't think the repricing of stock by -22% in a single day was unwarranted. It is more of an early warning signal of what is about to come. Just my perspective.
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Another misplaced optimism in this thread is hope that somehow ITC will be extended. I believe it is coming due to Lyndon's framing of it in the CC. Please do yourself a favor. Verify things for yourself.
ITC extension needs congress approval. Both House and Senate are dominated by Republicans, who are dead against any extensions. Apparently Obama tried to put into the budget several times but congress struck it down. We need a remake of congress where *both* house and senate are dominated by Democrats. Then they need to consider, debate and pass the bill, which President should sign (not veto). So effectively you need a government where all three house, senate and president are Democrats. Even if that were to happen say in 2016, when will the law pass? will go into effect when? Can the business model survive until then?
A whole bunch of NEM dilutions are already coming into play in 2016 itself. So can SolarCity survive NEM dilution alone to begin with?�
1/1/2015
guest They are? The CEO from the article I just linked said they were not against it. Don't know how many are though, do you have a stat on how many are against it?
�
1/1/2015
guest Jeez, just another CEO of a solar installation company, who says we should NOT say 'ITC won't be extended' out in public says there is republican support. That forms the basis for the optimism.
No I don't have stats. I based my assumption on what I read on a friend's Bloomberg terminal.
Sorry can't provide a link or screenshot. Take it for what it's worth. Don't take my word for it anyway. Dig up the data for yourself. Let us know if you find anything interesting.
Last thing you want to believe it something coming off the captain of a sinking ship. All of this is arranging chairs on the deck.�
1/1/2015
guest Have you guys looked at Bonds?
Bonds Detail
Its now 68 cent on the Dollar of massive 566 Mio issuance, almost 12% yield, Bond market is obviously worried, if you think Solar City will survive until 2019, just buy the bond + difference between face value and current market price (ca 32 Cent on Dollar) in stocks and options. So if stock drops to 1$ but bond is repaid you wont get your face ripped off.
I would strongly suggest you dont though. Personally im still short Solar City but i enjoy your conversation very much, so i hope you think about buying the bond rather then equity or at least not 100%
Usualy stocks with this kind of bond yield trade below book value like some energy names.�
1/1/2015
guest Based on that link, because these execs think it's a self fulfilling prophecy, don't want to say ITC won't be extended.
So they all come out and say that they think ITC will be extended and we now are supposed to believe it.
Very amusing.
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Please don't take this as attacking you. But I want to put forth something related to the topic you mentioned.
The whole reduction in growth targets is the side show. It was a complete distraction. All of the financial media focused on that.
The real story is:
- Sales dropped (check both MW bookings or no. customers)
- Costs kept going up
- NRV going up at an abysmal rate. On a per-share basis it is flat (after rounding)
This is when there are very supportive policies in place.�
1/1/2015
guest ok, thank you for your analysis...it's noted and we shall see what happens....�
1/1/2015
guest We have a Democratic president right now!
That didn't help, did it?
We need Democratic congress in both house and senate. That's the issue here. The obvious fact is that the force of inertia is certainly in favor of ITC step down.
Interestingly , I am one of those folks that took losses in Tesla f!res. Luckily I held on to my core position, and still holding on. In this case though I sold out everything. Maybe I spell the bottom. lol
That's why I keep saying you should research and decide on your own.
But I somehow feel compelled to present information when the thread is going into wrong places (in my perspective anyway).�
1/1/2015
guest Your comments are appreciated and noted.�
1/1/2015
guest Thanks gene
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So this is what Peter said in the CC with respect to Hawaii:
Does this mean it's game over in Hawaii until they come up with that self-supply solution? I mean are they able to do installs anymore in the other (grid-supply) model or not?
For reference: Hawaii Regulators Shut Down HECOs Net Metering Program | Greentech Media
This is some delicate management speak which is hard to decipher.�
1/1/2015
guest The reason I am specifically asking about this is, we all thought Hawaii has very favorable environment in terms of sun shine, high electricity prices, etc. IF SolarCity is having a hard time surviving in Hawaii post net-metering, what are the odds they will survive in CA?
That's why I am looking for a confirmation.�
1/1/2015
guest I do not believe it is game over in Hawaii. From the conference call it seems like it would just be a little while until it was a high growth market again. Speculation on my part but it could easily be waiting on power walls in significant numbers. That seems to be the only missing piece of the puzzle now in Hawaii. And it sounds like since they are accelerating the production line to the gigafactory it will actually push back q4 products that people were expecting.
As someone I've been reading for years now I'm sorry to see that you have lost faith SBenson but I really appreciate you posting your thoughts here.
California and Hawaii are in very different levels of saturation. While it is always possible that the PC could enact something similar to Hawaii I would be surprised if it was as much of a step down as Hawaii. that being said I was very surprised with management pivot on strategies so we shall see
I really don't see solar cities inability to raise financing as a legitimate concern here but if the economy somehow had a massive crash anything is possible.
One thing I'm very interested in is modeling what the numbers look like when you consider 40% growth and installations next year but 60 to 70% growth in revenues which is what was guided. The per watt value of those installations will have to be significantly higher for those numbers to make sense.�
1/1/2015
guest $25 per month in Hawaii just to connect to the grid and paid $.15/kWh pumped into the grid at peak hours? That's not gonna last, retail must be like $.35 there.
Just like everything other anti-net metering initiative in the states, they will eventually fall. All you can do is hold back demand, you can't erase it. And meanwhile it builds and builds and builds as technology advances and consumers are more informed.
Potential big week for solar in Pennsylvania as it sounds like the budget is near passing our corrupt and moronic state House. Rumor has it that a compromise has been reach with the governor that raises sales tax rather than taxing methane frackers in the state to raise education funding. The initial proposal had a chunk of change dedicated to wind and solar, we'll see if that chunk makes it through the final negotiations.�
1/1/2015
guest Thanks for the kind words blake.
Just for the record I sold everything yesterday morning at average price of $29.15
I did some intense research over the last week to cover every corner. I still have a lot of self-doubt. A lot of times I put information here in the hopes that it actually gets challenged, then I can be more sure either ways. I will post two more mega-posts, so to speak. One related to CA and the other drilling more into SolarCity's reported numbers. Hopefully that will create some discussion and help people make more informed decisions.
Take no offense, but the central problem with a lot of us bulls has been
- We have been too trusting of what management has been saying
- We fell for a lot of deceptive math (EVC, EVC style cost are prime examples)
- We have generally been *very* positively biased. I hate to use words delusional/wishful but I feel compelled to
Maybe I will regret taking these losses and selling into a low. But I honestly couldn't help it. I saw no silver lining.�
1/1/2015
guest Interesting take on ITC stepdown/expiring...this article was written 3+ years ago...
http://www.greentechmedia.com/articles/read/What-Happens-When-the-ITC-Expires�
1/1/2015
guest I find it hard to believe a rational informed investor would take losses at this point(of all points).
There's so much low hanging fruit these guys could take the stock to $70 just selling marmalade for the next year.�
1/1/2015
guest I keep coming back to Elon buying millions of shares at $40. Is there something that we don't know? Could it really be that the market (and us) don't really understand the underlying value of SCTY? These past couple of weeks have been brutal to my portfolio, but I continue to hang on hoping that something comes of it.�
1/1/2015
guest
SAN MATEO, Calif., Nov. 3, 2015 /PRNewswire/ -- SolarCity Corp. (Nasdaq: SCTY) will hold its 2015 Analyst Day on Tuesday, December 15 in Fremont, California. Presentations by SolarCity's founders and executive management team will begin at 9:30 a.m. PT and conclude at approximately 11:00 a.m. PT. The presentations will include discussions of SolarCity's industry leadership, business outlook, and the hardware, software and power systems that support our residential, commercial and grid service offerings.
The presentations and related materials will be available via a live video webcast on the company's investor relations website at http://investors.solarcity.com/, and a replay will remain available for one month. Analysts are invited to attend the live presentation and tour SolarCity's new panel manufacturing facility in Fremont after the presentation. To request an invitation, send an email to [email�protected].
The above presentation would be nice if it was sooner than the 5 weeks away.
I spoke last night for 1/2 hour to a guy who works for Solar City since 2011. His confidence left me feeling like I should hold tight a bit longer.�
1/1/2015
guest Hawaii needs self consumption, which needs residential storage. At current solar penetration, just dumping excess solar into the grid doesn't work in Hawaii. Net metering simply can't exist with cheap solar.�
1/1/2015
guest Pretty sure it's been brutal on all of us. With 46+% short interest, people are going to try to make their money on the other side. Right now, we're just caught pants down due to the shift in strategy. This strategy paired with the negative press from Chanos + the complex business model to understand without fully understanding the industry and operating model are a formula for the depression we have at this point. I suspect, this is why SCTY is holding an Analyst day. They want to clear up a bunch of things that have been floating around there in a formal setting.
I stuck this in my IRA because I knew this would require an investment horizon of 5+ years to really start seeing appreciation that will get us to at the very least a $15B market cap (average size of power suppliers that are publicly listed)�
1/1/2015
guest Yep, my shares are in my Sep IRA as well. My thoughts seem to parallel yours as to where we are. I just wish that December Analysts Day was sooner.�
1/1/2015
guest That would be great if it were the stated goal of the utility commission, but they seem to have no plan for building out that model. Are they just buying time until they can build out utility scale solar/battery in order to keep the customers on the teet?
If residential solar/battery is the way to go, shouldn't they be turning their resources toward financing such setups in consumer's homes?�
1/1/2015
guest It's definitely tough seeing this stock hit new 52 week lows daily, I do take solace in the fact that the factory in Buffalo is coming along really nicely. I also think SCTY is going to become a vertically integrated power company which is going to be huge. It's just going to take a significant amount of time for this to occur (in investors' minds).�
1/1/2015
guest In my years of following solar, I've found the most interesting insights by looking backwards at what we took as fact in the recent past. That was a great exercise while following the progression of solar in Germany, everyone was dead sure the grid would explode if they hit more than 20% solar at any peak. Then they blew past 50% without issue.
This article shows 2017 retail install prices at $3.21/W installed for residential and $2.83 for commercial. Meanwhile SCTY is already at $2.84 on it's way to $2.50 and likely lower by 2017. Progress out on the edge is very rarely linear with something this big.�
1/1/2015
guest Sbenson would be rolling over in his grave - if he was dead.�
1/1/2015
guest electracity is right. That 2.84 figure is complete nonsense. A clever deception.
I feel if I keep at this, I won't be surprised if I uncover some outright fraud. So far I only spotted deception, a lot of it, both in words and numbers.�
1/1/2015
guest The market is irrationally sour on solar. Consider SolarEdge. They have been completely profitable, analyst expect $1.40 EPS in June. The company is winning market share from industry leader Enphase based on innovation and price. They have been growing 70% or more for several years. They are addressing a global solar market that is expected to keep growing around 35% annually. They are even growing 50% in Germany's mature solar market.
So what price would a rational investor put on $1.40 EPS in a healthy, innovative and growing company. If your answer 20 P/E or more, that would be $28/share.
Presently, the market says this kind of Earnings is only worth 12.5 P/E, as the stock is trading at $17.5. Just correcting this incredibly bearish sentiment is worth 60% to the upside.
So SolarEdge is a huge buy opportunity today, and I hope investors seize the opportunity. But more importantly this shows us just how messed up market sentiment is right now. SolarEdge has a very simple business model. It is highly profitable and growing top and bottom line. And yet this market hates it. It should be no surprise that the market hates SolarCity just as much or more. But this hate has nothing to do with fundamentals. This market hates fundamentals. And this market hates growth. This market hates solar.�
1/1/2015
guest Mind if you share? I looked through your old posts and couldn't find how you backtracked the installation figure being non- sense.�
1/1/2015
guest $1.92 in straight up install costs is about where I'd expect an installer at scale to be(edit: nationwide installer in the US). Add on the tons of sales commissions they currently pay plus overhead and you get $2.84.
That's not even remotely impressive. Why the disbelief?�
1/1/2015
guest Canaccord Genuity Reiterates Buy Rating for SolarCity Corp (SCTY) - MidSouth Newz
SolarCity Corp (NASDAQ:SCTY)�s stock had its �buy� rating reissued by investment analysts at Canaccord Genuity in a research report issued to clients and investors on Thursday, MarketBeat.Com reports. They presently have a $48.00 target price on the renewable energy company�s stock, down from their prior target price of $76.00. Canaccord Genuity�s price target indicates a potential upside of 72.10% from the company�s current price.
�
1/1/2015
guest SunEdison is down 21% today. They posted mixed result with downward guidance.
So this seems to fuel negative sentiment today. I would point out that SunEdison mostly is on the utility side of solar and other renewables. So this is not direct commentary on the future of rooftop solar.
My own outlook is that utility solar will largely suffer with the fate of grid generators. Gold plated networks will disconnect the wholesale market from the retail market. But at this point the stock market is having a hard time differentiating behind-the-meter from front-of-the-meter, and viewing all solar just as distressed as coal, natural gas and the utilities.�
1/1/2015
guest The simple answer is that $2.84/W cost figure is NOT all inclusive. It selectively picks the costs. It is so called EVC style number.
In the same EVC style model SolarCity claims shareholders got $2.45/W (slide 1). But looking at the incremental NRV/W, we see that shareholders in actuality got only $0.58/W.
So the missing $1.87/W is unaccounted costs.
Here are the details:
Some of the leak we know like R&D which is $0.05/W but there are many others. We don't know if these costs are recurring or one time in nature (like capex) but there is a leak in both quarters that we can verify. We need to pour ourselves all over the financials to get to the bottom of this.
NRV Inc NRV Bookings Inc NRV/W EVC/W Leak 2015 Q1 2718
2015 Q2 3057 339 395 0.86 2.02 1.16 2015 Q3 3256 199 345 0.58 2.45 1.87
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There are one other puzzling thing. In their slide 1, they claim the cost was $2.84/W and shareholders are getting $2.45/W. So they priced the system at $5.29? Lets say that is true, what about paying all the financiers (tax-equity, and debt sponsors)? So they were able to sell the system for well beyond $5.29/W. That doesn't smell right.
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Why is NRV not growing faster then?
There is a massive gap in between what the company is actually making vs what it says it is making. That gap is the hidden costs or unaccounted costs. See my post above.�
1/1/2015
guest I must be a contrarian investor, as well as a complete idiot too I guess. If you view the future of energy with any objectivity at all you can understand how solar and wind...when paired with those batteries they are already packaging at Gigafactory 1 will completely flip this entire equation. The grid is no longer the only game in town and rather than being an asset is now a rapidly aging albatross in terms of cost to features in the same way cell phones leapfrogged traditional Telco land lines or Netflix ousted Blockbuster. If you include in any fashion the related costs associated with fossil fuels be it in carbon, industrial waste, public health, earthquakes related to fracking or even the fresh water resources diverted from agriculture or increased cost passed along to the human customers...when presented with a viable alternative at scale...it seems to me at least pretty obvious which technologies will win and lose.
If you dared to make the wild assumption that government was in the business of solving problems...:wink: then the ITC debate would be solely between people desperately trying to protect their financial interests and pretty much everyone else. It seems at least from a policy perspective the results of their actions are mostly proven out in examples from either side. Just my $.01...I'm down from my previous costly contributions.�
1/1/2015
guest Oy. I was kind of afraid this would be the response I would get (and for good reason though). I appreciate the work you did, but silly question did you e-mail investor relations about the figures and what drives it for an estimated breakdown. I think the unaccounted for cost are very much the high volume of capex one time charges which is not publicized enough.�
1/1/2015
guest Whoa, that's a bit over the top:
- Pick a battery price
- Pick an average usable percentage
- Pick a battery life
- Pick a cycle efficiency (efficiency of electricity converted, stored, discharged and converted).
Calculate cost per usable kWh of electricity.
Compare to the current cost per kWh of electricity delivery.
Now consider that cheap batteries deployed strategically at large scale by utilities and I don't see how the grid would be an albatross, especially since at the same time cheap batteries would be adding significant household demand by being used to power cars.�
1/1/2015
guest I'm narrowly looking at this from the energy policy perspective and how this debate might shake out. I was thinking about whether all or nothing is likely...or some sort of deal or concessions. I'm staying out of the financing conversations.
I think the albatross aspect is that in many cases it isn't adding value if your cheap batteries and cheap panels replace any grid connection at all.�
1/1/2015
guest Actually scratch that. I honestly can not make anything add up to anything.
All I know is that Cost sheet selectively picks items. They have an entire deck for it. Cross check it with their real financials. You will see missing items. For example R&D, and then 'Other Expense - net'.�
1/1/2015
guest Interested investors may want to study the Supplement on Cost Calculation that SolarCity publishes each quarter. In it you will see exactly which numbers from financials are included. Specifically not included are R&D and stock based compensation. The intent I belive is to cover the cost of installation and an allocation overhead that varies with that. R&D really has very little to do with what it costs to be a solar installer. It mostly support development of products and alternative revenue streams like aggregated grid service.
For example, SolarCity has spent a lot to figure out how to produce high efficiency panels, the benefit of which will be realized over the span of ten to 20 years. This represents longterm value creation which is not captured in either EVC or RV. Indeed, none of the value that Riverbend will create over the next 12 years currently registers in value creation metrics. My back of the envelope calculations suggest that the incremental value of Riverbend over its first ten years of operation is worth $2B or more. This value only begins to impact DevCo and PowerCo metrics in a positive way in 2017. Until then Silevo and Riverbend compete for cashflow and add to leverage used to finance installed watts. Essentially, SolarCity is leveraging it's currently book of business to finance Riverbend and other developments. So this counts against NRV for now, but the value Riverbend creates is not included in NRV. Other installers are not making this kind of long-term investment and so enjoy nicer financials in the shortrun. It think this is the pothole Elon advised Lyndon to avoid. It sucks going into 2017, but when Riverbend starts to deliver, it will be a whole new game.
Events & Presentations - SolarCity�
1/1/2015
guest The reason the grid cannot(really 'will not') deploy batteries in such a fashion is that it completely destroys the profit model of current forms of production. Everyone keeps saying that utility solar plus grid batteries is cheap(which it is), but when you add it as a component of the overall existing system it then cannibalizes itself. You can't claim the benefit of that 10% of the total production which comes from solar without accounting for the fact that those very same panels and batteries make the other 90% of production completely infeasible.
Our gird is a very delicate flower built to optimize profits at our expense and hold us hostage to midday needs. If we remove those midday needs, the effect on the traditional pricing/profit model should be obvious(and apparently is not).
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You'd be 100% correct with all your assertions above, but this thread is for the investment side and there is a very rational argument to be made here that profits won't be there. I obviously disagree with that notion, but I'm more on your side of the argument.
In my mind:
Solar is the future.
SolarCity has the "best" differentiated model.
SolarCity has the lead and is nearly to scale nationwide.
SolarCity has Musk and some of the best minds in the business.
When that dynamic changes, I will get worried. In the mean time, Arizona net metering discussions don't concern me, that just means demand will build up there. They're not going to be able to keep all the thumbs in all the dams for very long.
Ironically, I would never consider SolarCity for my install. I'll just buy the panels and put them up myself, but that's me. I don't have an iPhone, but a lot of people do.�
1/1/2015
guest Let me go all in and add my last $.01 then...just like my SCTY position. :biggrin: I have completely tuned out politics, presidential debates and I don't even have to suffer through the ads. I've been trying to get up to speed on the issue...and I'm only beginning now. I've followed Moniz at least some of his public speaking appearances, but only read a few articles about Obama's solar initiative as well as how the military was also utilizing solar and projecting the cost savings. I have read many opinions that the ITC debate is Republican vs. Democrats...and perhaps it really is at the end of the day. But, I was thinking about who the power players are at the table for this negotiation. Obama is still president and doesn't need to win another election. Sure, you have Texas and the coal or big oil states that you have always had before. So you've always had green states like California but now Hawaii has an interest in cheap renewable energy for their own problems for example. Also consider the state of NY is directly invested in SolarCity via Riverbend and Tesla made a huge economic splash in Nevada. So while I'm not even sure that would ensure any votes from either state it seems like the balance of political power is shifting from the entrenched interests...or at least might pivot on a different axis than red vs. blue or R vs. D.
To bring it back to the investor side of the discussion, it seems the ITC is the single biggest issue currently effecting Solarcity and their recent focus shift. For me today it was more interesting thinking about energy from a sort of above the fray perspective rather than drilling into the accounting of SCTY or regional squabbles.
I live in gray and overcast Western Washington which isn't solar country naturally. Still, if I was presented with a choice of electricity solar+batteries vs. grid power I would lean heavily toward islanding. I do think the utilities will have to compete for business in the near future instead of being the default or only option they are now.�
1/1/2015
guest Until you investigated the reality. Then you would appreciate your sweet, sweet grid connection. Imagine having all the power you need arriving on a thin wire.
Microgrid is the best of both worlds. The home mostly self consumes, and can island if necessary. But backup and the ability to sell excess electricity is available from the microgrid. The community mostly generates it own power, but has lightweight connections to neighboring areas.
Originally towns were on a microgrid, but without connections to neighbors. I think most of the desire to island is to regain control from massive utilities.�
1/1/2015
guest If it's such a sweet, sweet grid connection why does the desire to regain control from the massive utilities exist? Not picking a fight actually, but I think most people remember the California gouging and also don't trust the utilities in general to provide cost control.
Nothing can compete with renewable energy, says top climate scientist | Environment | The Guardian
�
1/1/2015
guest I think self sufficiency, as well as the desire to remove ourselves from large, distant corporate entities when possible.
Same reason not to sign a twenty year Solarcity contract.�
1/1/2015
guest The only thing you NEED to focus on politically is if Bernie continues to have a 10% shot. That's a 10% chance of 2018(or even 2017) SCTY $90 calls being worth a ****-ton and they're basically free now. Other than that it's anybody's guess which event causes the squeeze, but it's certainly coming. This recent setback does not change my opinion that by late 2017 SCTY will be too obvious to counter with disinformation.�
1/1/2015
guest Or have something really crazy like a 30 year fixed rate mortgage on their house. :biggrin: I don't follow your logic.�
1/1/2015
guest I wrote "when possible".�
1/1/2015
guest I know this post is a couple pages ago but I Needed to respond, been on my to do list. I have been very trusting of management because I feel they have proven themselves very trustworthy. For years now they have executed as planned and Lyndon/peter/elon have never been caught in a lie, at least not with me.
The metrics are very confusing because it is a different business model with a lot of variables which is why they keep introducting new metrics to try and clear up the waters. ( not sure if that is working )
I have wondered how they would be able to finance this insane growth rate post ITC since that seems to be the primary method to use. I am still wrestling with wandering if the slow down was the best thing for the company or not.
The silver lining is you can rebuy now at lower levels
I am in a heavy capex moment myself right now but if Solar City remains at these levels through the end of the year I hope to start scooping up the longest term leaps I can.�
1/1/2015
guest Incremental Value of Riverbend
I would like to lay out my thoughts on the incremental value that the Riverbend facility presents. What is important to understand is that many of the costs of Riverbend are impacting the current financial performance of SolarCity, but none of the benefits. So the emphasis here will be sorting out incremental value not yet impacting current financials.
I don't have all the details worked out, so this is just a rough sketch. Please help me fill in the details for a more robust analysis.
Capital. SolarCity has purchased Silevo. They have two plants. The Riverbend facility will be leased from Buffalo and so is financed. SolarCity will need to pay for equipment. Can someone confirm that the capital for equipment is in hand? I'm not aware that SolarCity will need to raise any incremental capital to bring Riverbend on line. So my tentative assumption is no incremental capital required.
R&D. Much of SolarCity's research money is presently directed to Silevo and how to manufacture 22% efficiency panels. While R&D will continue to be an expense over the life of the Riverbend facility, the essential spending is being done right now in the years leading up to production at the facility. In any case, all this research is incurred just to run the to smaller Silevo plants. What Riverbend adds is scale to leverage R&D. My tentative assumption is that Riverbend adds a negligible amount of R&D spending beyond current commitments.
General & Administrative. Senior management for Silevo and business support (HR, IT, legal, etc.) are already in place. Certainly running Riverbend will require more middle management and salary staff. My tentative assumption is that Riverbend will add a modest amount to G&A.
Sales. Solarcity plans to consume all panels produced at Riverbend. SolarCity is already committed to selling installed solar systems. My assumptions is that there is no incremental sales cost for the output of Riverbend.
Gross Margin. Lyndon expects that the high efficiency panels to be made at Riverbend will generate a savings of 25c/W in total cost. This net improvement to GM will change over time. Riverbend plant will accelerate progress down the experience curve. As SolarCity doubles its cumulative production experience, the per unit cost of production should fall 15% or so. This includes both manufacturing and supply chain efficiencies. Moreover, technology advancements that continue to improve panel efficiency and other performance and cost metrics will increase the output volume and value to SolarCity. These factors suggest that the 25c/W improvement in GM will continue and may even improve over time. My assumption is that Riverbend will improve GM by 25c/W or better for the first ten years of operation.
Volume. Riverbend has a nominal capacity of 1GW/year. The actual capacity of the plant will depend on the efficiency of the panel. I will assume that the nominal capacity is based on panels in the 18% to 20% range. We now know that Silevo is capable of 22% efficiency. This implies a capacity in the 1.1 to 1.22 GW range. Moreover, Silevo should be able to increase efficiency each year, perhaps by as much as 0.5% each year. Over ten years this would add as much as 5% to efficiency for an average efficiency of 24.5%. Now I have already assumed that such efficiency gains would support the incremental GM overtime and waved my hands over R&D costs. So I will assume that the gains are already embedded in the assumption of no incremental R&D net cost and 25c/W incremental GM. Thus my volume assumption is that Riverbend adds 1.2 GW of incremental capacity.
Rough Impact. From 2017 thru 2027, Riverbend should add about $300M ($0.25/W�1.2GW) in incremental Gross Profit and add $50M in incremental overhead. This is a net impact of $250M/year on earnings. Over ten years plus the option to renew the Riverbend lease for another ten years, the Riverbend facility is easily worth an incremental $2.5B to shareholders.
To put this into perspective, PowerCo is worth about $3.3B in NRV, DevCo will add about $1.5B in EVC through 2016, and incremental to this Riverbend is worth about $2.5B 2017 and beyond. I would add that the start up cost of Riverbend is presently weighing on the PowerCo and DevCo. This burden will lift in 2017 and beyond. Thus, the combined value of SolarCity is at least $7.3B or $75/share.�
1/1/2015
guest "New York State will invest a total of $750 million through the Buffalo Billion and other state resources to establish infrastructure, construct the 1.2 million square foot facility and purchase required equipment." From here.
Do we know if SolarCity is spending ANY money right now? My understanding was they are not until the factory is up and ready. When SolarCity is ready to operate and make use of it, that is when SolarCity will start actually spending some money there.
There is no mention of any spending in Riverbend in the 3Q 10Q.�
1/1/2015
guest I'm pretty sure they are spending money on the factory. Similar set up to the Gigafactory in terms of incentives I believe. I'm just surprised this wasn't brought up in the presentation.�
1/1/2015
guest I am referring to the official 10Q. (Not to their gimmicky presentations) There is no mention of it in the official sec filing.
No the setup is NOT similar to gigafactory. Not one bit.
In gigafactory much of the incentives are in the future, except free land and a road to it. Tesla and partners are bearing the cost of construction and equipment.
In case of riverbend, the state is bearing the cost of not only building the factory but also buying equipment in it. I specifically quoted directly from the state government website. Countering that with what? Gut feeling?�
1/1/2015
guest Gut feeling? I'm not even countering anything-- it was based off of what I read a while back when it was announced. Solarcity is investing it doesn't give you the split of how much that 750M is, but over time SCTY is projected to invest about $5B.
Extracted this from the 10Q.
In the nine months ended September 30, 2015, we used $1,201.4 million in investing activities. Of this amount, we used $1,134.9 million on the design, acquisition and installation of solar energy systems under operating leases with our customers, and $147.8 million in the acquisition of solar panel manufacturing equipment, vehicles, office equipment, leasehold improvements and furniture. We also invested $44.6 million in short-term investments in highly rated corporate debt securities and asset-backed securities. These expenditures were offset by $136.6 million from sales and maturities of short-term investments. As we increase our solar panel manufacturing operations, including the start of operations at our one-gigawatt manufacturing facility in Buffalo, New York and our research and development focused California Technology Center, we estimate investing approximately an additional $60.0 million in the remainder of the 2015 and approximately an additional $120.0 million in 2016 related to the acquisition of solar panel manufacturing equipment.
Also, not sure if you saw this either but they had a pretty good explanation for their calculations given on their presentation.
http://files.shareholder.com/downloads/AMDA-14LQRE/936907342x0x857522/439EECE4-13E3-4858-98A3-15B584C3C890/Q3_Cost_Memo_-_Final.pdf�
1/1/2015
guest Negative opinion on solar http://finance.yahoo.com/video/solar-stocks-worse-heres-why-222400096.html�
1/1/2015
guest Money spent on currently riverbend would be amortized, not expensed. So it would affect cash flow, but not a major part of P&L. Knowing the capex and cash flow of Riverbend would be interesting.
Presumably SC stated "cost of installation" is the number they use to create an asset on the balance sheet and amortize. I think some SC investors think they are writing off the cost of installation in the quarter they do the work. They do not. They are creating an asset which creates a depreciation expense each quarter.
Both SC and Tesla Tesla plan to go to cash flow neutral soon to demonstrate stability. That is their way of demonstrating that they don't need regular cash infusion to stay in business.�
1/1/2015
guest Recent Energy Gang podcast discusses this. Everyone interested in this post might enjoy subscribing.
another Energy Gang podcast...
"such a sweet, sweet grid connection" - So nicely put. Having storage and production necessary to go off grid is tremendously capital wasteful.
Huge kudos to Jason (wk52) for making it very clear that, even when annual production greatly exceeds consumption, and you have huge storage, even slight misalignment between production and consumption leaves you without power.
Grid connection is like having a huge backup battery behind your backup battery.�
1/1/2015
guest SolarCity is definitely spending on R&D, managing the build out of the factory and hiring workers. It is a good thing that plant equipment is included in the lease. Lease payments should be counted as part of the cost of goods sold, so whatever contibution Riverbend makes gross profit includes the capital for plant and equipment.�
1/1/2015
guest Wow this is incredibly bad. What's driving SCTY down today�
1/1/2015
guest Reading this forum?�
1/1/2015
guest Wondering same about SUNE. Doesn't seem to me like their results justified anything like a 35% hit to the market cap.�
1/1/2015
guest Chanos has been prescient in forewarning us. This is exactly what he was talking about.
If CA NEM 2.0 comes even least bit unfavorably, given the context of ITC step down, the bond market will quite literally evaporate. SolarCity will not be able to do any installs even if they want to at razor thin margins or worse negative margins. They won't get financing for it.
The true breaking point for me was a nominal research into potential outcomes of CA NEM 2.0. It is not as rosy as Peter presented at all. Will I be able to handle if the stock drops to single digits? My answer was no to myself. It might not happen most likely, but it 'could' happen. I reached the threshold of my loss bearing capacity and I hit the exit button.
All the gimmicky math and deceptive presentations don't help.�
1/1/2015
guest Bond implications are starting to be understood. SUNE is in the worst position of all.�
1/1/2015
guest I'm struggling with this man. Chanos' premise is that SCTY is the subprime mortgage broker of the solar industry which is ridiculous and unfounded. Yes, admittedly he has made a significant amount of money on the dip but at the expense of others not understanding the business model.
I'm struggling with the Gimmicky math point and deceptive presentation. Everything is laid out for the key metrics that I linked in the last post. Enlighten us please? What you're implying is some sort of malfeasance on management's behalf that would trigger some type of massive audit.�
1/1/2015
guest Thanks for the clarification.
For me the real concern is how much cash is flowing into Riverbend because this competes with cash needed to do installations. So the amount of leverage used in deploying MW is impacted by all the cash needed to grow the business. SolarCity is essentially leveraging its longterm recievables to jump into making panels. So Net Retained Value is made smaller by the leverage needed to move in this direction. This is how I see Riverbend impacting both DevCo and PowerCo in the present situation.�
1/1/2015
guest Right, this is a given and I think they were looking at the rate of CF leaving which I believe made them shift strategy to being CF neutral/positive so they can only focus on utilizing internally generated cash.
There's honestly nothing that can explain this price action to me. On a technical standpoint it's totally broken and should have been due for a bounce. Fundamentals... well that's what we're talking about here�
1/1/2015
guest I said this a long time ago: I wonder if SCTY presents the "nuclear option" to analyst. That is, SCTY fires 80% of its workforce at ITC non-renewal. What do the financials look like after trimming 1/2 billion off the yearly income statement?
Understanding the true profitability of the average single solarcity PPA sale today would go a long way to predicting SCTY future possibilities.�
1/1/2015
guest I see you haven't at least lost some humor. Remember what I wrote on Aug 3, 2015 when you recommended buying SCTY (your SA article entitled: "Solarcity: Misunderstood And Undervalued ") near the 52W-high?
Here's my critical comment again, posted in your article's comment section:
and below that I wrote in another comment on the same day:
to which you replied:
Do you have any advice for people following you into this trade near the 52W-high back in early August 2015?
How is that $100 PT working given the current price near $24? Do you reiterate it? Did/Do you buy more SCTY?�
1/1/2015
guest Chanos had literally 15seconds or less on air to explain his thesis on SCTY. So he said something in abbreviated language. That was misconstrued by the bulls (including me) and we all enjoyed attacking him. The real point he is making is financing will become harder in this 'environment'. It was not clear at the time what "environment" he has been talking about. Most of us naively assumed he is referring to 'rising rates' environment and countered that with the usual bull point that spreads will come down. But his environment, in retrospect, can be anything - ITC step down, NEM dilutions etc. But his key point was, it is not possible to run the shop with ever increasing amounts of debt, especially in a bad environment.
I will have to make a megapost on the gimmicky math and deceptive presentations.�
1/1/2015
guest It's incredibly easy to spread doubt about solar right now.
All you have to do is look at this board. Nothing major has changed and SCTY is making prudent moves to be cash flow positive while still growing at 40%, but doubt has crept in. Doubt spreads and shorts take advantage.
Buy low, sell high.
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You don't think he was being purposefully vague? That's how it's done. You plant the seed of doubt and let human nature do the rest.
A month ago we all agreed that SCTY's increasing debt was a good thing because that meant sales and future profits. The chart guys on the Street just didn't get it. How is that somehow no longer the case?
People used to get rich drilling for oil, they will now get rich by financing future renewable energy production. Is that not an immutable fact? How does that equate to an adverse environment?
Focus people!�
1/1/2015
guest Look the market absolutely hates solar right now. Just as the price of oil has been cut in half over the last 12 months so has the price of natural gas. And coal is making its final spin in the crapper. That, my friend, generates a lot of vindictive hate.
Natural gas is at $2.40/MMBtu because the price of solar at $40/MWh is equivalent to gas at $3.41/MMBtu. If gas were any higher it would hasten the build out of solar, wind and batteries. What happens when solar drops to $35/MWh, which coukd happen within a few years? I anticipate that natural gas prices get capped at $2/MMBtu. Moreover, natural gas and oil compete in chemical feed stock, heating and transportation. So as the price of gas gets crushed by solar, so oil gets crushed by gas.
The fossil industries and all that rides on the economic health of the fossil industries cannot stop solar or batteries. The best they can do is direct enormous hate at solar and hope to slowdown the financing of solar. This is the ugly side of disruption. We are engaged in economic warfare. The excessive shorting we see is not about turning a profit on trade; it is about impairing an industry that stands as an existential threat to the oil and gas industry.�
1/1/2015
guest That's a "horribull" analogy. With solar, people can get a small loan and have their own inexpensive supply of "oil" from their own property.
Oil exploration and refining was the opposite of inexpensive, decentralized energy. Oil was/is a capital intensive gamble. SCTY and similar are entirely unnecessary intermediaries that an efficient market will mostly remove.�
1/1/2015
guest I also wrote this: My Massive Bet On Renewable Energy | Seeking Alpha - and it looks like there is no rational reason for solar stocks to move up or down. Just look at CSIQ. So the whole renewable energy thing is not working out for me at all. On the other hand, neither are fossil fuels with Kinder Morgan down 50%. So all in all, this year I'm miserable (even in my non energy related investments). Should have stuck to buy Tesla on dips below 200. Yes I bought more SCTY options when it was at ~40.�
1/1/2015
guest I'm not sure why anyone is long in stocks without significant IP or barriers to entry. Why not just invest in a gravel pit operation.�
1/1/2015
guest I guess I'm the only long term investor here. People are going way too short term paranoid it seems on the thread.
The facts are extremely clear: 9 billion in contracts with average fico score of 740. 99.4% of all payments paid to Solarcity since the founding of the company. That's 9 years, including during the great recession in 2008. I think that's better then ivory soap.
To say that they are any risk of not receiving those payments over the course of the remainder of the contracts is a little paranoid and emotionally clouded to say the least.
Im for one not happy with the way management played the guidance game this quarter... However, I think a little strategy was used in why they did it the way they did it. The past two years was to front load or maximize the company scale to prepare for the ITC as well as worse case net metering outcomes. Energy storage + solar at scale and price is the end game since this ultimately be where the grid ends up. It is painfully obvious. It's like having an old plasma tv with expensive cable, then buying an Apple TV and now having a connected tv with voice activated commands and a wii/PlayStation with tv channels on demand to complete the cord cutting experience. TV is no longer the same tv. The entire cable business has to change as well as many others as a result. This is not a fad, it is the new normal. So is solar+ storage and its relationship to the grid and the rate base. You can't put the toothpaste back in the tube. This is going to happen. Period. Solarcity is by far the leader in solar+storage development and implimentation with an aggregation pilot with utilities already in progress. Why do some here avoid the fact that this is happening? Why are some avoiding the fact that this has a profound bottom line impact that is well beyond any ITC or net metering events happening today? We're not taking about 20 years from now, this is happening within the next two years and grow well beyond that. If you consider yourself a long term investor, why are some crying the world is ending all of the sudden, when this medium/long term fundamental business tech and model is firmly intact?
The other thing people have to understand is the grid is not owned. It is allowed by our government. We as a country do not want a bunch of wires to fill our communities so we allow legal monopolies to occur in the absence of a competitive market in this area. Net metering is an exchange of value we as a community see it already as valuable to our grid. So did every utility that has signed on to do it. The necessary discussion of that true financial value is finally coming to happen. What is ironic is that utiltiies arguing it's a cost will only shine light on their own books and the overwhelming consensus (thus far) is that net metering is a greater then retail value to the grid. These are independent studies, not sponsored by either side. The facts have yet to play out in commissions and we will see those start to come. Even if commissions try to circumvent due process and objective evaluation, such as in Arizona and a few others, the legal system will not.
I am extrapolating broadly because many supposed long term investors are willfully or not willfully ignoring the true business outlook for Solarcity and the real numbers behind it.
Solarcity has stated from day one on the public market they know he ITC expiration is coming and they will be working on every level to cut costs and innovate in order to thrive in post ITC world. It you actually listen to management, they are thinking many steps ahead, they are planning many steps ahead. Look at every strategic move they've made and it has been spot on from energy storage to silveo to buying zep and paramount solar... every big picture move exactly right.
To me, it sounds like some posters here watch a lot of CNBC clips and literally rehash it here as their own analysis. Not everyone, but some seem to be just parroting whatever paid talking heads say on a daily basis here.
again, either weather the storm or get to the sidelines, but don't try to spin the story cause you're upset with the stock price right now.�
1/1/2015
guest I wasn't making an analogy, I was saying that we've passed a turning point. For the last 100 years it's been advantageous to hoard oil and sell it at a premium, now that renewables are proven to be the better option there's not going to be anything to hoard. Therefore people won't be making money hoarding oil anymore and the best option for monied interests is to finance the purchase of the technologies that allow for power production. I think we can all agree on that, no?
The idea that major banks won't flock to 740 credit score borrowers with a 99.4% repayment rate is just laughable.�
1/1/2015
guest @Foghat, I am long with you. Holding 5,000 shares.
There is a Town Hall investors presentation Thursday (tomorrow) at 6 PM. But I am not finding a link. Anyone know what the link to a feed will be?�
1/1/2015
guest Have some tickers?�
1/1/2015
guest Why the Energy Sector Could See More Defaulters - Market Realist
This helps to provide context. Lender are tightening up credit in the energy sector. Oil and gas producers have become over leveraged to continue operation. So defaults are on the way. This very well could be impacting renewable energy bonds as the market tends to lump all energy into one market.
The upshot here is that O&G will slow new well development and restructure. This can allow prices to stablize. As that happens, renewables continue to grow and take share of the energy market. In time investor will sort out who the winners and losers are.
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You mean like tar sands?�
1/1/2015
guest There is no shortage of finance for solar. Solarcity is filling the rent-to-own and payday loan niche. They were able to sell a high margin product to high FICO customers due to an immature market.
"Increasing customer acquisition cost" in a booming solar market is a euphemism for "customers are catching on to our low value offering".�
1/1/2015
guest jhm, Solarcity has a 99.4% payment received history. When they see this fact, hard to even remotely lump Solarcity in with oil&gas or any other solar company (i.e. SUNE)
for all others, acquisition costs are directly linked to scaling/80%-100% annual compounding growth. Think a little bit here... Going from 500MW to 1Gw is a lot more acquisition cost intensive as opposed to going from 25mw to 50Mws or 100Mw to 200Mws... Just look at solarcity's install costs and you'll see this company is moving firmly in the right direction at the historic scale level currently at.�
1/1/2015
guest For gravel, I would suggest following an empty truck back to the quarry and talking to Ed, the owner.
For solar stocks, I wonder which are oversold because of the sins of the PPA sellers.
Anyone know how much of SEDG business is U.S.?�
1/1/2015
guest If SolarCity is not in business, who will service that debt? Who will honor customer maintenance commitments? There is some exposure to SolarCity even though they are customer payments backed. That's the extreme case.
In a simpler case:
You can NOT mortgage away 100% of the contract. If margins drop to zero, and they get financing only for 80% upfront, they can NOT do the install anymore. Think about that for a second.
Sensing that margins will drop to zero, the market can dry up even earlier because it's painfully obvious that the business is unsustainable.
And hence CA NEM 2.0 announcement is ultra crucial. Factoring in the certainty of ITC drop, CA NEM 2.0 sets the tone as to whether the business is sustainable or not.
The jury is out but that is the risk shareholders are taking. I personally couldn't take that risk.
For info, CA NEM 2.0 is expected to come out before Nov 17 as per this. It could go into affect as early as Feb/Mar 2016 in southern california. The link has details.�
1/1/2015
guest Foghat, I too am also still long. However I have only 250 shares. This investment was always a gamble and paid for with money I could afford to lose. So this puts me in the position of being able to ride out the storm or drown with the sinking ship (whichever way it goes) without too much hardship. That said these very low share prices are worrying me. Could SCTY fail or be subject to a hostile take-over simply because of a super depressed share price? Seems like Solar City is in a lot of danger right now, simply based on very negative sentiment.�
1/1/2015
guest Nope, been here since the IPO and won't go anywhere.�
1/1/2015
guest insiders (many also major tesla/spacex investors) own majority, hostile take over not in the cards. Do some people here not remember that Elon is the rive bros cousin? They have been working together since day one on Solarcity. Did anyone read the vanity fair article showing how the rives/masks spend extensive time together on vacation talking business and big ideas? Elon or the rives selling or allowing a hostile takeover of Solarcity is not even a low probability event. I'm just going to say it... It will never happen.�
1/1/2015
guest I find it quite very shocking that over the last 35 pages since the ER, not a single person except me is looking at California and putting it up as a discussion item, while I believe it is fundamental to SolarCity's very survival.
Did I completely lose my mind? I am unable to comprehend the silence on the subject.�
1/1/2015
guest You make a near-zero maintenance 20 year money fountain sound horrendous.
Anything can be spun negatively, I'll keep faith in the simple concept that solar is the next thing and that at least half adopters will want their hand held for the next 5-10 years. SCTY has a huge head start and will only benefit for a shakeout.�
1/1/2015
guest Advisable to read maybe the 35 pages before the ER and you'll have a better answer on California and many other net metering cases. many, many topics and issues have been discussed and analyzed in this thread. Might be a chore, but start from the beginning and you'll find an amazing amount of data to answer a vast majority of your questions.
any developments on California will come with news releases. None have come for a while so discussion hasn't advanced. But everything up to today(baring any new developments) has been covered within the history of this thread�
1/1/2015
guest Speaking for my self... I am certainly aware of the family relationship with the Rives and the Musks. I didn't think Elon had a majority of shares. However, collectively with all the insiders making up a majority of shares then a takeover seems out of the question. I didn't read the vanity fair article. Frankly, I thought Elon didn't take any vacation. I just have been thinking of all the worst case scenarios and summing them up with the likelihood of them happening. A lot of bear arguments already in this thread so no need to re-hash.�
1/1/2015
guest I struggled to explain why the Business model doesn't work in a post ITC, NEM world in a lot of posts with a lot of data and words. But the above sentence really gets to the very core of the problem.
The margins *need* to be healthy for this model to work.
Note: you should remove the renewal portion when computing margin for this purpose because renewal portion can not be sold or mortgaged.
A homeowner buying a system for themselves through a loan doesn't face the same issue. The homeowner can put their own money as some amount of upfront capital or use home equity. So a home owner can still install a system even if payback drops to 20 years! On the other hand SolarCity will fail miserably if payback reaches 20 years.�
1/1/2015
guest Is CA any closer on deciding what NEM 2.0 will be?�
1/1/2015
guest I agree. Financial markets always make corrections with a chainsaw. Investors with the skill of a surgeon will make much finer distictions. This is not the bond market environment for SolarCity to issue a new ABS right now, but when they do, I hope it is received as a positive catalyst for the stock.
In any case, I am optimistic about SolarCity moving to a cash positive basis and Riverbend.
We all need to keep in mind that SolarCity is increasingly becoming a vertically integrated company. A few years ago panel maker were losing money, and SolarCity saw the advantage of going after better margins in installation. They took advantage of a Chinese solar module glut. They recognized the need to provide zero down financing to accelerate the pace of adoption, at a time when mort gage refinancing was at a very lown rate. Then they saw the tremendous need to cut installation costs, so Zep Solar was a key acquisition. The big challenge is solar is being in the right place in the supply chain at the right time. If ITC stepdown happens, US installers take the first hit on margin compression. Solar component makers take a smaller hit. The market for solar components is global and growing robustly. So component makers can simply sell more outside the US and suffer little price erosion. Thus, under this scenario, you do not want to be an installer that is completely dependent on component suppliers. This is why SolarCity is getting into making panels. The effective margins on making panels and other components may prove higher than the margin on installing them in the US. The customer financing peice is irrelevant. SolarCity is not trying to earn Net Interest Income like a bank. Financing exists simply as a means to closing a sale and not for its own sake. Indeed SolarCity would greatly benefit from a new wave of mortgage refininancing or some HELOC mania, but these have been out of favor since the mortgage crisis of 2007. Getting into aggregated grid services is a huge wildcard. We simply don't know how much this will be worth, but we do know that utilities will be quite resistant to giving away too much value. So in 2017, SolarCity will be much more vertically integrated. While other pure installers are getting squeezed between suppliers and customer, SolarCity will lock in most of the supply margin for itself. They will also benefit from close ties with Tesla Energy. I am particularly optimistic about dispatchable solar at commercial to industrial scale. The utilities will experiment with all sorts of clever rate plans, but batteries will exploit their weaknesses. Given the rate at which battery prices should be coming down, multi-decade battery leases are one clever way to make the cheap batteries of tommorow affordable today. That is, a 20 year battery lease that includes at least one replacement is actually cheaper than a 10 year lease without replacement. So battery leasing could open up a whole new set of opportunities. Regardless, there will be lots of opportunities in the future that we don't see so clearly today, and that is why it is so good for SolarCity to be flexible, divesified and integrated with strong entrepreneurial leadership.�
1/1/2015
guest Unfortunately much of the debate circled around *fairness*. Not in terms of what is happening and what is likely to happen.
If the assumption is, what is *fair* is what will happen, then we are doomed.
That is precisely what happened in AZ and HI. We thought we will win but lost mightily.
With all the positive bias I really couldn't see through it.
CA is infinitely more important. I can't believe that the team wont consider discussing that again.
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CA NEM 2.0 is expected to come out before Nov 17 as per this. It could go into affect as early as Feb/Mar 2016 in southern california. The link has details.�
1/1/2015
guest Hawaii was not as bad as I expected. With the grid supply option, a solar system PPA could still be under utility compensation. This could even be tax advantageous for a solar system owner because compensation as opposed to net metering turns the customer into a power generating business and they can make use of depreciation on the system to lower their taxes as opposed to just having a lower power bill. If this causes the interconnect approval to speed up in Hawaii, it might be a long term positive.
-- Edit --
Thanks for that info, I've read the NEM 2.0 proposal summaries somewhere but the implications are not yet clear to me. CA doesn't seem like a state that would cause renewable adoption to slow down, though.�
1/1/2015
guest I'm pretty sure that NEM 2.0 has to be decided in December. All NEM 2.0 variants destroy PPA's, as far as I can tell.
However, there will probably need to be incentives to not completely destroy residential solar in Cali.�
1/1/2015
guest With all due respect, Benson, I think you may have lost perspective. For me, I was quite satisfied with the response in the Shareholder Letter. It reads,
Draconian scenarios such as you entertain are clearly forbidden in the language of state law AB 327. Changes in net metering cannot go so far as to fail sustained growth in onsite solar. I'm not sure what the legal test for "to continue to grow sustainably," but it seems to me that a decline in annual MW installed across the industry would be a failure to continue growth. Perhaps legal minds can comment on this. But more than just this legal objection to a draconian dismantling of NEM, I believe that the people of California want distributed solar to succeed. It is valuable to the state in so many ways from cleaner air to economic freedom. It is even important to making best use of water resources in the state as thermal electric generators consume almost as much water as agriculture. The state is in deep pain due to this draught. The big utilities will try to push for what they think they need, but I just don't see the State of California allowing distributed solar to get shut down or grow any slower. This is California, the most environmentally and technologically progressive state in the Union.�
1/1/2015
guest First place, like all laws this law is too is open for interpretation. With each of the proposals, there are attached clauses that explain how the law is interpreted. Look it up please. It is not black and white.
Second place, law does NOT guarantee SolarCity's business model. It only ensures residential solar will grow. There is a subtle difference there.
You can very much have a situation where residential solar survives but PPA model fails. Here is a small post that is trying to explain it out. Shamelessly quoting myself for your convenience:
>>
SolarCity can NOT mortgage away 100% of the contract. If margins drop to zero, and they get financing only for 80% upfront, they can NOT do the install anymore. Think about that for a second.
The margins *need* to be healthy for this model to work.
Note: you should remove the renewal portion when computing margin for this purpose because renewal portion can not be sold or mortgaged.
A homeowner buying a system for themselves through a loan doesn't face the same issue. The homeowner can put their own money as some amount of upfront capital or use home equity. So a home owner can still install a system even if payback drops to 20 years! On the other hand SolarCity will fail miserably if payback reaches 20 years.
<<
That is what seems to have happened in HI, the grid-source option is a decent one (per dalasid above) but based on what Peter said (my interpretation) they are unable to use it to provide service. They are effectively locked out of the state.
What would be helpful is if each of the proposals is dissected (they are all public info), and we see whether PPA model can survive or not. Electracity claims to have done this above and concluded that ALL proposals will make PPA model to fail.
Did any of the bulls look into these proposals and impact (rationally)?
If you are blindly believing what management has to say. I'm sorry the portfolio could go either extreme direction with no warning. Well, HI is your warning.�
1/1/2015
guest Regarding possible tax advantage, I wonder it this could apply equally well to the self-supply options. It has been a curiosity as to why someone would go the length of getting grid connected for feed in if the tariff is $0. But it this arrangement allows one to take a loss as a generator on both power exported and depreciation, then there could be a tax advantage. I also wonder if the tax arbitrage angle may work to the advantage of third party owners. For example, SolarCity has a PPA at 13 c/kWh, but when the a kWh is exported at below 13c, then SolarCity gets to take the difference as a loss. Not a tax expert, just wondering how the utility, PUC and solar industry might conspire to create tax breaks.�
1/1/2015
guest PPA requires straight up 20 year guaranteed net metering. Net metering is antithetical to CPUCs long term mission of a value based distributed energy marketplace. Anything less than 20 year net metering requires cost risk to be shifted from solarcity to the homeowner to do a PPA-like product.
But CPUC will probably need to provide solar incentives to stimulate the market, although no one likely gets a twenty year guarantee anymore. Solarcity can perhaps come up with a even more complex Complex Financial Product, or just sell systems. Since they are THE low cost solar installer, selling systems should work great. Right?�
1/1/2015
guest My interpretation is SolarCity wont be providing a system to consumers with grid-supply model. Peter's wording on the call is confusing. They need some time to come up with a solution for self-supply option. So they are effectively locked out of the state is my understanding.
I tried to get confirmation both in this thread and elsewhere but I couldn't.
Does anyone know if SolarCity is still in business in HI post-nem?
Maybe someone could ask friends or friends of friends to find out.�
1/1/2015
guest I'm assuming this is for future storage customers that just use the grid as a backup? Hey you rarely need us and we'll stay connected in case you need me but in return I want any excess power that you produce. But yeah if you can do that while depreciating your system and taking losses, it is a no-brainer. That's a big if though. zero revenue loss making business seems like just asking for trouble.�
1/1/2015
guest Wild day today, got some more shares at $24.54 and had more ammo ready to buy more in case of another big drop, but now I'm seeing it's just under 1% off from yesterday's price? What is going on? Any reason other than SUNE bringing everything solar down and then investors realizing SUNE is different than SCTY?�
1/1/2015
guest If the objective is to move to a value based distributed energy market, there are other alternaitves. Here's one I would like to see.
Consider a community solar scheme wherein some producer participants have solar and/or storage assets in their homes under durable leases or owned out right. Second there are subscriber participants with short term subscriptions, say annual. So producer participant get to sell surplus power to other participants for whatever is the going rate for the solar community. Subscribers are attracted to community if an abundance of surplus power translates into low prices. So over time subscribers come and go allowing a natural market for surplus power to set the price. In the midst of this scheme the distribution utility gets to earn a reasonable amount for the distribution service provided, but is otherwise not obligate to pay any feed in tariff.
The problem with traditional net metering is that the utility is obligated to both buy and distribute power at a price that compensates for neither. The future of distributed solar need not rest on such an imposition. It is enough for the utility to distribute fed in power and receive compensation for doing so. Solar owners can sign up their own customers to buy the power. There are plenty of ways this can be done.
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Why do you think PPAs matter to the future of SolarCity? I see it merely as a financing option, not at all essential to the business. Suppose Tesla were to stop leasing car. Would that invalidate their business model?�
1/1/2015
guest Exactly. What's keeping SCTY from straight up selling and installing financed American made panels that also happen to be the most efficient(edit: and were manufactured in a factory someone else paid for)?
I just don't see any realistic scenario that negates their advantage and value in the medium/long term.�
1/1/2015
guest Lyndon Rive on Q3 CC:
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I am still looking for an answer from the bulls, somewhat impatiently:
Is SolarCity still in Hawaii post net-metering?�
1/1/2015
guest It was my understanding that this setback affected the entire solar industry in HI, no? In other words, holding back total demand.�
1/1/2015
guest Yes, customers prefer PPAS. That's why SolarCity offers them.
Can a PPA make sense if net metering is guaranteed for only few years? Yes, simply add the provision that batteries will be installed if feed in tariffs fall below a certain level. If a customer owned their system outright, they too would be buying batteries within a few years. This is what is happen in Germany and Australia. Does it help to have a PPA that provides batteries when needed? I'm happy to let customers choose.
The whole issue with net metering is that it is a stopgap until batteries become less expensive. We are still half a year or more from Tesla being able to deliver in volume.�
1/1/2015
guest Have you ever had work done on your house by an employee of a non-local corporation?�
1/1/2015
guest And who will bear the cost of the battery? SolarCity or consumer?
Will the price together with battery be competitive to utility prices?
How much margin are you expecting (without renewal)? Is it financeable? If margin is less than 20%, NO solarcity can not finance.�
1/1/2015
guest My entire house was supplied by a non local corporation. They have a travelling crew that came and fixed all my issues.�
1/1/2015
guest Is Californias Net Metering 2.0 a Solar Tax Risk? | Greentech Media
Hmm, here's an article on potential tax risk implication of moving away from NEM. It seems this tax risk could be something some homeowners would prefer to shed to a third party. It you are in a high tax bracket, it may make even more sense to lease your system. And that would make economic sense if such a third party had a lower marginal tax rate.�
1/1/2015
guest Here is my understanding (until someone corrects me):
- Hawaii is very pro-solar. They have a commitment to meet a 100% renewable portfolio standard by 2050.
- Phased out net metering and gave 2 options for new solar customers.
- jhm crunched the numbers and said that 'grid-supply' options is workable.
- dalasid just now claimed that the 'grid-supply' option is not as bad as feared.
- Peter made no mention of 'grid-supply'.
- It appears that 'grid-supply' option is workable in some cases. But not for SolarCity.
- Peter said they will have a solution for self-supply option "at some point"
- All indications show that SolarCity is effectively locked out of the market (until proven otherwise).
If this is not business model failure, I don't know what is.
If people are thinking California is not a risk and are not looking deeply into it, they have their heads firmly in the sand.�
1/1/2015
guest :cursing:Hi,
Sorry if this has already been posted:
SolarCity Veterans Day Spotlight - YouTube
SolarCity Video Highlights Solar Jobs From Veteran's Point Of View
�
1/1/2015
guest I'm sorry. I don't see any failure here. The grid-supply option works fine because grid electricity is really expensive. The feed in tariffs were close and sometime even more than their PPA.
When Peter talks about self-supply option, I do not get the impression that this denying the grid-supply is workable. I think they are simply working through the details of a new solar+battery package that is optimal for the self-supply option. So I am looking forward to a new product offering, and I think Hawaii is where they will start.
Whatever NEM 2 in CA comes to, it won't take effect until July 1, 2017. This will give SolarCity and Tesla time to roll out a solid solar+battery in California. The Gigafactory should be hoping by then.
BTW, any net metering that includes time varying rate and demand cages will actually improve the economics of adding storage to a solar system. Flat monthly fees, steep connection fees and fees based on the solar capacity are worrisome because the only behavior that such fees incent is not to install solar or to disconnect from the grid entirely. Hopefully the CPUC will see past such anti-solar tactics.
So I think the Sierra Club proposal comes closest to what I would like to see. This proposal allows TOU pricing with full retail credit for exports. The provision for TOU rates allows the utility flexibility to connect the time dependent cost of power generation and distribution to be reflected in rates, and this motivates all customers to value electricity use appropriately. So it does motivate conservation. Also if a utility gets swamped with too much midday solar power the rates can be set lower. TOU allows a utility to better manage supply and demand through the day and seasonally. So this creates systemwide and environmental benefits. I do not see it impeding the growth of solar in any meaningful way. I would go one set further than Sierra Club and allow demand charge with suitable reductions in rates. The one restriction I would place on this is that it would need to be a competitively priced plan for both residents with solar and without. If solar owners are compelled to be on this plan, it must be attractive enough that at least 1% of non-solar customers sign up for it volutarily. This test is to assure that solar owners are not simply being segregated into a bad rate plan. Such a provision helps to assure that the benefits of NEM are being share equally among all ratepayers. So if solar owners are segregated into a rate plan that ratepayers would not voluntarily choose, then have a situation where solar owners may be benefiting less than non-solar customers. This sort of test would apply to any substantial fee that applies to solar accounts but not non-solar, as it implies a segregated plan that non-solar owners would not voluntarily choose. So certainly utilities can come up with plans including TOU and demand charges that ratepayers would voluntarily choose. If NEM is included in such a plan, that would seem reasonable to me.�
1/1/2015
guest Guessing Lyndon will have a few things to say about the noise that has been getting spread around. Company update tomorrow at 6pm PST.
SolarCity Town Hall
https://www.eventbrite.com/e/solarcity-town-hall-tickets-19303575514�
1/1/2015
guest Very nice. I'm wonder why they are calling it a "Town Hall". That sounds very much like a political campaign event. So is the need to address the voting public? I would live to see them unveil a solar+Powerwall product. That could be a boost for both SolarCity and Tesla investors.�
1/1/2015
guest You mean like Terminix? SolarCity is a local corporation, their location is about 8 miles from me.�
1/1/2015
guest sorry, Terminix is a franchise
keep thinking�
1/1/2015
guest S Benson I hate to suggest it but did you go short without telling anybody.
SolarCity did not close up shop in Hawaii unless I missed something. Peter mentioned that they have a solution coming with the self supply option that will return Hawaii to a high growth market. He never said that there was no market there. With the grid supply option they pay you half of a very high retail rate. If SolarCity is able to provide battery backup for less than half of the retail rate of Hawaii it makes a whole lot of sense to do that. It also will increase the value of those installations dramatically I would think.
They currently operate in markets that get less than half of Hawaii's retail rate for net metering. I think the reason he did not mention the grid supply option is it goes without saying they can install solar at those rates.
I hope the reason he didn't mention the grid supply solution is they are close to having a self supply option and with the faster connection for the self supply installed solar it makes more sense for them to not push solar sails until they have the batteries to make the self supply work.�
1/1/2015
guest To be clear, you think people wouldn't want to install with SCTY because they're based in California? Ironically, I have no interest in a ppa from scty, but if these doomsday scenarios were to happen and scty were forced to streamline and install these Buffalo panels I'd likely pay a slight premium to have them do my install.�
1/1/2015
guest No, I don't think SC will be competitive with local companies in a mature market.�
1/1/2015
guest Grid operator prepares for rapid uptake of solar and storage : Renew Economy
Wow, this is amazing. The Australian Energy Market Operator has be working on scenarios for transitioning to 100% renewables. Check out their rapid transition scenario. Rooftop solar figures massively into this scenario, some wind, and almost no utility solar. Batteries figure very large and make the transition much more economical. This is a huge endorsement of rooftop solar and distributed batteries.
PV Magazine Mobil: Texas grid operator predicts 50-fold increase in solar by 2030
Along similar lines, ERCOT, the grid operator in Texas, also anticipates large uptake of solar, 13 GW by 2030. They are also quite enthusiastic about the role of batteries in driving down transmission costs.
It seems grid operators without a stake in how power is generated are in a good position to appreciate the role of distributed solar and batteries to make the grid much more cost effective. Could it be that rooftop solar is much more effective is reducing grid congestion and costs then utility solar or wind, as the AEMO suggests. If so, this should have direct bearing policy formation around distributed solar such as NEM. It could be that from a grid perspective NEM is a very beneficial policy.�
1/1/2015
guest Based on what? I don't think it's remotely in their plans to try and race to the bottom on price, but they certainly could win if they tried. Best panels, American made, stable known company, best installers, didn't have to pay for their first factory and likely could get away with not having to pay for the then next 10GW of production facilities. Scale is the most important thing if you want to charge a slight premium for a premium product. That being said, there's going to be more money in staying at the forefront rather than competing as a bland commodity.
Again, I certainly agree that SCTY will never be able to or want to compete with the amazing installer that's literally across the street from me, but by your logic no one would ever buy an iPhone or a BMW.
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Lyndon was on Bloomberg again today. They need to have a proper PR department with a proper spokesperson because I have yet to see one media appearance where Lyndon explains something and the interviewer gets it. He's an engineering type person and there's obviously nothing wrong with that, he should write the content and let a pro deliver.
Chanos is much better at it that Lyndon and it's an issue.�
1/1/2015
guest Blake, James, Both of you gave your guesses as to the situation in Hawaii. Thanks. But I am looking for proof/facts. I shot out an email to both investor relations department as well as customer service department to know straight from them if they are operating in HI or not. Will keep you posted.
Regarding my position, No, I am not short. I seriously considered though. But backed off due to numerous reasons. Nevertheless my position shouldn't matter as much as legitimacy in my points. I really don't have delusions that I can control the entire stock market, where millions of shares trade everyday, with my writings in this thread. Jeez, if that was possible, why sell at all. Just write a few grandiose posts here and it's all done. Isn't it?�
1/1/2015
guest For jhm: Bloomberg - Utilities Buying Gas Pipelines Better Watch Out for Batteries�
1/1/2015
guest Your position in the stock is relevant only to see about how far your judgement on the stock is biased. I am clearly very biased Pro solarcity as you mentioned up thread about the Bulls being too positive and I agree.
I just called Solar City trying for an office in Hawaii but it seems like I get a national number. They told me that they are currently not doing new installs in Hawaii so once again it appears I was wrong on part of solar citys business model�
1/1/2015
guest
"The threat from batteries, however, is that they can remove the problem of �intermittency� from renewable sources � allowing for solar and wind power to keep the lights on even when it�s cloudy and calm out, Paul Patterson, a New York-based analyst for Glenrock Associates LLC, said in a telephone interview.
If battery costs fall far enough compared with gas, then wind and solar could become the preferred source of "peaking" power that�s needed when electricity demand is at its highest. �In general, there would be less demand for natural gas,� Patterson said.
There are signs it�s already occurring. Utility Southern California Edison said at an energy storage conference last month that supply from batteries is set to compete against gas-fired peaker plants."
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I heard from a guy I bumped into that has worked for SolarCity for many years. He said they are working at re-entering Hawaii with batteries as soon as they can. How soon that means, I am not sure. Maybe the Solar City Town Hall meeting tonight will address this.�
1/1/2015
guest
Big Thank You!!
This means two things.
1) Management has been extraordinarily deceptive.
A full fledged share holder letter. A full deck of slides. A conference call. There are so many smart people here in this thread. Not even one caught a whiff of a suspicion that SolarCity is entirely out in Hawaii. Isn't their communication very deceptive?
2) The business model is very misunderstood by the bulls (including me until I sold)
Here we have it. SolarCity locked out in an ultra pro solar market where electricity prices are sky high.
I will write a post which will explain the situation in extraordinary simple terms that even an 8th grader reading it should understand. I hope at least some here will appreciate it.
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You wish! There will be nothing announced there. It will be a few years before they have a 'self supply' system. Self-supply actually means, complete isolation from the grid. Even after they have the solution, it will take time for them to build credibility and gain sales. It will be a painfully slow sales process. Don't hold your breath on it.�
1/1/2015
guest SC will be OK if they can be profitable charging a small premium. But then why didn't they just switch to selling systems in Hawaii?�
1/1/2015
guest That's what I'm talking about! Thanks.�
1/1/2015
guest SBenson - I gotta be honest. You surely spend a lot of time on this board as a non-stock holder. You've clearly shown that you have done a very good amount of research that has pointed you to the direction of selling. However - why spend so much time on here telling us about your decision?�
1/1/2015
guest SunEdison has just declared a $67.50 annual dividend on their preferred convertible stock. Last close was $522.50, implying a 12.67% yield. It should be interesting to see how the price adjusts to this announcement. The yield could tell us something about cost of capital for SunEdison. I should hope the yield drops to 8% or lower.�
1/1/2015
guest Here is what the website has said for a while now: Off Grid Solar Power Systems – Off Grid Hawaii - SolarCity�
1/1/2015
guest There are many reasons:
1) I made a big bet. Lost big as well. So I am looking for validation. In case someone here convinces me that I am wrong, I could go back in and hopefully catch the swing back up.
2) Alternatively, if I did it 'right' and nobody is able to prove otherwise, this rigorous discussion helps understand where the bottom is or how to detect it. I will consider participating on the long side, based on a set of conditions. I am formulating those conditions in my head. This discussion helps me with it immensely.
3) Assess if going on the short side makes sense. This is the least likely thing I will do in any case.
4) TMC has been useful/helpful to me a great deal with respect to Tesla. So consider it as a form of giving back if I can say that.
5) I hate to go back to SA or anywhere else. Quality of people and discussion is definitely much better here.
Many more.. But that's probably plenty.�
1/1/2015
guest I can't speak for Benson, but I believe as humans we tend to seek validation of our views, especially in a situation of loss. When one of our favorite stocks tank, it is hard to take cognitive dissonance of believing in a stock that the market rejects. So we look elsewhere for things to validate our views. We all react to such situations in different ways. I would encourage each of us to be patient and respectful with one another as we each sort things out in our own ways.
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I appreciate that, Benson. Thank you for your continued participation.�
1/1/2015
guest I think "locked out" is an exaggeration. I think it's simply not worth the effort right now. Approvals for feed-in systems have a waiting list due to "saturation". Wholesale electricity prices are $0.15/kWh or more there, so it's not like the end of net metering is going to kill the market.
In Hawaii's case the "self-supply" option is not disconnected, it simply won't pay consumers anything for feed-in. The grid will be an energy sink and emergency source.�
1/1/2015
guest 15 cents in Hawaii isn't the problem.
No 15 cent guarantee for twenty years is the problem.
Solarcity business model is based on locking in a profitable margin for twenty years.�
1/1/2015
guest All I can do is speculate they're really not interested in competing with local installers for straight purchases. HI is in the middle of the Pacific Ocean, not a very large market and as a previous Oahu resident I can tell you there is a very necessary and very pervasive bias toward local businesses when all things are equal. It's an island, things are very different there.
The rules in HI looked pretty advantageous to solar companies a little while ago, new rules came down that is grinding all solar installs to a halt. How you gonna keep operations going in the middle of the ocean while waiting for that to clear up? They got a million other places to go.�
1/1/2015
guest I do wonder if SolarCity's strategy in Hawaii will be to emphasize self-supply installations. Grid-supply would work and other installers will pursue it, but SolarCity may be in a distinctive position to fill the islands with batteries. As SolarCity builds up a fleet of batteries, it may achieve a scale where it can bargin with HECO for aggregated exports. Basically, when the battery fleet is sitting on a certain amount of surplus energy it can offer that to HECO. So building up a trading relationship like that puts SolarCity in a position of selling power to HECO at real time wholesale prices. By contrast, the grid-supply option is based on exporting at average wholesale prices. We aggregated batteries SolarCity can export when the spot price is above average. This creates substantially more value for HECO, SolarCity and its customers. So scaling up the battery fleet is key to making this all work. So I am proposing this as speculation on why SolarCity may want to focus exclusively on the self-supply option. Hopefully the Town Hall will give us a few more clues as to what is in play.�
1/1/2015
guest like I said before, read this thread from the start. Also, advisable to read the alternative energy thread(the old Solarcity thread).
Hawaii was shut down approx. 2 years ago, so Hawaii has been a unpredictable market for a while. In that time it was shut down before, Solarcity grew at 98% compounded. Secondly, Hawaii is at over 10% residential solar power. They are literally 3X - 5X ahead of the other major markets as far as solar per capita. So they are at a point where they need to fully understand the impact on the energy system. Thus far, Solarcity is at the cutting edge doing many different studies with NREL in Hawaii. So far, the only reason the Hawaii market opened up last year was because Solarcity proved the current grid could handle more solar! Solarcity also is the first company to sell solar+storage ppa without incentives to a utility in the United States. They have also proved that solar generation is not the same as nat gas or oil based plants which affects positively on planning and grid management. There are many more studies currently underway as well, so Solarcity is right there setting the standard for what will happen in the rest of the country and potentially the world. This is exactly the reason Lyndon rive has said Hawaii is the post card of the future. The studies that come out of Hawaii will lay the groundwork for everyone else and that becomes a significant advantage in a total market that is only 1% penetrated.
Lastly, the Hawaiian governor and congress do not want the HECO merger to happen based on their lack of clarity on getting to 100% renewable. I posted a video of his believes earlier in the thread and he is absolutely for distributed grid.As a result heco is not happy not is the Florida utility trying to buy it. If you read the articles coming out of Hawaii, there has been some trickery and deception on the side of the utiltiies against solar and foes of the merger. Again, this is par for the course as we've seen in Arizona and Nevada thus far. All in all, the story isn't over, were right in the middle of it. So try to do some research before spelling out the most dire conclusion. There also is a pending injunction on the PUC decision to stop the previous net metering regime, but you failed even to mention that or maybe not even know about it. It's all in previous posts.
And for those not clear on solarcity's position in Hawaii, Solarcity was the number #1 installer in Hawaii beating out many local installers that held that position for a long time previously...
add:
Also posted many months ago.... Solarcity started advertising off grid Solar+storage back in May... 6 months ago... That they are offering lease/loan/sale to Hawaiians starting in 2016. Did everyone forget that? Seems Solarcity is well aware of what was/is going on in Hawaii. They have a staff of 30 people dealing exclusively with policy/regulatory issues in their markets. Far more brain hours then us persistent few. Let's be real and do the research it we are going to throw out the most dire assumptions and conclusions.�
1/1/2015
guest I was thinking about SRECs today. Pennsylvania's last governor(an OKC methane industry puppet) allowed for out of state SRECS to be used in PA, but not the other way around(or something like that), in effect rendering them worthless. The new governor is going to reverse this at some point.
I imagine SCTY keeps these SRECs when doing PPA deals? Wouldn't this be worth millions if SCTY became a huge installer in PA this year? If the main form of incentive the state plans to use is SRECs, then holding onto half of the supply would have to be seen as a good thing, no?
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Corporate bond supply has gone negative for the first time ever. If SCTY can secure a good rating, won't they be issuing bonds at lower yields in 2016 due to high demand?�
1/1/2015
guest The CFO said the banks are wanting bigger ABS' so I expect Solarcity to come out with multiple offerings soon, possibly record capital levels. It looks like they are averaging about 4.4% so possible that is maintained or even lowered in this next batch of offerings due to demand and high quality of the ppa/lease/loan payments. The investment ratings are actually better then some utilities right now. Lyndon said he's not going to do anything to devalue these investment ratings, so his current statement on accepting sub-650 credits scores at about $1000 down payment(by the consumer) may not be as rate raising risk as at first blush. It will be interesting to see what these future abs' will look like since this pretty much unlocks a large percentage of available solar market, possibly 25-30% more potential customers in current markets.�
1/1/2015
guest That's a good point I didn't think of.
So SolarCity will need to figure out a way to put the variability on the consumer side.
If the risk on solarcity's side, the contract is not financeable.�
1/1/2015
guest Since we are taking SCTY apart, I wanted to ask a related question about SRECs. I assume they belong to SC. Do they sell them? Do they sell only SRECs from excess power not used by the SC customer?
If they do sell all SRECs from power generated on their customers' roofs, doesn't that mean that the power that they sell to their customers is not really 100% solar, but just average grid mix power?
Am I completely misunderstanding how SRECs are supposed to work?�
1/1/2015
guest before you get too excited by this, all solar customers with solar under the old regime are grandfathered. That means they get the net metering rate they signed the contract under. So all contracts are locked in at the current rate.
More broadly, there has never been a case nationwide where solar customers have not been grandfathered.
So, all Solarcity ppa/lease/loan contracts are/will be grandfathered that are already in place. So pretty much $9 billion in contracts are secured as right now and all contracts they sign will be grandfathered under whatever contracted rate and net metering rate at the time. Arizona commission had a discussion about grandfathering with their legal and came back with no utility had ever not grandfathered, so their has been attempts and they were immediately shot down. But, anything can happen right?�
1/1/2015
guest I would imagine jhm will be here momentarily to give you the full scoop. I don't understand all the ins and outs, but I do know that some states(PA included) have artificially devalued their SRECs purposely while others(NJ) have gone the other way to increase their value. I just hope SCTY is savvy enough to accumulate and sit on their PA SRECs for a couple years until their real value appears.
PA is relatively untapped for SCTY, imagine 3 years from now when they have a third of the once useless SRECs in the state. If these things are made "valuable" by the state in the form of renewables targeting, SCTY could literally set the price.
(Knowing almost nothing about the SREC market or how it works)�
1/1/2015
guest No body is talking about existing contracts.
We are discussing about future contracts. More specifically why SolarCity is locked out of Hawaii. As in, why SolarCity is not doing installs in the grid-supply option.
Get a grip dude. Don't try to attack me, when I am not.�
1/1/2015
guest I appreciated the clarification. I, for one, didn't know that existing contracts are usually grandfathered. That makes a huge difference for the contracts that have already been signed.�
1/1/2015
guest No one is installing, so Solarcity not locked out. As I said before, Hawaii stopped all installs a couple years back as well, so Hawaii not really a massive impact on solarcity's bottom line. However, even as new contracts are at a near standstill for everyone, Solarcity just signed a multimillion dollar deal with Kauai. If anything, Solarcity still making money right now despited PUC disputed actions.
disregard what you want, but Hawaii is in the middle of some transitions where everyone is waiting to see what happens. Like this is a few month window not forever my friend. Puc decision is pending an injunction as well. 2016 is the year of starting solar+bat in Hawaii. Look at all the evidence.
Just to reiterate, all contracts signed are grandfathered under whatever agreed on rate and net metering credit regime at the time. This applies for all future contracts as well, so whatever the terms of the contract at anytime in the future, will be upheld for term of the contract.�
1/1/2015
guest I'm pretty sure one could find investors willing to take that bet. The feed in tariff pretty much depends on the price of oil and how quickly HECO can move off of oil based generation. So this can be modeled by finance quants and hedged with oil futures. An energy hedge fund or investment bank could easily work this out.
But it may be cheaper for SolarCity just to do their own hedging. Moreover, SolarCity can manage this risk by installing batteries should the FiT ever get sufficiently low. As far as selling an ABS, the variable portion can be bound or excluded.
Putting this risk onto the customer, I think, is the wrong direction. SolarCity is in a much better position to quantify, hedge and manage this specific risk than any homeowner could be. Shedding risks like this is exactly how a PPA creates added value for homeowners. In light of this sort of risk, I would expect PPAs to become even more popular, not less. It's all well and good if a homeowner wants to buy there own system to save a few bucks, but then they expose themselves to all the risks of owning solar. PPAs hedge all these risks for the consumer, a hedge that many consumers are willing to pay for.�
1/1/2015
guest I see no reason why SCTY couldn't take the risk and sell it on. It's how insurance companies operate: buy customer's risk and then sell it on to a re-insurer. The risk has to be priced in.
A key problem for any large installer in Hawaii is that new installations of the grid-tied option are backed up due to saturation. No matter how many customers would be interested in grid-tie, they are limited by the slow speed of approvals. Not a problem for a small installer, but it is a problem for a large company.
Combine the increased uncertainty with the elimination of net metering, with backed-up installations, with fast-tracked "self-supply" (which isn't actually true self-supply in HI, which makes a huge difference to feasibility) and SolarCity wanting to do self-supply, and it's not surprising that they'd just stop even trying to do grid-tie installations.�
1/1/2015
guest "Rive acknowledged that investors are concerned about the company�s access to capital and want to see that it�s able to take out short-term debt and replace it with longer-term loans. SolarCity is planning securitizations totaling about $600 million within the next six months that should reassure them, he said.
�Every time we�ve done securitization, we�ve been highly oversubscribed,� he said. �Expect to see a lot more over the next four to five months. We have a large backlog.�
SolarCity CEO Says He Wishes Strategy Pitched Differently - Bloomberg Business
�
1/1/2015
guest Ha, I had to get educated on this. Here's what I found. SREC credits are like ZEV credits in the automotive space. In certain states, utilities are required to generate a certain fraction of their energy from solar. So SREC credits represent 1MWh of solar production. A utility can meet there obligation by credits from their own solar assets or they can buy credits from anyone else certified to produce SREC solar power. Many states like Pennsylvania have very low solar carve outs, the mandated percent solar. So it is fairly easy solar production to exceed the carve out, in which case the the price SREC credits will trade at goes to $0. Currently, prices are about $270 in New Jersey. SRECTrade | SREC Markets | New Jersey | NJ That is like making an extra 23c/kWh if you can sell credits in NJ. I would expect SolarCity is gobbling this up. However, this is likely to be a short term opportunity. As more solar gets installed in NJ, the price will drop to $0. So like ZEV credits for Tesla, SREC credits are nice for SolarCity in the short run to boost cashflow, but it won't last.�
1/1/2015
guest Asking in a friendly manner. Can you please prove that bolded assertion? or is that something you are assuming?�
1/1/2015
guest No actuaries available to price this risk. Will HECO be paying 5 cents or 50 cents in 2028?�
1/1/2015
guest Who is selling/leasing/ppa-ing Hawaii residential solar right now in any numbers that you know of? This is a transition period now, no one quite knows what the sales pitch is especially with a pending injunction on the PUC decision at the moment. So everyone is in an effective hold period.
by the way, they are still installing all contracts before the net metering decision, so instslls are continuing in q4 right now.
To add, Solarcity has been taking reservations for off grid option since May, so it might be interesting to see that installation backlog number for 2016. I assume it is small but this is really another wait and see since we are in a pending injunction period. However, back in May, Solarcity stated demand for solar+bat package was greater then any time in company history selling just solar, so we could see a surprising backlog number if ever revealed by Solarcity. 2016 should be very interesting for this metric. Gigafactory output will be key driver of meeting demand and reducing backlog. Tempering sales will actually be necessary until production ramps(if ever) to potential demand levels.
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IIRC, Lyndon said this(last statement) in q2 conference call.
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Sbenson, any comments on this?�
1/1/2015
guest That's very uninspiring. Why wait 4 to 5 months? The last one was done in August. So the next one is 7 to 8 months away from that. Didn't they say they will do it every quarter not too long ago?
"SolarCity is planning" doesn't directly translate to it being a done deal. Sentiment in the financial industry can change overnight, if not in a heart beat.
Promising something over the next "4 to 5 months" says nothing at best. At worst it says that they are unable to do it for a while.�
1/1/2015
guest Hi,
I am thinking of making my first buy in the company. I saw your table with the evolution and extrapolation of net retained value a couple of pages ago SBenson and I think the following
NRV per share, if you dont account for the extensions is 22$ per share and rose about 3.5% in last "horrendous" quarter.
This will be paid out in the next twenty years with and actually most of it earlier since it also comprises commitments made four years ago, which only have 16 years to go.
so this means essentially that if the company is
1) priced at a P/E of 20
2)fires everyone and stops all operations except for the inning of the contracts. The company should be valued slightly in excess of 22$ per share.
I do have two questions,
1) The renewal numbers seem small compared to the gross retained value. Shouldnt this be about 30% of the grv? Its basically the lease contracts extended by 10 years in 90% of the cases right?
2) Where does the huge difference between gross retained value and the 8.9 contracted customer payments come from?
kind regards�
1/1/2015
guest According to you customers will be defaulting in droves when market prices drop. How is this different?
And, have you adjusted your position given that you now understand that the self-supply option will be grid-tied?�
1/1/2015
guest the renewal is lease/ppa contracts after initial 20 year contract, renewed in two separate 5 year increments totaling in 30 years. At least the initial five year renewal contract will be 90% of prior contact $/kWh rate. Solarcity shows investors the total value of each install at a 6% discount rate over this total 30 year shelf life under Solarcity management. That really what the retained value is all about.
Judgements on how many people will renew might vary, but Solarcity is showing what the full value of an install is over course of managed production.
Solarcity's estimation is that most will renew. The value proposition is compelling enough for a customer to continue service at at least 90% the prior rate. If at that 20 year mark they need additional energy to meet consumer needs, Solarcity will also add additional capacity to current installation. Again, solarcity's stance is most if not all consumers will renew. I Personally believe 20 years from now Solarcity will have one of the most advanced systems on the market, and thus, create a compelling offer to upgrade creating another long term contract at higher premiums, so to me it actually is a notable probability they may increase retained value at the 20 year mark. But to each his/her own.
Current contracts are grandfathered at current net metering credit rate at time of contract, so net metering rates are "locked" under terms of the contract. As such, so are all future contracts under future net metering regimes. Grandfather has a very strong legal precedent nationwide. So, once 20 year contract signed and installed, 20 year rates are secured.
gross retained value is after tax equity partners are paid. If I recall correctly his is usually after 7 years of contracted payments on tax equity funded projects.�
1/1/2015
guest Thanks jhm, I appreciate the details. So I understand that SolarCity can sell the SRECs whenever they think is most beneficial, but they don't really rely on that cash.
So, say I have SC panels on my roof, and produce 20 kwh during the day, use 10 directly, and feed the rest to the grid. Then in the evening I need to use 10kwh from the grid. Does SC get any SRECs in this case? If they do, and sell the SRECs to someone else, doesn't that mean that they are selling me dirty electricity for the 10 kwh I need in the evening, even though my panels made that much energy earlier in the day?
P.S. I know this is off topic. I won't ask any more questions.�
1/1/2015
guest
It is happening within the next four to five months, so this means it could start at anytime they've sufficiently packaged the offering, so tomorrow, this week, next month, whenever they're ready.
so between now and feb/march, Solarcity is going to offer $600 million in multiple ABS'. That's the message I got from it.
I guess those of us invested will have to see if this happens, but precedent of four prior oversubscribed offerings has supported the result that they will.�
1/1/2015
guest The idea that renewals have any value themselves is kind of silly if you ask me. 20 years down the line the leverage SCTY will have with their existing customer base will be infinitely more valuable as they start selling battery backup, micro-grid setups, etc. It'll much more likely be a different "product" than a straight renewal based on net metering. Those panels may stay and be a part of the "new product", but things will be vastly different by then. Imagine you're projecting the federal budget 20 years out in 1926, you would have missed....by a lot.
That being said, the value of the 20 year happy relationship is going to be astronomically more valuable than the idea of a customer renewing a PPA for a few years. In ten years when grid prices are 40% higher due to solar's impact on the grid profit model, people will be loving life paying these PPA rates. After 20 happy years you sell them whatever solar/storage solution makes sense at that point and SCTY is the trusted premium provider who can command premium prices that people are perfectly happy to pay.
I'm not saying we(TSLA Investor Message Board members) won't all simply buy cheap panels and handle it ourselves, I just don't think the average fellow will want to touch any of these details now or 20 years down the line. SCTY is out front and likely plans to stay they way through all iterations of solar/storage.�
1/1/2015
guest i agree with the idea Solarcity shall offer a compelling new product that may sway renewing customers to "upgrade." I also think if given a choice between paying more for upgrade or sticking with the older system that produces cheaper electricity, there is a strong value proposition in just sticking with renewal as well. Bottomline, Solarcity has a strong case of retaining renewing/upgrading customers.
However, this is somewhat not the point of Solarcity presenting retained value. The point is showing the total value of an installation over the total life of a system under Solarcity management.
The assumption of how many will actually renew is on us individual investors. I feel most if not all customers at the 20 year point will renew/upgrade. This belief is also what Solarcity believes, so that's pretty convent for me, isn't it.
Again, Solarcity is showing the total value of instslls under management with retained value metric(under 6% discount rate). We investors can speculate on what the renewal number might be, but we are given by Solarcity the total value for our calculations. From public statements, Solarcity sees most will renew.�
1/1/2015
guest I understand that you're upset because of the money you lost but I do not draw the same conclusions that you do. As I mentioned way up thread and I believe mule mentioned somewhere up through it as well it might actually be quicker for them to wait and install the self supply option than waiting for the extraordinarily long grid connection. Not to mention if they do roll out with battery soon that should be a huge net positive for the company.
As in this Hawaii issue that you feel is so detrimental to the company might actually be a huge positive. That being said if its two years until we have batteries then I'm wrong.
As a bull you may have overlooked some key items and had to positive a view, but I think you're biased has swiung to far in the other direction now.�
1/1/2015
guest http://www.bizjournals.com/pacific/news/2015/11/12/solar-pv-permits-on-oahu-rise-nearly-40-in-october.html
"That the statewide solar electric industry will take a sales and revenue hit due to the transition away from NEM is a given. The question will be how long and how deep that hit is�
1/1/2015
guest Agreed. I guess this is just the best and most logical way to illustrate the considerable residual value after this "20 year money fountain"(� ThetalkingMule 2015) contract is up.
I mean, in theory they could just sell the whole 20 year package again to the very same customer at the very same rate and both parties should be overjoyed with neither of them having to get off the couch. Now that's some renewal value!
Of course, nearly-free electricity may well be ubiquitous in 2036 and the money will be in some kind of awesome fuel cell tech as a "storage" for solar, who knows. Hopefully SCTY has their eye on that **** and is ready to pivot if needed.�
1/1/2015
guest I agree with this - things aren't as bad as you think, and they're not as good as you think. A company affiliated with Elon Musk has always had a positive reputation. As chairman, I would be incredibly surprised if SolarCity is selling a deceptive product. Elon's passion and end goal has been spoken and talked about a million times over on this site. I would be extremely surprised if his oversight over the company would ever allow any sort of malfeasance, which would directly impact the survival of his overall goal.�
1/1/2015
guest where ever the market goes, my indication is Solarcity will either lead it or be right there with others. Elon has already stated he does not see any other energy storage developments that can challenge tesla energy for a while so, my estimation is im Positioned well to witness the most effective commercial execution of innovate consumer energy products.�
1/1/2015
guest Elon doesn't run the shop. We shouldn't associate SolarCity with him too much.
Great vision. Poor execution.�
1/1/2015
guest That's the whole point of discussion, if everyone had a rosy outlook on this investment the conversation would be pointless.
Having so much knowledge of a company for months/years and then to suddenly shift to preaching doom and gloom smells a bit fishy to me, but this guy is putting some of the best numbers/arguments out there. If you think they're incorrect, refute them. As shareholders, we should be buying this guy lunches for doing half the work for us regardless of him being invested long, actively shorting or any other motivations.
I tend to look at things from a big picture, largest economic force wins, long-only perspective, what we're getting here is a how-is-this-company-going-to-make-money-next-year analysis from a worst case perspective. That may seem "negative" to some, but a lot of times worst case becomes reality at least temporarily.
I personally hope the folks at SCTY are reading this thread because they could stand to take some of the advice presented around clarity of accounting. It wouldn't surprise me if they are. This company is doing it right, we shouldn't be afraid to drill all the way down to reality even if it's unpalatable to the average near-term investor.
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Exactly, and the best part is that SolarCity isn't even positioned to be your "solar provider", they're your energy provider. Even if the storage tech changes in 10-20 years and Telsa is out of the game for some reason, that customer who's had a PPA for 12 years can just call up SCTY to design a micro-grid based around salt water batteries or Bloom Boxes or whatever they like.
Nothing's ever a certainty, I like the analogy of trying to pick the 4 winners of the 1200 car companies that existed at the turn of the century, but STCY has such a huge lead and today's Henry Ford is Chairman. What's not to like?�
1/1/2015
guest Elon is the tesla energy side of the Solarcity solar+storage package. His execution on the production of power walls/power packs is an integral part of the statrgic outlook. So, yes, his development of tesla and the Gigafactory is very important and can not be separated from the futur of Solarcity.
Solar+storage is the futur of Solarcity. California is maybe the one of the largest initial markets for Solarcity solar+storage products. As such, aggregation developments are important to track. Looks like November 30th is an important date because they announce contract winners. Solarcity might be in the mix, but I'm not sure.
How California is bringing DER aggregation to wholesale markets | Utility Dive
However below is the article on the 50 home pilot program to aggregate the solar+storage energy for firm demand response. Might be interesting to follow the outcome of this program in tandem with the first ever DER whole sale market auction in California. Again, November 30th they announce the selected winners.
SoCalEdison & SolarCity partner to study aggregated distributed resources | Utility Dive�
1/1/2015
guest Thanks Mule for the kind words. Appreciate it.�
1/1/2015
guest Not me. I have said repeatedly that SC accumulated contracts have significant value considering the high average FICO scores. SC customers will pay, or SC will have recourse to make them pay.
What is solarcity's product in a state with a grid-tied self supply option? The only thing proven to work for them are complex financial products that lock in their electricity costs over the time it takes to depreciate the installed system.
I'm sure the are working on an even more complex Complex Financial Product for Hawaii.�
1/1/2015
guest Understanding current dynamics - made simple
Understanding what's in store for SolarCity is quite straightforward actually.
Step-1) Take SolarCity's current economics
Step-2) Remove renewal portion (as it is NOT financ'able/bankable)
Step-3) Add in the impact of ITC drop
Step-4) Add in the cost savings
Step-5) Factor in the impact of Net-Metering scale back. Whether it is lower FIT or adding battery costs
Step-6) Is there still 20% profit margin left?
Answer: Yes - SolarCity can continue to operate in the state.
Answer: No - The contract is not bankable. Thus SolarCity will need to pull back from the state.
If we were to do this, each one of us will arrive at a different answer, because we will all use different numbers, data points and assumptions.
When I tried to foresee the future through this, it didn't look good and hence I pulled back. Infact it looked like SolarCity will be on the cusp just with ITC hit alone.
Do your own math. Come to your own conclusions.
Also note, even when the math works, there may be additional issues. Like electracity pointed out in case of Hawaii the FIT is not "gauranteed" for 20 years (the way NEM is). So this creates additional issues around financabilty/bankability.
The key question is: is SolarCity's business model bankable, post-nem, post-itc?
Because the entire business model is to take on debt to put the install, collect money over time, while paying back the debt. If you can't raise the debt upfront - it's game over! period. there are no two ways about this.
Careful in brushing aside PPA/Lease model saying they can always sell it in a different way or bank it in a different way. PPA/Lease *is* the core creativity that is foundation to this company, that created these many installs for so long. Switching into a new model won't happen overnight. It will be a very slow painful process.
Look at MyPower scheme. Lyndon predicted it will be half the sales within no time. But even after an year or so, it makes up 10 to 15% of sales.
The best, most cost effective way to get solar for any consumer is, get a loan if needed, then buy the system outright. SolarCity given it's very expensive business model (sales, admin etc.), can't compete with local guys in this specific model.
So SolarCity needs to create a different model which is somehow appealing to homeowners, yet one that is bankable.
The future is clouded. Very clouded. The stock price is pricing in this risk. Market is not irrational the way we might have thought (before knowing what the heck is going on).
There is a phase-2 to this post. Will post shortly. But will post a few thoughts on valuation first. Will pivot into that starting from one of jhm's posts (applogies upfront jhm). Also want to listen to any responses on this post before I do a phase-2.�
1/1/2015
guest Oh, please. This is a market risk, not an actuarial risk. The market risk can be hedged by shorting oil futures.
SolarCity could even write a swap contract directly with HECO as HECO already short in oil in precisely this way. With such a contract both entities hedge their risk. It's a win-win.�
1/1/2015
guest you don't accept assumptions on renewal, yet you accept assumptions on net metering changes? You can't find bankability on net metering scenarios. Also, as I've posted just a few minutes ago, you are completely ignoring solar+storage value which is looking very valuable to Solarcity and Solarcity customers in resulting cost/kWh. Why?
no matter how you break the pie, still has all the ingredients. Can't dismiss ramping solar+storage in Solarcity business model and value proposition if you are so concerned about the future viability of he company.
to add, Hawaii PUC has stated in the Hawaii article I linked earlier that if the current non net metering arrangement causes damage, they they will adjust. Doesn't sound like even in the most doomsday scenario Hawaii PUC is going to let solar industry go underwater.
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Sbenson, any thoughts on this? It's not going to go away anytime soon,so...�
1/1/2015
guest I (or for that matter market) would NOT price in "pilot projects" and "studies". Sorry.
When there is adequate proof that the model works, and there is visibility into revenue trajectory, that is when some future gets priced in. Not some pie in the sky.
For reference, have you looked at the Tesla threads? Veterans in the forum believe that Model X is NOT priced in adequately at this point. Model X is literally in the front door and still not priced in. Revenues from storage products are NOT priced in either. Consensus opinion is that once X and storage revenues start coming in, there will be a strong trajectory of stock price going up.
A phenomenal company like Tesla, with products literally at the front door, are not getting credit for them.
SolarCity can't get credit for a "pilot" project. Sorry.�
1/1/2015
guest Yes, and more.
There are lots of ways the renewal value can become immediate cashflow prior to 20 years out. For a prime example, anyone refinancing their mortgage would likely save money and reduce their tax bill by buying out their solar lease. How many families are not going to refinance over the next 20 years? The majority will.
And there are many ways for SolarCity to encourage prepayment. Any sort of upgrade is an opportunity to lock in more value.
Thus a substantial portion of the renewal value will be prepaid and realized by SolarCity within the next decade. That is why the renewal value is relevant to shareholders today and in the coming years. It's not just cash flow that we must wait 20 years to see. The value can be realized much sooner than that.�
1/1/2015
guest Youre really losing me now. We're taking about the future Solarcity and there business, not a day trade "priced in or not" stock. You continually say the future of the company is in peril, but yet you don't accept the future of where the company is going and in many respects is already there. Somehow you're going to this priced in and out arguement, which ironically, weakens you're argument even further because it isn't priced in to solarcity's stock(or tesla either).
Solarcity is is seeing aggressive success with demand logic already, Walmart expanded its order as a result. There is a growing list of companies installing demand logic right now. Solar+storage is not a concept, it is working right now. Kuaii is another real world example of Solarcity solar +storage. Now is the time residential storage is beginning to ramp up. Again, demand has been over the top, more demand then in company history selling solar only, so this is happening. It's not a far off idea, it is the future business model in he real world. The pilot program rolls directly into the real world whole sale market. Wash rinse repeat.
It can not be dismissed in modeling the future business success of Solarcity. To do so is missing a significant piece of the future value as an investment.
If you incorporate this in your down-beat projections, I might find that interesting. but until then, good luck with all your investing endevours.�
1/1/2015
guest The "future" that I have always been talking about is between - now and Q2 2017 -
That is where the risk is. That is what we all have been collectively talking about.
If you have/show proof that storage revenues for solarcity will dramatically go up in this period to put the company on a positive track and save it from abyss. That's great. Lets talk about it.
Per my estimation a "pilot" project today doesn't create that sort of revenue streams (or contracts of revenue streams that can be discounted back to current date) between now and Q2 2017 to save the day.
Hope that makes things clearer.
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Add to above: if SolarCity makes it out ok into 2017 Q2. I will be back buying a lot of shares.
As I clarified this morning, when someone asked my intentions, I said I am considering going long if a set conditions prevail. I am still sorting it out in my head.
I might very well miss out a swing back up as I wait for my 'conditions', but that's totally cool with me. I would rather miss out than stare into abyss. That's just me.
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The issue here was many people are confused as to what the fucc is going on.
I have a perspective. I'm just sharing it. You might have a different one. Please share it.
How do you explain current $25 price? Short manipulation?�
1/1/2015
guest I take exception to step 2. The customer cannot exercise the option not to renew until years 20 and 25. The customer is under obligation to prepay the renewal to get out of the lease at any other time. Moreover, the renewal option hold substantial value to the customer at the time they may exercise the option.
Furthermore growth opportunities extend into many more states and countries. Existing a poor performing market for any reason is not the end of SolarCity.
ITC will have systemwide impacts that are not anticipated in your analysis. For example, the utilities may escalate rates in response to a step down.
Furthermore, this analysis ignores the durable value of Silevo and Zep including the befit of have eposure to other non-installer parts of the solar supply chain.
You may also want to address SolarCity prospects to grow in the C&I segment. Such customers exist under substantially more complex utility rate plans and benefit enormously from adding batteries.�
1/1/2015
guest James, just to clarify, the question is NOT what value it has to the shareholder. The question is merely what part of the system is 'bankable'.
Can that renewal portion be financed? The simple answer to that very specific question is - no.
There is a reason why I said 20% margin in the last step. That is the "equity" that SolarCity needs to hold, while it mortgages the rest.
Forget about what value SolarCity will be creating for shareholders. That's a different topic.
For SolarCity to survive, the model needs to be bankable.�
1/1/2015
guest Cost of diesel could affect electricity prices
Cost of renewables could affect electricity prices
Incentives/disincentives could affect electricity prices
In 10 years HECO will probably use TOU pricing based on momentary cost.
There is no instrument to hedge a twenty year solarcity contract.
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Or they just need to sell the system and let the client finance the system. Partner with a lending institution to make a easy one stop sale for the customer. Solacity pre-qualifies. They know the prospect is credit worthy.
Why oh why don't they take this approach? There must be a reason.�
1/1/2015
guest Haha clever�
1/1/2015
guest I'm getting suckered into one more...
it it might be advisable to really understand the business model. Solarcity is in the business of selling electricity. Low cost electricity compared to the local utility. They are not looking to make revenue off the sale of storage. The revenue stream is not from selling storage.
Solarcity's revenue stream is from selling cheaper energy. Solar+storage is all about a cheaper cost/kWh for the consumer. That's the value proposition. That's sales pitch. That's the Bottomline.
Current contracts of solar+storage already have 50/50 sharing under the whole sale market aggregation rate plan. It's already in place. Solarcity solar+storage is meant to lower cost per kWh and that's what customers are buying into.
revenue is measured just like it is today, only instead of net metering, aggregation services revenue goes to cost of energy delivery by Solarcity which translates into cheaper retail electricity as well as healthy profit margins for Solarcity.
Like I said before again and again, this is a time of uncertainty and transition(net metering, ITC, aggregation, value of solar,etc.). Long term investors either weather the storm or sit it out until they are comfortable. Otherwise, traders run this from day to day until some kind of longer term financial modeling can be established.
Again, good luck with your investments.�
1/1/2015
guest The idea of some kind of short-term existential "risk" for SCTY is just laughable. They've been doubling every year with massive revenue, have pivoted to 40% growth to show profit, install costs have been cut in half and you want us to think there's a major threat somewhere in the net metering minutia of the mainland states? That's just not reality IMO.
The battle in PA for instance is whether there will be a 110% cap, 200% cap or no cap at all and we have essentially the same type of ridiculous legislature as Kentucky or Oklahoma. There's no stopping solar, it's far too simple of a technology and so far superior. SCTY has proven to be the "favorite" provider of solar energy. Cut some soft costs and start printing cash. What's the problem?
This portion of the thread will be a hoot in a year or so, just like the 2013 Tesla threads are a hoot right now.�
1/1/2015
guest For most of the year I had a lot of time on my hands in this thread was crickets. Now I'm insanely busy but I wish I had a few hours to go over and respond to a lot in this thread!
Benson what numbers were you using for the install cost in 2017 for Solar City�
1/1/2015
guest Agreed. I read this thread all day long at work and it's been quite interesting. Glad to have the discussion and I will continue to read and think about it, but the future is solar and right now SolarCity is still the #1 installer. It seems because of the uncertainty we are in a down pattern because people don't know what's going on. That's all. It will all settle out shortly. I was listening to some Frank on the way home from work and this song came on and gave me some peace
"That's life (that's life) that's what all people say
You're riding high in April, Shot down in May
But I know I'm gonna change their tune,
When I'm back on top, back on top in June
I said that's life (that's life) and as funny as it may seem
Some people get their kicks,
Steppin' on a dream
But I just can't let it, let it get me down..."
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What do they mean by "lackluster power use "? Meaning that as more people use more efficient products that use less energy along with more residential solar, the power consumption is going down while their is more gas to use?�
1/1/2015
guest Perhaps it is time to bring this out again: Cramer Manipulation - YouTube
LOL!!�
1/1/2015
guest Just watched the Town Hall. It was...disappointing. The information could have fit on a single slide of FAQ presentation. No new information, except that it sucked to grow up in Bombay without power.�
1/1/2015
guest New patent showed up today relating to installing solar on carports. Seems like a smart solution.
Solar Photovoltaic Module Clamping System (Solarcity)�
1/1/2015
guest Interesting to learn that the same Hawaiian PUC member that cut net metering, skipped the cue of thousands and got their solar permit approved days before the decision to cut net metering... Now they are currently under investigation for ethics violations... That's real good representation of utility oversight!
Dont know if anyone has seen this, but if this doesn't sell the case for man made global warming nothing will. Bloomberg report on NASA findings in clear plan comparison charts:
What's Really Warming the World? Climate deniers blame natural factors; NASA data proves otherwise
The case for supporting renewable growth is very clear. Solarcity has a very strong business case just in these data points alone. Also strong support for taxing emissions or incentivizing non emitting production capabilities such as solar (and storage). It is clear we all paying the price for someone else's Pollution costs.�
1/1/2015
guest I didn't hear the thing but I grew up in Bombay with far fewer power failures than here in the US.�
1/1/2015
guest I was not free to hear the Town Hall meeting. I was thinking there would be a way to play it afterwards but I can not find any link to listen to a recording of the meeting. Anyone have a link?�
1/1/2015
guest PR and positioning continues to be an issue for SCTY. Cut the silly commercials and put some resources into proper PR presentations.�
1/1/2015
guest SC Q4 results will probably be good. I've been trying to process what the good and bad news in the next year will do to the stock price. I think the market hasn't fully processed the understanding that PPA doesn't work without classic NEM. Yet I think it is likely that SCTY will meet guidance through 2016.�
1/1/2015
guest The first part is what I was trying to make in many number of posts. With data, with models, with step-by-step instructions. But as I keep looking I see more wrinkles to the story. You and I may be overlooking some negative aspects that can turn into surprising positives (potentially huge). Will post more with proper info and put it up for discussion.
What guidance are you referring to? MWs? Revenues? EPS? "cash flow positive"?�
1/1/2015
guest The idea that consumers will for some vague reason not be compensated for kWhs pumped into the grid is just a silly.�
1/1/2015
guest
i saw some of it. Lyndon did an introduction to the business and himself. Introduced a Solarcity rags to riches story of a low level sales rep rising to becoming a director of sales, and an emphasis of never giving up and building on the momentum of the grass roots efforts through things like the ambassador program and proactive support for solar in general. He said because of the size of Solarcity and the solar industry in general, solar is a significant agenda item across all local/federal climate change legislation and initiatives. He is also confident in California governor Jerry brown in supporting roof top solar as well as all renewable initiates in the state. He also mentioned New York governor cuomo as a significant renewable minded leader.
a few other key notes:
i saw a picture of silveo. It looks completely done from the outside. I imagine they are in full swing on finishing the inside and getting the factory tooled out and set up. It appears they are still on schedule which is outstanding in my ooinion.
Lyndon made it very clear that 100% of all home sales have had successful transfers of lease/ppa/loans. And he said they do an average of 20 transfers a day. Not only is there 100% success rates, he sees sellers getting better pricing on their homes. In fact, he noted some leasing solar right before a home sale in order to make the home value go up. He strongly rejected they myth that leasing and ppas are liability to home owners. Leases and ppas are assets.�
1/1/2015
guest You have thrown a curve ball into the whole argument. I don't even know where to begin...
Lets start with this: where do you think money comes from for SolarCity to do 40% more installs or any installs for that matter?
SolarCity bears the cost of doing the install upfront, remember? So, where does that money come from?�
1/1/2015
guest Low risk corporate bond demand is through the roof with low supply. Direct to investor bonds.
Edit: The idea that monied individuals and major institutions will not want to be involved in financing solar projects with the best borrowers in America might be the silliest of all!�
1/1/2015
guest Ok... can you get 100% mortgage on a home purchase? What's a reasonable/normal down payment expected?�
1/1/2015
guest How would he have any idea of the impact of attached PPA's on a home? How would he have data on potential buyers who walked away? How would he know when owners had to cut the price in negotiations?
Leased solar panels can complicate a home sale - LA Times
This only gets worse as solar gets ultra cheap in the next decade.�
1/1/2015
guest Generally 3-20%.
I'm starting to get concerned that you're not being entirely forthright with your opinions on SCTY. You've done some AMAZING research and are clearly an intelligent and logical thinker, but to pose some of these questions does not square with rational investment research. As I mentioned before, it doesn't matter to me either way since an assertion that can't be refuted is still a great conversation point.
In other words, I can't imagine that you honestly think down payment necessity will be a barrier to success for SCTY. Even with the ITC only at 10% and no state incentive, a $1.50 install cost continues to make the model a no-brainer for bond investors and customers. Some kind of small down payment could always be added and spread out over the first 6 months.�
1/1/2015
guest I would like to see some discussion about what would happen if SolarCity loses access or partial access to the bond market because of exogenous factors.�
1/1/2015
guest Deaccelerating growth in a high demand 2016 market should allow them to concentrate on higher margin sales. They should be able to improve all financial measures, although I have no idea if they will go cash flow positive late next year. With no ITC extension they may be reducing sales expense by Q3. Good individual sales people only need to have many real buyers to make their numbers.
Chanos will be proven right or wrong by how SC responds as states replace NEM 1.0.�
1/1/2015
guest It's actually much more likely to be the reverse. Buying cheap panels in 2022 is all well and good, but unless you're off grid your electric bill is still going to be rough due to increased retail rates.
You can't make the argument that solar is going to tank due to net metering erosion and then turn around and say a guy 10 years down the line will be on easy street with just cheap panels.
Unless you're saying there's batteries involved 10 years down the line?�
1/1/2015
guest Hey JHM, what's your current best guess BFPT for SCTY around Jan 2018 given the new slower growth strategy? I was planning on using profits to help pay for my Model 3 but now I'm thinking I might have to settle for a used Leaf for now, but possibly still buy a M3 down the road a bit if/when the stock recovers. I was saving up for my reserve amount in March (I'm obviously not rich) but I may forgo reserving and buy more SCTY now while it's down.
Edit - let me add, I understand the ITC step down, Fed interest rate hikes, and state by state feedin tarrif battles are all large unknowns at this point and none of us have a crystal ball. You seem like the smartest guy in the room numbers wise so I just wanted your take on things given whatever you think might happen. I specifically want to know when you think sp could get back up to about $100. I was hoping by start of M3 production but recent events could mean that gets pushed back a few years and that's fine, I just want to brace myself for that and arrange my finances accordingly.�
1/1/2015
guest Hey Mule, As you threw a curve ball, I am trying to bring the conversation back to a reasonable point to further the discussion. If you were to look at my post 3105 now it might make more sense.
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Foghat, Thanks for being patient. I overlooked the main point you are trying to make, as I was blinded by the -pilot- project terminology. My bad.
So if we were to adjust my simplified model, we would be adding an extra step in between, right?
Step-1) Take SolarCity's current economics
Step-2) Remove renewal portion (as it is NOT financ'able/bankable)
Step-3) Add in the impact of ITC drop
Step-4) Add in the cost savings
Step-5) Factor in the impact of Net-Metering scale back. Whether it is lower FIT or adding battery costs
Step-6) Add in any additional revenues or utility/state credits for added batteries
Step-7) Is there still 20% profit margin left?
Answer: Yes - SolarCity can continue to operate in the state. The model is bankable.
Answer: No - The contract is not bankable. Thus SolarCity will need to pull back from the state.
** Even with this, my original point remains. How do we measure or even guess this new step-6? Do we have any clues?�
1/1/2015
guest Anyone noticed that while calculating net retained value, which I have seen quoted as "cash coming to solarcity over the next thirty years" they include off course the contracts that have thirty year periods (or 20 years plus an expectation of renewals in the following ten years) minus their debt.
but then when you look at the debt profile, this is a lot shorter term probably around 10 years on average.
thoughts on this?�
1/1/2015
guest Thanks. If I may, what is your current position? Short, neutral, long? What conditions would you be looking to change positions (to go long, or further long, I presume)�
1/1/2015
guest That's all very well and good, but do "you honestly think down payment necessity will be a barrier to success for SCTY"?
...because that's what you implied in your post. When you don't answer and link to an unrelated post, that does not do much to calm my concerns about the forthright nature of your posting. There's simply no way down-payment requirements will be a concern here, I'd like some deeper detail around your concept that it might be.
You're poking holes in corporate communication of numbers and profit scheme logic and it's been a great exercise to challenge these notions. But when you appear unwilling to directly address questioning of your own logic, that's where I feel people might start to question your authenticity. Accentuate the bad, deflect on the good. How am I supposed to interpret that?�
1/1/2015
guest Lyndon has the facts on all home sales of his systems, which by solarcity's account is an average of 20 a day. I would say Solarcity is the closest to the data then anyone else possibly could.
Just read this article that came out today: Rooftop Solar Brings Higher Home Appraisals | Greentech Media
maybe since 70% of all installs are lease/ppa in the U.S., Lyndon has support for claims it appears.
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This is my point. You either believe solar+battery is a valuable tech to solarcity's business growth/success or you don't. Solarcity is at the forefront of the new energy system transition, they are going to be creating a new way to make money, so you either believe it or not. That's investing in Solarcity is to me. again, in this time of transition, uncertainty is not very model friendly, so I understand some having reservations about things. Great, enter when you feel comfortable. For me, I believe solar+storage how Solarcity is implementing it (along with tesla) is worth my dime and patience. I clearly see the writing on the wall and have made a long term investment. It's not just the business, but the entire approach to vertical integration and supply chain development within a 1% penetrated trillion dollar industry is a clear advantage, along with technical brain trust as well as founder continuity and long term mission oriented innovative culture. I feel this is a winning combination within an uncertain market environment. That to me is worth the short term risks of policy transition.�
1/1/2015
guest ok.. we are running fast on a huge misunderstanding.
Let me re-state my thesis while I answer your question.
- For SolarCity to survive their business model needs to be bankable.
- Bankable means SolarCity will be mortgaging the contracts, through various means like ABS, Solar Bonds on website, Collateralised bank loans etc.
- SolarCity can NOT put the entire contract up for a loan. It needs to hold some portion of it (Equity) while it mortgages the rest.
- I estimated (or speculated) that will be 20%
- So in effect it needs to have 20% profit margin on an all-in costs basis
- If it doesn't, where would that 20% come from?
- In short run, it could come from mortgaging the existing book, but in the long run (over 2 quarters) it is NOT sustainable
- And hence, the profit margin is directly related to bankability
Hope that makes sense.�
1/1/2015
guest Solarcity needs to to not run out of cash for operations. They don't have to finance all of each contract because they have a profit margin. They probably need to finance 3/4 of each contract, which is where the 20% comes from.
That's why understanding the true profitability of the average sale each quarter is critical. If they are truly selling profitable business to creditworthy customers, then financing should not be a problem.
The beauty of complex financial products is twofold: It distorts the buyer's evaluation of product value, and it makes understanding financial statements difficult.�
1/1/2015
guest Install costs vs. contract value is a vast chasm of cash, so what's the problem? Do you honestly think whatever derivative product comprised of 20 years of people paying grid rates to SCTY + net metering + SREC value is not far far far far far greater than the total install costs plus all overhead including financing?
SCTY has their cash ready to rock up front via low cost bonds that have wide appeal. What you're saying is calling into question the viability of the entire model, not even necessarily that it will be profitable. If it was bankable a year ago when install costs were 12.3% higher, why would it not be bankable a year from now when install costs are down another 5-10% and other soft costs are cut by half or more and the market is many times larger?
I just don't see a viable concern there. Or certainly not a concern specific to SCTY or solar in general.
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Hence the communications issues. It's a tough story to explain, but it's very easy for me to understand the level of skepticism in light of the communications/education gap at SCTY. Lyndon apparently addressed this yesterday, I guess he's reading this board after all.
(For the record, I'm not a fan of this public mea culpa either. At the end of the day this is 90% the result of short disinformation.)
I'm fairly convinced there's nothing to hide, so more transparency would be a net positive. Some of the hesitancy may come from the brokerage mentality that this business model has. You're obviously going to be hesitant to share too much detail when you're technically charging people vastly different amounts for the same product. I think the consumer can handle it though, especially now that install costs are so much lower and it doesn't feel like you're paying for the privilege of making future installs cheaper.�
1/1/2015
guest
They have $372mln in cash, with $669mln in ready to abs assets right now. With somewhere around 1.25Gws coming in 2016 to abs/aggregate, they are looking at the billion mark in cash going into 2017. This also includes approx. 50% deceleration in hiring and sales growth savings and a "meaningful reduction in cost targets" which leads to dramatic improvements in quarterly profitability. Not to mention the 1.25Gws worth of assets for abs offerings next year...
so, a billion in the bank with dramatically less need for financing installations at 1.25Gws levels... All January 1st 2017 post ITC.
Solarcity has investment grade ratings by the most reputable rating agencies in the country. It has received 99.4% of all payments due over the course of its history and each of its offerings have been well oversubscribed.
Net metering contracts are grandfathered for term of each contract.
lots of glaring evidence on solarcity's ability to finance its operations post ITC.
Im actually looking at the problems facing sun run potentially since they not even close to solacity's cost structure. I could see Solarcity absorbing many of their employees as 2017 approaches... Not sure if a aquistion is in the cards, but for the right price...�
1/1/2015
guest They have $327 million in cash plus the $566 million that they raised in October.�
1/1/2015
guest Why distributed batteries beat utility batteries on cost
Utilities think that they can cut network costs and save ratepayers money by building utility batteries at a cost of $3000/kW. Let that price sink in a moment.
Let's try to back into this. A 100 kWh Powerpack costs $25k and can output 25 kW. This puts the price of the battery at $1000/kW. But on a utility application the cost of siting the battery and adding inverters and other balance of system costs add another $1000/kW. Finally the installer needs to gross 20% to 35%. So the price tag to the utility comes to $2500 to $3000 per kW. Now the regulated utility is limited to making no more than a 10% profit on assets, so naturally they prefer higher asset values, and they go with $3000/kW fully installed cost. Now again because this is a regulated utility it can provide financing at 10%. The duration of a 10 year annuity at 10% discount is 6.76 years. So the annual cost of this kW comes to $443.79 = 3000/6.76. But wait! That's not all the utility still gets to make it's 10% profit margin, so the retail cost ratepayers is $493 = 443.79/.90 per year. According to the utility business model all ratepayers are morally obligated to pay their fair share of $493/kW/year.
Amazingly, utility batteries at this price will actually reduce utility costs and ratepayers will benefit. I actually believe that is true. Not because $493/kW/year is a super retail price for storage, but because everything in the grid is marked up like this and batteries really do make the grid more efficient. Moreover considering that batteries both charge and discharge at this rate, the flexibility is double. So paying $493 is comparable to $20/kW/month in monthly demand charges times 2, or $480. This is the going rate for my utility.
But what if a commercial ratepayer were to install their own Powerpacks along with their own solar system. The battery still costs $1000/kW, but siting, inverter and BoS is pretty much all included in the solar system. So the incremental cost just depends on the mark up of the installer. Naturally, this commercial ratepayer wants to limit their costs as much as possible because they do not profit from inflating energy assets. So the go with an installer that only marks this incremental component up 20%. The installed cost per kW is just $1250. Suppose they finance this at 6% over 10 year. This loan has duration 7.80 year, whence their annual payment is just $160/kW/year = $1250/7.80. Moreover, this business gets to use this battery for free as long as it lasts beyond 10 years. But wait! There's more. While the ITC is at 30% and this is a component of a solar system, the net cost is $112/kW/year.
So we see that the utility retails a kW of storage for $483 per year, while a commercial ratepayer can install and finance directly at $112 net of ITC or $160 excluding ITC. The kW of storage may save the ratepayer as much as $240 in demand charges alone. So clearly this is the better deal for the commercial ratepayer. But what about the rest of us? Would we rather pay our "fair share" of $493 from the utility or $112 to $160 from distributed storage? It seems pretty obvious to me. The utility model is broken.�
1/1/2015
guest Don't know that it was mentioned in either. I picked it up because a post earlier in the thread linked to it and said that SolarCity's bonds were offering 11%.
Bonds Detail
I have heard that some investment banks have had troubles placing takeover bonds recently, so I am interested in hearing more about what would happen if SolarCity lost bond market access.�
1/1/2015
guest From the shareholder letter, they have $372 million in cash, plus:
"We currently have solar assets totaling $669M in our Financing Receivables eligible to move into
aggregation and/or ABS facilities over the next few quarters."�
1/1/2015
guest Well not so much under aggregation model. Firm power provided just for peak demand alone saves the need to build out peaked nat gas plants that take many years to get on line and contributing to the grid. DER aggregation is quicker more resilient source of firm power on demand. Utilities will be forced to adapt as this is already being proved out in California as I write this. The compensation for whole sale firm power is shared with the customer of solarcity's energy. Solarcity is the aggregator of these targeted assets for firm power distributed the compensation(like net metering credits) to its customers which lowers their retail cost per kWh.
supports the transition to grid as service.
if some people actually think about this for a minute, the light bulb moment might happen...
If a utility is needing to respond to a spike in demand somewhere on the grid, is it easier to fire up a peaker plant in some far off location or is easier to call up power at or near the demand from an array of distributed batteries at or near the area of need? Which is more efficient use of capital resources? A billion dollar peaker plant used 3 to 4 times a year or minimal to no capital investment in paying for access to firm power at or near the place of demand 3 or 4 times a year? things just can't get more obvious to me.
its Solarcity as Apple Music monthly subscription fee to access music catalogue... Utilities pay a monthly fee for access to power on demand when they need it. No need to buy whole albums all at once individually when you can pay less per month for all the music you need.�
1/1/2015
guest
Hellooooo subprime:
"SolarCity Corporation (NASDAQ:SCTY) [Detail Analytic Report] reported that it wants to lower the credit score that homeowners need to qualify for its systems. Lyndon Rive, Chief Executive Officer of SolarCity stated that the firm may lower the FICO score requirement for customers to less than 650 in two quarters. The average score for SolarCity customers is 750. Rive added today, their floor is 650,he still don�t like that floor."
Avon Products Inc. (NYSE:AVP) Falls Down to Knees on Dividend Slicing View- Amedica Corporation (NASDAQ:AMDA), SolarCity Corporation (NASDAQ:SCTY) | Streetwise Report�
1/1/2015
guest Right because you know... buying a house is the same as getting a Solar Panel System installed.�
1/1/2015
guest Right. The economics dictate that utilities will have to adopt DER aggregation. That is how the utilities deliver the benefits of storage at lowest cost. The bulk of batteries are sited at lowest cost and greatest benefit at the point of consumption. Aggregation assures that the benefits of distributed batteries are made available to all ratepayers, not just those who physically have the batteries.
This turns the whole net metering debate on its head. True or not, the utilities have maintained that distributed solar shifts costs to other ratepayers, and they even buttress their contention by arguing that residential solar is more expensive to install than utility solar. But with batteries it is just the opposite. Distributed batteries are cheaper to install and finance than utility batteries, and they reduce total network cost most when they are aggregated well. So the refusal of utilities to aggregate distributed batteries would in fact impose high costs on all ratepayers than would be obtained under aggregation or utility ownership of distributed batteries.
So if batteries flip the issues regarding distributed solar, what should we make of dispatchable distributed solar, i.e., solar plus storage plus aggregation? In this light, NEM is bad policy because it offers no incentive to add batteries or aggregation. If may have made sense prior to the the Gigafactory, but it will make increasingly less sense post-Gigafactory. None of the NEM 2.0 proposals make any provision for dispatchable distributed batteries. So NEM 2.0 will be obsolete by the time it is implemented. It seems that it may be best to force utilities to continue NEM as is, with the provision that they can innovate alternative schemes for compensating batteries that customers can voluntarily opt into. Basically if they want to avoid NEM, they need to reward batteries. The basic argument here is that it costs less to induce solar customers to get batteries and provide grid services than for the utility to operate centralized battery banks to firm up NEM. The value of distributed solar goes way up when it is made dispatchable. So that is the economic way out for the utilities. The answer to NEM is not to make distributed solar more costly to its owners, but to make dispatchable solar more valuable to all ratepayers. It is in the economic interest of all ratepayers to pay to keep dispatchable solar on the grid. The tables are turned.�
1/1/2015
guest who pays the operational costs on a foreclosed house?
Does a solar system provide marketability to potential buyer of a foreclosed home?
What is the payment history of energy bill payments for subprime homeowners?
these questions and more are thoroughly vetted by rating agencies as well as Solarcity in committing to this segment of the market. Lyndon has already stated he will do nothing to jeopardize his investment grade ratings in entering this market segment.
im thinking they might possibly shorten the lease term(maybe 10-15 years), have smaller systems which create less financial risk exposure. In addition, there are new financial incentives to bring solar to low income communities so I assume these also reduce Solarcity risk exposure if foreclosure/non payment happens and make it attractive to accelerate penetration into this segment.
it supports the logic you can't have 100% rooftop solar penetration if a 20-30% can't have it on their roofs because of low income or lack of low cost credit access.�
1/1/2015
guest
The real interesting thing here is all Nem solar contracts are grandfathered... But... when the battery added to the solar system, net metering is replaced with aggregation compensation through Solarcity. Thus, every grandfathered system at that point no longer is under nem. Utilities no longer have to pay those retail rates to these 20 year contracts that they are saying is shifting too much cost.
So, net metering naturally goes away as installs solar+storage grow. It's the market system actually working. As a result, the utilities take that long term payment schedule off their books, replace it with demand response which saves money on peaker plant deployment as well as accelerates achievement of epa carbon reduction regulation as well as state renewable goals.
In effect, maintaining net metering at retail actually accelerates the end of net metering and catapults utilities toward grid modernization within the new grid a service model.�
1/1/2015
guest I agree. $1000 is a pretty good chunk of equity to offset the credit risks. Government incentive will help, and there may well be a positive role for GSE which guarantee many of these mortgages to play.
Protecting low income families from inflation in their power bills can improve payment of martgages. Financially distressed families tend to stop mortgage payments before stopping utility payments. So there would be motivation for mortgage lenders and GSEs to work with SolarCity on this. One option to consider is offering refinancing of the mortgage to include the solar system. Payments on the new mortgage would be even more secure, and in many cases a homeowner's creditworthiness and home value have increased since the time of origination. In such cases, refinancing could be a very beneficial move for the homeowner. Additionally, this approach circumvents the need for SolarCity to provide solar financing. Still there may be role for tax equity financing, so a clever mortgage lender could offer a hybrid solar mortgage that utilizes tax equity financing in conjunction with a traditional mortgage. There are lots of options here. So I'd love to see SolarCity work closely with mortgage lenders.
Additionally, lowering the FICO score threshold will improve the marketing and sales cost per Watt. Whenever SolarCity has to deny a customer on credit, it leaves marketing and sales as a sunk cost with no benefit. I suspect this may be a primary motivation here. It is costly to turn away business.�
1/1/2015
guest The prospicience of The Chanos:
Selling a complex financial product to subprime customers.
But the subprime aspect should be fine as long as it is priced into the product. The subprime move and the reduced guidance does suggest they are facing increased customer resistance. Moving to a customer group that is less skillful with their personal finances should be just the ticket.�
1/1/2015
guest Grasping at straws today. This is been a great exercise the last couple weeks.�
1/1/2015
guest Foghat - Forgive my lack of knowledge on this, as I have been following this thread for some time, but not posting, and some of the statements on hear seem to rely on some "institutional knowledge" that I don't have.
First, you refer to all the net metering contracts being "grandfathered". I understand the concept, but in practical use to the consumer, what does that really mean? Once the utility installs a net metering device, is that meter now stuck forever? Can they never remove it? With permitting regulations, grandfathering prevents owners of existing facilities having to upgrade every time the standards change. However, when a utility permits someone to utilize a particular service, are they required to continue providing that service forever? It seems that it would vary by jurisdiction, but I don't know.
Second, if SCTY expands solar+battery installs, then how does that catapult utilities to grid modernization? Aren't they getting less income from their grid, so therefore less incentive to put more capital into an asset that is returning less all the time? Again, I assume I am missing something that will make it obvious.�
1/1/2015
guest That's right. Imagine SolarCity approaching a utility saying, "Hey, we've got 50,000 NEM customers in common with 250MW of solar. We'd like to install 100MW of Powerwalls for 400MW of storage all aggregated for grid dispatch. How can we make this happen?"
Such a deal would be worth several new peak power plants plus off load the obligation of NEM.
The cool thing for SolarCity investors is that such a deal would leverage the existing customer base to add business and long term cashflow. This is incremental to NRV and would have minimal sales cost. Most customers would likely be delighted to participate because it gives them backup power at little to no cost.
This is one way that SolarCity can create incremental value without installing more panels. We simply do not know the details of the new strategy. It is possible that SolarCity could pull this sort of thing off in 2016 and it would be worth installing fewer MW solar to do it. From an ITC perspective, it would be very good to do this in 2016 before the stepdown. I think the main consideration here is how much Gigafactory output they can get their hands on.
Edit...
Taking the deal above a few steps further. It seems it could be worth around $2/W for the utility. At least, $1/W is in line with capex for a new peaker, but this deal offers more flexibility and offset NEM obligation wich I figure is is around $150 million for 250MW solar. So in the ball park of $2/W, $200M total, is $500/kWh of storage. A mix of 7kWh and 10kWh Powerpacks can keep the average battery cost under $400/kWh. So the total installed cost can be likely remain under $500/kWh. Maybe customers kick in a little extra for there choice of system. At a minimum revenue equals cost, and SolarCity pockets the ITC value, netting about $60M.�
1/1/2015
guest Oh yeah, one more thing, going along with the whole "grandpappy" thing and people paying their utility bills. With a SCTY PPA contract, can a consumer no longer bypass their solar system and connect to the grid? Admittedly unlikely hypothetical, but what if grid rates drop below the PPA rate? Could someone default with SCTY and just go back to paying their utility bill?
Also, is SCTY bound by the regulations in many states that prevent utilities from being shut off during cold weather etc? I have heard that some individuals will abuse those rules and quite paying their electricity/gas bills once the weather turns cold, because they can't be turned off. Just a question?�
1/1/2015
guest You forgetting the plan already in place: SC customers buy the 10kwh powerwall. They use it for backup, and SC occasionally uses it to sell power at peak rates.
It would never be economically viable for SC to install powerwalls on their dime at customer sites.�
1/1/2015
guest This is *precisely* the point. Very well said!
You have to look at the operating level and include all-in costs, no ifs, no buts, everything needs to be included. Every penny that is going out whether accounted or not.
You don't get that from GAAP statements, nor from their gimmicky slide decks.
Interestingly there is a good metric to track this - Incremental NNRV/Watt.
Incremental means quarter-over-quarter
NRV already factors out all costs, now matter how they happen
NNRV takes out the renewal
Divide by bookings (because that's what RV is based on)
Gives you a precise operating level profitability as it stands today.
This is a very useful metric to understand the survivability of the Business model.
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And more importantly we need to model or figure out what happens to this "true profitability of the average sale each quarter" (which I compute as Inc NNRV/Watt) when
- Published cost savings happen
- Some of the unaccounted leaks are tamed
- ITC steps down
- NEM goes down
- Batteries come up
My personal view is it's impossibly hard to model this. And hence I should just watch it.
I need to figure out what level 'Inc NNRV/Watt' should be at a minimum pre-ITC-step-down for a healthy post-ITC-step-down level.
If SolarCity is not able to converge to the needed number as quarters go by, it is game over!
I hate to say this but you are one of the few people here who doesn't have wool all over the eyes. You really get it. I should have listened to you more patiently early on.�
1/1/2015
guest Again all, forgive my lack of knowledge, as I'm just a small time investor who loves alternative energy in general, but still trying to figure this company out.
So what exactly is SCTY's "secret sauce?" I understand they are way out front in terms of size, but in the grand scheme of things, they are still the big player in what has so far been a very small pond (compared the BIG pond of all US electrical utility customers). What do they bring to the table that is unique? I understand they are doing a new type of financing, but is there anything that prevents anyone else from doing the same model? For long term value, it seems to me to matter more what keeps them on top in five years more than how cash flow positive they might be next year. Is there something they do that can't be replicated by someone else? In particular, if it really makes that much sense, why wouldn't utilities just adapt the same model?�
1/1/2015
guest grandfathering the net metering rates that applied at time of contract. So, if net metering changes from retail rate to less then retail rate, grandfathered systems still get retail rate. And this applies if the net metering rate goes down again. For the life of the contract they get that retail rate.
the incentive for a Solarcity customer to add storage has many benefits for them as consumer:back up, communication with thermostats, dishwashers, air conditioners, connected home efficiencies, etc... As well as a 50/50 aggregation share which all translates into a lower cost per kWh then they are paying right now. The value proposition is competing for a consumer. The demand will be robust given basically no saturation of the market, a very big trillion dollar market. Now, the utilities have incentives to use aggregated storage for demand response. The more solar+storage homes, the greater demand response capability. In addition, eps and state goals will be met with actual retail rates going down. Win win all around. Now the rub is exactly as you say, the vast majority of utility model does not incentivize reducing capital costs because they get a cost plus compensation. However the purpose of oversight by commissions and other governing bodies is to protect consumers from the natural tendencies of monopolies as well as oversee there cost structure to provide reliable electricity to the consumer. The numbers start to become to obvious to support regulatory capture and the system is forced to change. This is the reality of solar+storage on the current system. It just makes sense on so many levels it's hard to spin and cover up to protect entrenched interests. As we are seeing now, maximum effort is being leveraged to spin it and delay, but he numbers don't behave as they want and everyone can see it.
Again, nem promotes the installation of solar. More solar, means greater scale, greater scale leads to cheaper solar and batteries, cheaper solar and batteries lead to cheaper retail electricity and accelerated transition to a renewable low carbon emitting grid system which meets state and federal emission goals sooner.
The irony is that actually maintaining net metering at retail prices, accelerates the elimination of nem completely. No 20 year grandfathered credits to have to pay. Gone forever as batteries are coupled with the solar systems old and new. As some utilities are trying to add fees and reduce net metering credit, they are only preventing the market from taking hold and eliminating net metering off their books in addition, decelerating distributed demand response increasing massive long term capital investments which will only continue retail price inflation on consumers and missing carbon emission mandates.
as the benefits mount, light is shined on the solution and utilities will be obligated to comply which is the catapult point since the market will respond swiftly and efficiently to produce the solar+storage solution at the cost per kWh consumers desire.
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thats right Lyndon said once they have the customer base, acquisition costs slim down to utility levels... Like less then $100/per customer... Imagine that, from 2000-3000 today to 100. That cost structure is wildly complelling and hard to deny given current centralized monoplistic system that has only increased retail prices since its inception.�
1/1/2015
guest So by "grandfather", you are referring to the rates upon which the PPA is made won't change, not that the utility is required to honor net metering commitments forever?
The reason I ask is that while much of your overall thesis regarding solar power makes some sense, I'm not seeing SCTY really being in that great of a position to make money off of it?
If the utilities are "catapulted" into solar, where is solar city, since the distributed power you are talking about still relies on much of the grid infrastructure that is owned and maintained by the utilities.�
1/1/2015
guest The only sales cost I envision with this deal is contacting existing customers to see if they would like to participate in the program getting a battery for very low cost.
Did you see the calculation I added on the value of such a program to the utility? See above post.�
1/1/2015
guest i did. I also think you have to add in fuel costs,maintenance, retirement costs for the life of the peaker plant. In addition, they only run it a handful of time, but that resource needs to always be at the ready, so what is the actual cost per unit of energy used on the grid.
also, storage has its own pot of incentives. They do not disappear with the ITC step down. If I recall correctly, Elon stated next year we will see around $1billion in tesla energ sales. Solarcity has already announced a solar+storage product for Hawaii, also they have been taking order for only new customers wanting to do solar+storage solution. Given solarcity saying they have received record interest in solar+storage more then at any time for solar only, In addition to proving out the aggregation capabilities/business model in California for grid connected systems, we could see a significant ramp in solar+storage deployment. If anyone is looking for a significant catalyst, this would be it.�
1/1/2015
guest What are the maintenance costs of the distributed array of solar panels and batteries spread across millions of homes? I'm sure it would be very low, as solar systems are pretty "hands-off," but there have to be some costs to trees falling on roofs, windstorms, leaking roofs requiring solar panel removal, batteries reaching the end of their lives, Lucy runs into the powerwall in the garage, etc. Is there any data out there to quantify any of that?�
1/1/2015
guest
Great questions. I'd be interested in the answers too. First, the utility does not have to worry about these issues, it's on Solarcity. However, Solarcity is insured for issues like natural disasters and catastrophic system failures.
the question on shelf life of the batteries is key. Currently, they are leases for 9 years and tesla warranty is for 10 years. So, maybe they are seeing it like their standard inverter policy where they model for 2 inverters per every 20 year contract.
overall, the cost per unit of energy has to be compelling enough to work in aggregation situations that utilities will see a cost advantage. Solarcity could negotiate with utilities like they do with individual customers: they could offer a 15-20% cost savings over peaker plant costs and develop margin off that. The competition. Would have to match that so, could actually for a major shift in the whole sale market itself compelling others to develop DER capabilities. This also frees many energy companies to enter traditionally locked out regions that they could never access before. Even traditional utiltiies could form independent companies around the DER model and go global where it was never possible under the centralized system.
Currently incentives accelerate that case today and with continued scale and demand, will be compelling without incentives in the not too distant future. Gigafactory is a significant piece here. Elon has stated that he sees significant cost savings at full production levels and those are expected in late 2017 through 2020 time frame.�
1/1/2015
guest Thanks for the insight. Like everyone, I have heard a ton about the gigafactory, but that opens some more questions for me. Based on the research I have done, it seems that Tesla is using existing Panasonic technology for their batteries. Although I understand their batteries are somewhat "special", it doesn't seem there are any step function type improvements in Tesla batteries. Given that Panasonic (and others) already produce large volumes of batteries using the most modern production techniques, what is Tesla planning to do to make such drastic reductions in battery cost? If you have the same raw material inputs using the same manufacturing technology to make what seems to be only a slightly "premium" product, how do you save so much money just by putting up a spectacularly huge building to hold your whole project in? I just haven't been able to find anything that differentiates them as far as being able to change how batteries are produced. Obviously there are a lot of big investors who have been sold on it, and I know they do their due diligence, but for a publicly traded company, where's the magic that explains how Tesla and SCTY are going to have these drastically reduced battery costs?�
1/1/2015
guest Have you seen this recent interview? Elon explains how the gigafactory will change the way the batteries are made along with technology improvements. Can't remember where in the interview he talks about it though.......
�
1/1/2015
guest This is really off topic, so just a quick reply [to Ichabod]here:
* Tesla has been sourcing raw materials with an eye to low transporation cost. That's one big deal when it comes to volume, I guess.
* Tesla has simplified the cell design with an eye to automated assembly. Helps, probably a lot.
* Tesla may have (at least in short series) gone over to Si instead of C electrode. This might mean more to efficiency than unit price.
* Tesla is moving a large part of manufacture in-house; gains specificity, control and some immunity to externalities.
* The Gigafactory will be self sufficient on energy and have as small an environmental footprint as they can make - e.g. processing water.
* Finally, the very scale is a huge factor for economy over all.
Elon has consistently said the GF should yield at least 30% better cost of batteries. I trust him to have thought this over!�
1/1/2015
guest tesla is the single largest consumer for lithium ion batteries in the world. They are intending to produce the same amount of li batteries that were made worldwide in 2013. This is just a massive massive scale. That scaled production enables significant cost savings. Elon noted that they are literally taking the raw materials directly from the mine in one end and coming out with compete packs on the other end. He's noted the multiple inefficiencies of out sourcing this scaled production and how the Gigafactory streams line much of it. He said if you followed the raw materials from mine to production in non Gigafactory production, it would've travels three times around the world. Not the case with the Gigafactory. So, big savings with scale. In addition, chemistries are constantly improved creating a pack that is higher energy density per kilogram of battery. So lighter weight and more energy per pack. This is also significant for powerwall since they still have to be transported to home(Solarcity designed the two man lift handles) as well as fit effectively on a load bearing wall. The smaller, lighter, the better. Also, tesla energy can optimize chemistries for storage application as opposed to automotive applications. With the additional data coming from Solarcity from the field they can further refine the product to further reduce costs and optimize performance.
Verticle integration extends across company lines between tesla and Solarcity, Gigafactory is no exception.
everything taken in consideration, Solarcity will have a low cost battery to integrate into their solar+storage package that is well ahead of the competition. And that because of the scaled production. Competitors will essentially have to do the same to compete.�
1/1/2015
guest Thanks Foghat and Lessmog -
I know this discussion belongs more on the gigafactory thread, so I won't belabor the point too much. It does have some relevance, since the long term value of SCTY seems to be somewhat reliant on their ability to source reduced cost batteries from cousin E.
I watched the video through all the discussion on the batteries. FYI, the good discussion starts around 29:50. Honestly, it didn't give me anything that would approach a "warm and fuzzy." Paraphrasing, Baron asks Elon how battery costs go from $250/kwh to $100/kwh. There is a whole lot of yammering about transportation, and such a huge building, and chemistry, and more "stuff." Finally, Elon gets very specific that he can't talk about numbers, but that $100 is in the general range of where they are aiming for for cost, and that they expect all the things he has talked about to reduce battery costs by 30%. Everyone seems really excited about that, but $250 - 30% is nowhere near $100. That, and as someone who has worked in a commodity business in the past, I know that transportation of bulk products like ores is actually quite cheap. We're talking like $10-$50/ton to cross the Pacific ocean, depending on where you are going and when. There is actually a lot of efficiency in non-vertically integrated industry, where ores can be stored at other people's ports while your plant is down, where ships or trains can backhaul other commodities because they are using multi-product transportation nodes, and where companies can specialize and get really good at their niche, rather than trying to do the whole thing themselves.
Good insights from both of you, but they still seem to rest very much on some version of, "Elon says so." I understand the guy gets a lot of respect around here, but I've learned to be skeptical. I'm not saying he's wrong, just that I wish there was more specificity. Show me your patent you just bought from that battery lab that reduces costs by 15%. Show me how buying processed ore from China is 10% more expensive than buying it from Mexico and paying Nevadans to process it. Maybe that information is out there, but I'm not finding it, and watching Elon explain it himself didn't make me feel any better about putting my money into SCTY based on their inside track on cheaper batteries.�
1/1/2015
guest Daniel Sparks on Twitter: says Elon bought $7.8 million worth of SCTY.�
1/1/2015
guest - SCTY has no exclusive deal on the Powerwall. Musk has said this explicitly.
- Gigafactory production goes to the model 3.
- Panasonic and other partners need to profit from the Gigafactory. ROI needs to be considered when considering Tesla's true cost per cell. There probably won't really be low cost sell coming out of the gigafactory until after full production (after 2020). The "cheap" cells for the model 3 will really be recapturing Tesla's capex in the gigafactory, regardless of what the cost accounting says.
It's all good, but there is no windfall here for SCTY.
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hopefully yesterday�
1/1/2015
guest Yesterday as well as today: NASDAQ | SEC Filing
307,152 shares - average cost basis $25.35. About 0.5% of the entire float.�
1/1/2015
guest 83,955 shares yesterday
223,197 shares today
per filing at link further down on twitter feed
dang too slow. why do I bother posting anything?�
1/1/2015
guest This must be why SCTY was up 3% while TSLA, AMZN, AAPL, NFLX were down 3-4% on macro issues today.�
1/1/2015
guest SEDG up 5.5%�
1/1/2015
guest no, baron was trying to get Elon announce $100 cost target. But as jb Straubel has also done, they do not disclose their internal cost number for competitive reasons. Not for lack of knowing.
Gigafactory production is already sold out through 2016. If you believe reservation numbers and interest, they have nearly 100k order requests already and that was within the first week of the May announcement. Demand is through the roof, so tesla has some good visibility for what they can sell at this scale. You can't put in a product order in China for 35Gwhs of storage and actually think you can have it done. It would never happen. At least not by 2018. Secondly, control over production at this scale is an advantage. Engineering and production can work closely together to implement changes in a much more efficient manner. Remember, they are going to produce more batteries the all the batteries produced on earth(2013). You can't just put in an order request for that and actually succeed at getting any of it at quality and precision and price for tesla branded product.
The amazing thing about this entire conversation around the Elon effect is that he has had high fidelity in his mission and execution from his pay pal days through today with tesla,spacex, and Solarcity as chairman. That is an earned accomplishment. He also has the most current data in areas where no one has nearly amount of access. Tell me whose commercialized lithium ion batteries for 200+ mile range as well as commercialized li batteries for storage application at these scales already? In addition who has executed on space transport as spacex has thus far?
It all connects and adds unto each other, and that is critical here. Paying attention to what Elon says is just as valid as paying attention to academic/think tank studies that you might hold in higher esteem. I look at elon's access to real world data on commercialized li batteries and see the most "in the know" person on this part of the industry.
To be sceptical is absolutely necessary, to poo poo what Elon says is reckless. As a critical thinker you must validate a reason why he would be wrong about his approach and strategy just as much as he would be right. Given the track record and evidence at hand, Elon is a good prognostication as to what is really happening/going to happen in terms of energy storage at scale in the global market place. At this scale, there is no one else offering a solution. So Elon appears to have knowledge gap advantage.
If you look at what he did with spacex, then you'll understand why he's doing it with batteries. Spacex rocket costs $60million. Outsource contracted ULA rockets around $400mln. Elon has demonstrated his methods have validity. Show me a comparison and I will listen.�
1/1/2015
guest Foghat - Thanks for the response. Please don't take my response as poo-pooing Elon, just saying that as an investor, he provided nothing that would be the basis for investing money in response to Baron's question. I realize that Baron has already invested a lot of money in these ventures, so I'm sure he has received more substantial answers, and probably been able to actually look over hard numbers. I don't have 100s of millions to hand over, so I can't demand that kind of access.
Either way, your responses don't really address the root of my question. You explain that there is no way for the market to supply such a huge quantity, and without a doubt, you are correct. It very well might be possible that building their own plant may be the lowest cost option to procure such a huge quantity. However, that doesn't make it the lowest cost in absolute terms. Let's say I decided I needed sixteen quadrillion #2 pencils at my house because I figured out a way to use them to achieve cold fusion. It very well might be cheapest to just build my own factory to turn trees and graphite from this area because of the lack of availability of such a huge quantity. Chinese labor will still be able to produce pencils at a lower cost than me, but because my purchase volume is so high, my entry into the market would completely distort all existing pencil markets and cause my cost to be lower by making my own.
The fact that their production is sold out through 2016 I think it somewhat meaningless as well, since they aren't really planning any significant production until 2017.
To cut to the chase, to critically analyze Elon, this is what I see:
Paypal - great accomplishment, although what role he really had I don't know. I also know that Paypal's success was built on Ebay's early success, so was it Elon's genius or just being the right guy with money at the right time? I don't know, and I certainly am not taking anything away from him. I'm just putting myself in the role of a rational investor trying to evaluate the situation.
Tesla - Seems like a great company, and they certainly have produced one really awesome car (S). However, although the future looks bright, it is certainly far from a fait accompli that it will ever make money. Again, I'm not saying it won't, but it hasn't turned a profit yet, so as an investor, I can't really extrapolate a "success" on this one.
SpaceX - Again, truly amazing to start a company from basically nothing and launch rockets into space. However, as a privately held company, there's not much that can be extracted, other than that they are still in business. They raised another 1 billion USD early this year, so apparently it isn't returning money hugely, but I don't know the details, so I don't know whether it is good or bad. Like Tesla, it's not a strike against, and it is certainly doing some good things, but as an investor, I can't draw any conclusions.
SCTY - The investment this thread is based on. Hasn't made any money yet, seems to have some good ideas, but I'm still looking for the hard evidence of what they have that nobody else does, other than Elon. I'm not poo pooing Elon, but he can't do everything, and even if he could, although he is clearly capable of some amazing feats, the only thing he has publicly made money on is PayPal.
You ask who else has commercialized these batteries for this range, etc. etc., and those are good questions. However, I'm not putting Elon on trial to decide who is the most visionary person in the alternative energy space. He wins that by a landslide. I'm just evaluating a company's potential to make money, and having Elon involved in no way guarantees that, at least based on performance so far. I'm not showing any comparisons, because there aren't any, and they would be irrelevant anyway. The more important question is not, "who else has offered a solution to provide batteries on this scale," but, "why has noone else even tried to do this?" Maybe others have looked at it and decided it won't work, so they didn't try.
I'm just pushing to understand deeper, not to tear anyone down or poo poo. This is a thread for discussing investment in SCTY, and that's what I'm trying to evaluate without getting caught up into any hype.�
1/1/2015
guest thanks for your reply. The numbers are big. We're taking about a trillion dollar industry here. Each cent Solarcity cuts from retail cost/kWh literally opens up 10's of billion market share for them. if Solarcity can develop a product such as solar+storage that can do this absent any ITC or other incentives, then tesla energy storage is a significant development to track. Elon is the center of low cost energy storage. Tesla's developments here are critical to Solarcity unlocking this near infinite market. It's really not a Elon vision, but an execution on cost reduction that's at hand here. Cost/kWh is the target, not Elon worship. If you think this will be achieved at scale, then Solarcity is worth multiples of current market cap. If not, then don't invest in them because this is what they are attempting.
Solarcity has already hit its 2017 install cost targets. Reducing sales and marketing by .30 cents and they are at the target cost to thrive post ITC. Residential Energy storage is coming on line in 2016 in scaling numbers. Solarcity is already proving out the aggregation model as I write this. Tesla is expanding pack production to Nevada as I write this. The Gigafactory starts production in 2016. The combination of commercially viable solar+storage package is coming together in scaling numbers in 2016. As far as I know Solarcity is the furthest along in reaching this market eventuality. The pieces are in place.
now is the policy transition to get there. Business modeling/projecting is difficult. So this is about what you believe is going to be the way things shake out. I think this shakes out in favor of Solarcity and tesla energy.�
1/1/2015
guest Musk is a private citizen taking cargo deliveries and soon people into space. And now we're poo pooing even this?
He's trying to take us to Mars for god's sake. What will impress you?�
1/1/2015
guest Sunrun Mixed Q3 Shines Light On Shadowed SunEdison SUNE RUN - Investors.com
This is good on SunRun. Q3 results have revenue up 47% y/y and getting quite close to operating in the black. The are on track for 2015 MW installed to hit 205 MW up 79% from 2014.
So it looks like they are keeping pace with SolarCity's growth and taking marketshare from the rest of the pack. But more significantly they are doing this while moving closer to profitability. Their business model is much less vertically integrated than SolarCity. They mostly focus on marketing, sales and finance. A portion of their installs, they do themselves, the rest is done by afflicted installers. This makes for a much less capital intensive business.
It's good to see SunRun do well. It does add some confidence to the market, especially for distributed solar installers who offer lease financing. It may well be part of the reason SCTY went up a bit yesterday.�
1/1/2015
guest i like sunrun. Their legal team is really contributing to the fight against hostile utilities. My only concern is their cost structure going into 2016. They are, in my opinion, well behind Solarcity in total cost per watt right now. That profit margin is going to get cut significantly come 6-9 months. They are going to have to cut something significant in order to stay afloat. is it sales team? Or every department in some way? Something will get cut, cause it's just too much of a cost cut to do in 6-9 months and continue growth. I also don't think a stock offering is in the cards either so tight sledding soon.
Im speculating Solarcity will have an opportunity to hire their trained employees which would also help cut acquisition costs at continued compounding growth.�
1/1/2015
guest Tax Equity Partners
Someone brought this up earlier but I couldn't find an answer.
At the end of the Q3 the "Estimated Nominal Contracted Payments Remaining" is $8.9 billion as per the shareholder letter.
While the "Gross Retained Value" is only $4.4 billion.
Looking into the definitions, the first metric only includes 20 years of contracted payments, while the second one is for 30 years.
Normalizing both to 20 years for better comparison we have:
> Estimated Nominal Contracted Payments Remaining: $8.9 billion
> Contracted Gross Retained Value: $3.3 billion
Looking into the definitions again, the only difference between these two is the distributions to Tax Equity "Partners", as far as I can find.
We also need to remove MyPower cashflows, of 546 mln, on both sides because Tax Equity Partners are not involved in those cashflows. Thus we have:
> Estimated Nominal Contracted Payments Remaining: $8.4 billion
> Contracted Gross Retained Value: $2.8 billion
While these partners contribute only 30% of equity and expect all returns to comeback within 5 to 8 years, why is it that they are getting a whopping 67% of the cash flows, while the company only gets 33% of cashflows?
I find this shocking. Am I missing something?�
1/1/2015
guest You say "cash flow", but how are you accounting for depreciation of the installed equipment?�
1/1/2015
guest I don't think you are necessarily missing anything, but you are making some assumptions as far as how they account for things.
Somewhat based on your work and looking at things on my own, I have determined that you can't really make a truly informed decision about the valuation of this company based on hard numbers. There are too many poorly defined terms. One can invest in this company based on trust in the people running the show, or not. They say their costs are coming down and are on track to be profitable even with the ITC expiration. At one year out from a reduction from 30% to 10% to not be profitable now looks scary to me. If you take their word for it, they'll be there. You seem skeptical, but there are a lot of very intelligent people on here who are taking them at their word.�
1/1/2015
guest profitable?�
1/1/2015
guest Maybe I'm not getting your drift, but yes, that was their whole point of curtailing growth next year, to be profitable more quickly. I didn't gather any details in really how that was going to happen, but as earlier, it just comes down to deciding if they are giant BSers or really do have a viable plan to get there.
- - - Updated - - -
I know they didn't claim actual "profit" next year, but they did claim "cash flow positive", which is obviously a requirement for eventual profitability.�
1/1/2015
guest 1) Solar City is focusing on reducing acquisition, installation, and panel costs.
2) Solar City's factory will be fully operational by the end of 2016.
3) Solar City is focusing on utility and large scale installations, and is not forgetting about its 1 million customer goal. Solar City is intentionally being conservative with its expectations for a period of time when there are likely to be a lot of changes to state and federal incentives.
4) Solar City is not leveraging its Tesla relationship, YET. This is a positive sign. Tesla customers receive a nominal discount if they sign with Solar City. I don't think Solar City customers receive a discount if they buy a Tesla. YET.
5) Solar City is one of the main players fighting to ensure that Solar Power is treated FAIRLY.
6) Especially with the energy mandates being put in place, at the state and federal level, why would any sane non financially motivated politician vote against legislation that supports Solar? Any "politically" or "financially" motivated opposition to clean energy will be met with many very angry constituents, many of whom are very politically involved.
7) If Solar City has a problem, the entire Solar industry has a problem, especially since there are laws in place that prevent the utilities from owning more than a certain percent of Solar assets. What sane politician would want to kill the tens of thousands of middle and upper class jobs the Solar industry is creating? There are currently around 200,000 people employed by the Solar Industry. This is almost twice the number of people currently employed by the coal industry.
In U.S., there are twice as many solar workers as coal miners - Fortune
I'll continue this post at a later time. This post is for those who choose to actually listen to facts, and is not for those who have made up their mind about Solar City, and ignore what is really going on. In my view, Solar City will either go bankrupt or will be extremely successful, will be a major player in the Solar industry, and is worth $50 billion.
On top of all of this, the events in Paris now have the world focused on Paris and on dealing with ISIS. Bombing oil fields controlled by ISIS will reduce supply, and will cause more people to demand a shift away from "big oil". Also the attack in Paris should make more people aware of the very important conference that is in a few weeks.�
1/1/2015
guest Koolaid guy,
I appreciate your optimism, but the reason SBenson and a very few others are skeptical is that too much is uncertain. Responses to your points above:
1)OK, good. Did they not care about these costs before? "Focus" doesn't necessarily accomplish anything if there is no actual plan for how to reduce those costs. I can focus on losing weight all I want, but if I don't know what about my lifestyle is going to change, nothing will happen.
2)Good. Related to 1), how does that benefit them? Are they the best solar component factory operators in the world, so it will lower their costs? Some other companies have been running factories like this for a decade or more, and they probably have gained some institutional knowledge about how the optimize it. I'm not saying that SCTY factory won't be low cost, but there is no guarantee.
3)Again, "focus" and "not forgetting" don't increase revenues or lower costs. They are wise to scale back optimism given the impending regulatory/incentive changes, but that again doesn't make them or investors more money.
4)Interesting, but given that both are at the very early stages of market penetration of "new" products, there isn't that much to gain from leveraging the two customer bases.
5)Like all in their space, they are lobbying actively to retain the favorable treatment they have been receiving. At this point, it's all political, so we'll see.
6)Politics - that could be its own thread. In some jurisdictions, you might be right. As a national issue, it might be different. It's politics, and in my opinion, nowhere near a slam dunk to go any particular direction.
7)Again, politics. Your job destruction in solar is another man's job creation. I'm not taking sides on that one, just saying it's no slam dunk, although you are right, if it's SCTY's problem, it's everyone's problem, at least to some extent.�
1/1/2015
guest Up until 2 or 3 years ago solar wasn't really considered an existential threat to the legacy power industry, but that's all changed. Solar is no longer projected to be the cheaper form of energy production, it actually is.
The days of methane and coal interests playing nice are behind us and the real discussion is just beginning. They've seen what happened in Germany when wind hit 8% and solar hit 5%, their entire profit structure broke down and they have no way out.
I would expect even more oil & gas stooges at the state legislature level nationwide and even more obstructionism as we move forward. These people have absolutely zero interest in jobs and will ratchet up the rhetoric to drown out the rational conversation.�
1/1/2015
guest Hey, don't you know - "The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive." - https://twitter.com/realdonaldtrump/status/265895292191248385�
1/1/2015
guest Even if we pretend Climate Change is a lie invented by Al Gore, (as some crazy republicans believe), every sane person should understand why it is essential to support clean energy until 100% of our Electricity is from clean energy sources, and to stop subsidizing dirty energy. Technically, the incentives for using Solar power barely qualify as subsidies. Any politician who doesn't support reducing dependency on dirty energy, or who thinks climate change is a hoax, should be given a 5 week mandatory vacation to one of the most polluted cities on Earth and should be prohibited from staying in a hotel with an air filter. There is only one CORRECT side to this "debate".�
1/1/2015
guest I am looking at the cash coming from the customer and how it is being divided up among different parties. Not sure how depreciation factors into it. Any ideas?�
1/1/2015
guest Solar = good doesn't seem to me to be an investment argument that supports a particular stock price for solarcity.
The current stock price seems supported by the solarcity balance sheet at the end of 2016. A higher than $30 stock price seems to need the support of future profitable business. ITC renewal and/or the success of the panel factory would create future profitable growth. But as I have said many times, I don't believe solarcity will be able to be competitive in a mature residential solar market.
I don't believe that solarcity has problems today as per SBenson's analysis. Solarcity's new sales have a wide variety of individual profitability. As long as they manage towards sales with good real margins they won't have problems. Essentially the ITC pays for most of solarcity's direct solar install costs.
Solarcity can waste much of the accumulated retained earnings by not sizing the company properly post ITC.�
1/1/2015
guest I got this back from Investor Relations:
�
1/1/2015
guest They are growing so cash out > cash in. Assuming adequate liquidity, all that matters is that they have true positive margins after financing and the time value of money is considered.�
1/1/2015
guest Nope, I never contended that SolarCity has problems "today". All my analysis was to only show that they look woefully unprepared for ITC stepdown, especially in the context of nem phase outs.
I have stayed consistent with my conclusions since the ER.
1) They are doing ok now. But they are not as profitable (even accounting for future cashflows) as they lead you to believe with EVC and other metrics
2) They will be at the cusp of a breakdown just with ITC step down
3) Post NEM policies can assure the death of Business model, even while other normal residential market (finance and pay upfront) survives
I still stand by these conclusions. I haven't seen anything material to change this perspective (yet).
Edit: Adding more below
In fact (unfortunately) you and I think remarkably similarly.
Even though the current stock price seems like a "value" given the current book, if things were to go sour wrt ITC and NEM the book will evaporate while executing the wind downs.
So the current stock price is not necessarily a value. It is a bet.�
1/1/2015
guest How is there not a decent similar industry to model this revenue/profit? SCTY has hardware and soft cost outlays on the front end and huge contracts on the back end, that's not a groundbreaking model.
They say they want to be "cash flow positive", but as long of they're growing at this rate they never would be, correct? I mean until growth settles down to 20% or so, how can you possibly overcome the upfront costs of all these new contracts?
Obviously not saying this is a bad thing. Rather, why is it a concern when the revenue based on retained value should be easy to illustrate?�
1/1/2015
guest Im just going to be blunt. And this has nothing to do with the environment. The only reason we've done anything in the southwest Asia is because of fossil fuel access and extraction. That business is dirty both physically and politically. The long and well known history of bad actions on behalf of many have put global security threats exactly where they are today. Terrorism is directly linked to weak or failed states with high concentrations of fossil fuels or proximity/access to them.
Fossil fuel is a scarce resource few have control over that depletes over time... Of course what is happening to today geopolitically is directly linked to it. If you can't acknowledge that then there is something seriously wrong and you need to take a step back for a bit.
If you believe in global security, what can reverse this trend? This also is painfully obvious and it's what most of us here argue every freakin day.
distrubuted renewable energy changes the equation big time. Imagine competition between installers globally for something once only a few royal families, business, and governments had access to. Imagine concentrations of wealth being rebalanced among many entrepreneurs, business owners, and employees that would compete for it and establish greater efficiencies and global innovation unlike anything we've seen. How can terrorism thrive in a Middle East where access to jobs and access to political participation are common place? This is how significant renewable distributed energy is to our global security. Renewable technology, specifically solar, does not inflate because of scarcity, it actually costs less as innovations occur in the technology. This reduction in energy costs reduced costs of all goods and services across the board. It prices items far more efficiently.
how does terrorism happen when fossil fuels no longer the mainstream energy source in these countries?
What at is the most significant long term security strategy for the United States in this light?
It is painfully clear and obvious as a nation we must support and not impead renewable market growth and acceleration. Our domestic policies do impact our national security. And we don't need to senselessly deplete our blood and treasure either. And if we do it with conviction, much of the global community's blood and treasure as well.�
1/1/2015
guest The level of disinformation with your posting has escalated beyond the point of being a useful exercise.
You want this poor fellow to believe that not only will the ITC step down to 10%, but also net metering will be phased out across the nation? Essentially you're implying not only that federal and state support for solar renewable energy will disappear after 2016, but grid operators will be allowed to steal residential solar energy production and sell it to their retail customers. You've gone from posting great numbers to painting pictures that no logical casual follower of solar would truly believe.
As I mentioned in a previous post, the stakes are going way up and the dollars to be gained and lost in both the solar industry and in those industries potentially neutered by the spread of solar is in the hundreds of billions. When a gamechanger appears on the scene and is given a large value, it's very easy to spread disinformation and make a few bucks in the ensuing panic.
I would ask which is the more likely scenario:
1) The ITC is stepped down to 10%, net metering in all it's forms is slowly eliminated and the billions of dollars in existing SCTY energy contracts are "wound down" improperly leaving all the remaining revenue uncollected. Or...
2) The ITC does whatever it does, net metering remains and is expanded in the short term as the grid slowly moves toward treating all kWh produced as wholesale energy and SCTY continues to sell and collect on these convenient contracts that are below grid cost.
?
The scenarios illustrated by SBenson over the last 3 weeks since he supposedly changed his position on SCTY would lead to the end of grid-tied solar in the US. If that's what you feel is likely to happen, then by all means base your investment decisions on that. I just don't see that as a very valid or sincerely developed argument.
Solar is the future and is still in it's infancy in the US. SCTY is out at the forefront and also happens to be the #1 installer in the US. What's the problem?�
1/1/2015
guest I think it's best to understand what growth means for Solarcity. They are still compounding growth at 40%. That means if they install 10 this year they will install 14 next year.
The other critical part is that this is additive. That 14 from this year is added to the 10 from last year, so now 24 people are paying monthly payments for 20 -30 years.
solarcity compounded growth could drop to 0% and they are still adding massively to the bottom line at these scales.
so if Solarcity does 1.25gws or 0% compounded growth in 2017 that would put them at 4.5gws going into 2018. Even at 0% compounded growth in 2018, they would still be around 1million customers goal. Also around $15bln gross retained value. $30bln in contracts. That if they drop 40% compounded growth to 0% too.�
1/1/2015
guest Exactly, there's almost nothing they could do to keep their 2018 NRV below $15B even if they stopped all door-to-door sales today and just put up a one page website. Hell, that might even be the better way to go now that costs are so low. I just don't see how people are missing this.
And they are not compounding at 40%, they are compounding at 80-90% and PLANNING to drop down to 40% based on them not buying as many "warm leads". I think this is a California company underestimating the demand for cheap hassle-free solar on the east coast. The value proposition is just not being articulated properly.�
1/1/2015
guest And thus, we come to the one glaring problem all investors and non investors should see: public relations/investor relations are weak.
This, to me, is all on Lyndon and Peter. They need to really hone the sales pitch themselves. The really need to invest in messaging to the average investors what exactly they are doing and how they see the future of Solarcity.
I think Lyndon needs to be more prepared on the media circuit. He needs to promote not defend. Don't let bags of douche Cory Johnson take over the narrative in interviews. Control your story/message. Come on tv to announce more things. He needs to do talks that give the future of distributed solar. He needs to get on hgtv and do remodeling shows. If he doesn't do it, have Solarcity reps do it. The power of hgtv is profound in the home market.
He needs to take the responsibility of being the face of Solarcity or hire someone to do it. I don't think conference call by committee is the most effective either. He needs to lead the conversation. If he can't answer a question, direct the CFO to fill in the blanks. I'm sorry, Lyndon, you're not just one of the gang, you are the CEO, at least give investors the perception you are the one leading the ship on these calls. Allowing the annoying investor relations guy to step in at will and take over the coversation is distracting. You direct him to speak, not the other way around. Start a Twitter account of your own. Starting commenting on big ideas for solar energy. Get every day people excited about its promise. Drop some hints for future announcements. Also, dispel rumors and myths about the business health.
Communication soothes the soul. Solarcity needs to be more on top of it here. Lyndon needs to lead more from the front in public. If that means delegating others tasks so be it. Your public participation pays dividends, especially during times of confusion and uncertainty.
if I had a persistent compliant as a long term investor, this would be it.�
1/1/2015
guest Onondaga County to get 10 percent of power from 31,000 solar panels | syracuse.com
�
1/1/2015
guest I agree that Lyndon hasn't grown as a communicator. He should have his major talking point well-honed, and deliver whenever possible.
In business interviews he just answers each question in a literal, narrow, and defensive manner.�
1/1/2015
guest Mule, You are not getting it, even though I explained it multiple times in multiple fashions. Please feel free to ignore me. No worries.�
1/1/2015
guest That is not a valid argument.�
1/1/2015
guest Lyndon just sent this to my email: Lyndons Town Hall Summary on Vimeo�
1/1/2015
guest In solarcity's own words: increasing customer acquisition costs. If scale really works, in the best solar market that will ever exist, why are customer acquisition costs rising?�
1/1/2015
guest Just to fully paint the picture.
I also said that IF the business model is not sustainable on a post-itc, post-nem basis, then financing will dry up even before reality comes into play.
My "speculation" is that once financiers see that the business model is not sustainable, they will balk at providing financing even for the worthy portion of the book, as they will now have to pricein the administrative costs/risks of executing these contracts if SolarCity were to go belly up. If financiers were to be not willing to take/price this risk, it creates an unfortunate self fulfilling prophecy. Thus it is extremely important that SolarCity gets it's act together and shows some solid progress on an all-in cost basis (not on the BS basis that the slide decks are presented).
The model needs to be sustainable and SolarCity needs to prove that it is.
Oh btw, in case you folks missed, the model is already called into question by the market:
- Bonds are trading at "distressed" levels, defined as 1000 basis points more than benchmark bonds. Effectively bond market is saying that there is a good chance the business will go belly up.
- Stock price is trading below the published NRV, close to NNRV. In other words, market is saying it's likely that the company will produce NO shareholder value henceforth.
If you don't think that the business model failure is even a remote possibility, you are delusional. The entire market priced it the other way.�
1/1/2015
guest The bond market is probably the biggest warning. The near junk current price is based solely on SC ability to repay in about two years. That alone makes SBenson's sale of a significant position at a loss the only prudent choice.
Presumably bond traders understand the financials and the NRV concept.�
1/1/2015
guest The expense they've poured into getting up to scale isn't a major concern to me as they're mostly a thing of the past. Paying these third party vendors for warm leads and knocking on single doors will seem silly in a couple years time, that's just how SCTY felt it was best to get their message across in an immature industry. I obviously disagree, but I'm not losing my mind over paying sales people in the very near term.
But the facts remain, solar has finally arrived at cheap in the US. If you want panels on your roof you probably have some decent local options that will install whatever you like and let you manage your power and deal with the utility as you see fit. If you don't want to do all that, SCTY has top of the line panels, a mostly scaled install operation, and a great model that takes the job and risk out of going solar and saves you money.
Nothing has changed except the cost to SCTY for installs. So what's the problem?�
1/1/2015
guest It's funny, I see that as a signal to buy. If you believe the market is always right, which is implied by your statement, you'd never buy or sell anything because everything is already valued exactly as it should be.�
1/1/2015
guest To further refine that point, if you look at the portfolio of bonds that are part of the ETF ticker JNK, the average yield is around 8%. SolarCity's bonds are trading at 11%. To boot these bonds have convertible option in them, if you remove the option value, the yields are even higher!
So to summerize, they are not trading close to junk, they are beyond junk.
- - - Updated - - -
That's not the point. As I said just in the last page, the stock is not a "value". It is a "bet".
Some bulls here see this company going in a one way direction to heaven. I am just saying that is not guaranteed. Many of the market participants actually think that a one way direction to hell is just as likely. I am asking people to have an open mind and assess the situation as opposed to presuming that there is only one potential outcome which is a glorious success.�
1/1/2015
guest Please tell me anywhere on the planet where current long term contracts/mortgages/loans/leases are paid 99.4% on time over the course of a decade in business. Can you name one? I can.
Solarcity payments are highest quality payments you can find on the planet. Prove otherwise. All rating agencies rating Solarcity really believe they are high quality also, so whatever spin you're doing just doesn't jive with the cold hard facts.
Their bonds are worth a hell of a lot in the real world.�
1/1/2015
guest Surely that is true about any investment, no? It's just that the perceived uncertainty is higher for some investments than for others. SCTY is more volatile because the bets made by market participants are all over the place. Doesn't make it a lower-quality investment, although it does make it riskier.
Agreed.�
1/1/2015
guest You are confusing the ABS bonds with the convertible bonds.
The ABS bonds are backed by customer payments.
The convertibles are backed by SolarCity's credit, solely.�
1/1/2015
guest Quite literally everything said here was said about TSLA not 3 years ago ON THIS VERY BOARD. Boggles the mind.
There's enough info in this thread that people should be able to read it and make up their own minds. We'll see what happens.�
1/1/2015
guest Ok, I go offline a few days and look at where the price goes. SCTY up 7.7%, very bullish price action. Bears test $25, but the price gets in range of $28.
IMHO, recent prices have been based on nothing but sour sentiment, but even sentiment can't last.
SolarCity will announce a new cost target for 2017. It will be well below $2.50/W. Progress in this direction will reenergize the stock. I think many investors will like the new strategy. I expect more to be revealed on Dec 15. Until then, prices will be soft, giving buyers very nice entry points. So the bet here is that SolarCity has a better strategy than current sentiment would reckon.�
1/1/2015
guest A) This statement is obvious, but misleading. I didn't say Solar = Good is an investment thesis. I did however say that sane politicians will support sane policies. Those who are not sane, and oppose supporting clean energy, will ideally be voted out and/or ideally ignored. Even politicoans who claim to
believe Al Gore or China are operating a very complex conspiracy, can't ignore the fact that a shift to clean energy is good, and tremendously benefits the global economy. In my
view, those who are loud about supporting "big oil" will be silenced the same way those who supported "big tobacco" were.
B) There is no middle ground where SolarCity is only a little successful. Either SolarCity will go bankrupt or SolarCity will be very successful and will command a large share of the Solar industry. The current price assumes 0 growth, and SolarCity closing shop tomorrow. At $50, the market was pricing in 2016, and maybe part of 2017. At $27, SolarCity is a no brainier if you think it will exist in 2017, and will continue to gain new customers.
C) Your third point doesn't make sense. Are you trying to say you think SolarCity isn't planning on obtaining any new customers?�
1/1/2015
guest Elon bought 198k more shares today. Approximately 500k shares over the past couple trading days...�
1/1/2015
guest I wonder what his objective is. It seems he could have gotten more shares at a lower price on Friday. Perhaps he is going to buy upto a certain price so as to put pressure on shorts. I guess we'll see how this plays in the coming days.�
1/1/2015
guest On August 24, when there was a market wide dip, Musk bought 123.5K shares. I bought some shares around that time too. I was quite pleased with Musk's purchase. He must be knowing something and the current price at the time of low 40's must be a "value", I figured.
Two months later we see that
- The company's sales are dropping
- Costs are going up
- Company stepping into subprime (despite claiming that the residential solar market is severely under-penetrated)
- There is a massive rewrite in the company's growth trajectory
- Stock and bonds trading at distressed levels
I learnt my lesson.
Musk being the father of the company, so to speak, wants to show moral support. Maybe its helpful for employee morale and such.
If he really wants to make a difference, he should take some tough decisions, like fire Lyndon and half the staff at top tier, change the quarterly reporting dramatically coming out clean with all the numbers, and spearhead a change in business model.
Things like that will compel me to buy some of the shares that I sold.�
1/1/2015
guest You are losing all credibility with me. Firing Lyndon would be about as useful as chopping off one of his feet.
Maybe after he fires Lyndon he can step down as CTO of Spacex and be ceo of three companies�
1/1/2015
guest This guy is so obviously full of it, it's not even worth discussing anymore. If someone can't read his posts and see right through it, they deserve to lose their money.�
1/1/2015
guest It appears that you are not objecting to anything else in that post except that firing Lyndon is a bad idea. That is a matter of opinion and your opinion is fine by me.
It is subtle but you probably didn't notice the word "like" in that phrase. The point is not so much the specific things I listed need to be executed. The point is that something dramatically should change with respect to the company. The bonds and stock didn't fall to distressed levels for no reason. Something ought to change to make the original vision come true.
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With respect to SolarCity, in the current situation, unfortunately the truth is harsh. If you are only interested in a hype-ball bullish-bubble discussion, please ignore me as I asked before.
If you go to my profile page, there is an "Add to ignore list" button. Try that.�
1/1/2015
guest From the new Fastcompany article:
[FONT=MuseoSans, Helvetica, Arial, sans-serif]"To try to avoid this in the future, Powell plans to offer the Tesla Powerwall to her customers as an add-on. For $30 a month, Green Mountain customers will get a Tesla battery that would save them in the event of a power outage while allowing Green Mountain to tap into the batteries rather than using backup generators when demand spikes on hot days. Eventually, she thinks that the savings from this approach could allow her company to give the batteries to customers for free."[/FONT]
Thats an interesting, straightforward approach.�
1/1/2015
guest Was taking a look at the SCTY executive mix from their site, then looking up videos on these guys to see how they articulate various concepts in solar.
Got to Radford Small (SVP, Structured Finance) and found videos of him talking complex financials at some solar symposium in 2011 back when he worked at Goldman. This is the guy you send off to CNBC to discuss the model. Not a knock on Lyndon in any way at all, he's the one who I assume built this excellent model, he's just not the guy to spit it out to the talking heads and make people understand.
This video (at 32:04) illustrates how a guy who didn't even work for SCTY and was talking from a 2011 perspective really got it right. When asked about which sectors are most difficult to analyze, one drunk panelist starts talking about buy side analysts having a difficult time with solar and this guy brought it back to logic.�
1/1/2015
guest exactly. Lyndon is the public face for spreading the awareness on the mainstream media circuit. Someone like radford to talk to the goofballs on CNBC, Bloomberg, and any other financial news puppet show.�
1/1/2015
guest Is it me, or does Lyndon Rive always look like he has a sore throat in interviews? :biggrin:�
1/1/2015
guest He always eats a dry sandwich before he does interviews for good luck.
I kid, no, I think it's a nervous tick when public speaking. He also figits a lot. Elon has similar ticks as well.
I think it is a positive in that he is a real person, not fake. A little endearing too. An empathetic quality.
However, this doesn't mean you get manhandled by interviewers or not explain the promise of the business effectively.
a combination of likability and polish is the winning combo. He needs to work on that message polish, at least the financial speak part. If he doesn't want to, just delegate the task to someone who can. He doesn't need to do the minutiae. He needs the big shows like Colbert, Fallon, and kimmel.... The morning shows and such. Create that public awareness Lyndon!�
1/1/2015
guest See, I disagree. You put him on Colbert and ask him to articulate the value proposition to the world and it won't come across in any way the public will absorb. It's been tried a bunch of times and isn't working. There are plenty of people within that exec team that could be out doing these shows and spreading the word. Delegate.
You don't have a software engineer talk to people, that should be rule #1.�
1/1/2015
guest i think he does the simple pitch quite well: pay less for energy then you do now. Won't cost you a dime to do it. That's solar today. Not for the rich. Not for the activists. For everyone with a home that wants to save on that electricity bill.
He says this on Fallon, and the public will go wait what? The awareness is the key, not the specifics. They will click the ads now. They will google solar. They will start to get interested, because it's something totally new, cool, fascinating, and affordable (Which is Lyndon's job to tell people.)
I think he can do that, and delegate the rest. Tim Cook style.
hes got a great story too: the kid-next-door with big dreams that married his high school girlfriend and started his first health products company at 17 to help people be their best. As a person that's struggled with his own dyslexia, Lyndon health is important to tackle life's challenges head on and never give up even if you've deal a tough hand. Some places don't give people any chance, but not the untied states. Lyndon and his young wife came to America to find their place in the world. Even after starting a multimillion dollar company here, he was on he verge of succumbing to deportation. However, his fighting spirit to take on even the most challenging tasks to live his dream, he was able to gain a green card through his wife's special ability to play the sport of underwater hockey of all things! And actually, became pretty good at it because now, as an American citizen, he might just represent the untied states in 2016! And we haven't even discussed his current passion of leading his solar company on the mission to change the entire energy industry and combat combat climate change at the same time!�
1/1/2015
guest Fair enough. I really thing that CNBC interview is just sticking with me most.
Did you watch the town hall video? Too much detail to hear from a software engineer.�
1/1/2015
guest Again, the town hall meeting video will be seen by a few people, and they are already invested in Solarcity in some form or fashion.
Its not the audience for mass awareness message I'm taking about. That was aimed at most the ambassador program. It's ironic that the biggest ambassador opportunity is squarely in the hands of Lyndon. He needs to spread the word on media programs that will get him the most bang for his buck. There is a reason Donald trump talks so much trash. He gets free publicity from it! Lyndon can drastically cut aquisitiion costs by being more in the media. He kinda has to take the Elon route here. As a big idea speaker, I feel he can do it just as well too. Maybe they both do a show together as hard working cousins.... Bottom line, an emphasis on the broader media that connects with a wider age group and employment group would be really beneficial in my opinion.�
1/1/2015
guest Just picked up more SCTY shares at $26.50.
Also more SEDG shares at $16.00.
What can I say? The market hates solar right now.�
1/1/2015
guest Lyndon's thick accent makes it hard to understand sometimes. I'm a complete financial novice but for my 2 cents Brad Buss gives me a lot more confidence on conference calls. He should be the guy that gets sent out to the CNBC type interviews. That crowd doesn't get excited by tech stuff anyway, they just want to know how it's going to make money in the short/long run.�
1/1/2015
guest i agree�
1/1/2015
guest Wow, somebody is trying to give Elon a discount. How nice.�
1/1/2015
guest If I remember correctly, there are net metering decisions/discussions this week going on in Nevada and Massachusetts. I think mass has net metering legislation being voted on, not totally sure.�
1/1/2015
guest Hard to disagree with the idea of manipulating stocks like this as your means of income. Every 7% boost right now would be so easy to bring right back down with minimal effort.
These guys are printing money.�
1/1/2015
guest Jhm,
what are your thoughts on this added value to distributed solar in California?
In California, a Campaign to Take Transmission Charges Out of Distributed Energy | Greentech Media�
1/1/2015
guest India dawns as falling solar + storage costs beat coal : Renew Economy
Looks like rooftop solar in India could start knocking out coal demand in a few years. Rooftop solar+storage could be cheaper than coal power generation by 2023. I expect this to be a big market for Powerwalls. It will be interesting to see when SolarCity may want to jump in.�
1/1/2015
guest I've thoroughly enjoyed the back-and-forth in this thread since Benson went ursual.
I've tried to do my own analysis but I'm having a really hard time seeing how/if SCTY's business plan stands on its own legs, without generally linking their specific business too much with the inevitable glowing (shining) future of solar in general. The new EVC metric has gotten me suspicious, Elon's huge purchases lately has made me a bit more confident again.
I hope the good debate and exchange of ideas can continue without the need for us to label anyone derogatorily even though they might hold the opposite sentiment at the time being.
That said I do believe SCTY as a stock is in a very vulnerable position to be manipulated in the current climate.�
1/1/2015
guest This looks pretty profound. Assessing the transmission access charge at the customer level creates little incentive for a utility to prefer local production. Note who the three players are that are Participating Transmission Operators are, the ones who profit most from over utilization of the transmission grid, PG&E, SCE, and SDG&E. These are the big three waging the fight against rooftop solar. Smaller municipal utilities pay TAC on the basis of what the export from the transmission grid, so they are in a better position to value the benefit of distributed solar.
The longer view is that grids should be more localized. So this rule change would help to harness those beneficial economics. All utilities would use the transmission grid less and so it would decline in cost to the overall system.
Very promissing.�
1/1/2015
guest How Exporting U.S. Liquefied Natural Gas Will Transform the Politics of Global Energy - The Experts - WSJ
read this and you can see why big players don't want Solarcity (and distributed solar industry) to get in the way.
You can also see why nextera wants to buy Hawaiian utility. The Lng terminals alone are worth the cost of Hawaiian electric so that they have a hub to distribute lng to Asia! However, 100% solar goal is getting in the way, and so is distributed solar.
Warren buffet sees the lng gold mine and has already positioned himself to be pretty much completely vertically integrated in the Lng business and supply chain in the US. cutting lng peaker plants due to distributed solar and batteries definately gets in the way.
So, what is the real deal behind behind anti net metering and anti Distributed solar rhetoric? Not what they're saying at all these commission hearings...
Lets be real... Solar just getting in the way of big plans of a few established monopoly players.
to add, ARizona utiltiy and Nevada utiltiy posted record profits this year(they are supposed to be capped at about 10%, but yet they are making 4x that. weird huh?)... While at the same time saying solar costs shifts will cause retail rates to go up on non solar customers. The monopoly threatening the rent payers with higher rents works every time. Another prime example why we need a competitive market in this world over the terrible influx of monolpoly systems that are inherently bad and distort prices and breed inflation, inefficiencies, and social/economic turmoil.�
1/1/2015
guest You bring up a number of interesting points. I couldn't resist responding.
Business Model:
Most people who will take time to review the actual numbers and piece the puzzle together will see that the business model is vulnerable to the impending policy changes. If people are investing based on:
- Solar gotta win, and hence SolarCity will win
- Elon gotta win, and hence SolarCity will win
- Batteries gotta win, and hence SolarCity will win
then sorry, tough luck. In the long run businesses grow through numbers, not hype and hope.
My Position:
I am not a bear, nor I turned bearish. All I have to say is that the probability of success (or failure) at this point is unknown. At this point going long or going short both positions are merely speculative plays in my view. I might have come across as overly bearish because the resident theme here is very bullish and I am countering with data/points on the other side.
To further, in my view two things will be decisive in ensuring outcomes in one direction or the other.
1) California NEM 2.0
Based on this either stock will either spike or plummet. I have no idea which way it will go. Hence I call it speculative to be in the game.
2) SolarCity cost measures
If Lyndon comes out end of this quarter and announces new cost targets and some additional EVC magic, that will do nothing. There is an Abraham Lincoln quote: You can fool some people all of the time or all people some of the time but not all people all of the times.
He has to show some solid progress in *real* numbers, like:
- Sales/Watt
- Opex/Watt
- Incremental NRV/Watt
- Incremental NNRV/Watt
- Cash burn and availability of funds
- Incremental NRV/Share
- Incremental NNRV/Share
If he shows solid progress in these type of numbers, the stock will spike. or else it will plummet. I have no idea which way it will go and hence I call it speculative.
Stock Manipulation
It's hard to tell what stock price means when you don't have conventional metrics. What does a price of $45 mean vs $35? I don't know, nobody knows. But luckily bonds trade around par values. You can tell a lot looking at the bond prices. If we take the 11/19 bond, it traded around par, between 90 and 100 pretty much all the time. Then starting in mid Aug it started a decisive trajectory downward. So we can tell that this entire turmoil really started in mid-August.
I went to SA, looked at all the "Breaking News" from mid Aug. Unfortunately I did not find any pattern. There were a mixture of good news and bad news all over the place. There was nothing concrete that matches the bond trajectory. But there was one thing interesting. The peak nearly matched Chanos' first announcement that he is short SCTY. Umm, is that a smoking gun??
So then I looked at the short interest in SCTY over the same time frame. There was a strong movement upward in August. But it's flat all through the rest. So then again the shorts increasingly shorting is not adding up.
In any case, summary is I couldn't find any patterns.
I would be very hard pressed to believe that manipulation can happen in a stock where there are about 5mil shares a day are being traded.�
1/1/2015
guest I think LNG is desperate hope for a failing gas industry. Solar and wind are already cheaper than LNG, and batteries will soon round out the package. In the short run, it's fun to fantasize as this author does how LNG could change the geopolitical situation. But this requires massive long-term infrastructure that sucks in huge government subsidies and takes many decades to pay off. Meanwhile, within the next decade wind, solar and batteries all become cheaper than just the natural gas used to make energy, not counting all the big capex and infrastructural costs. This is why Hawaii rejected plans to create LNG infrastructure on the islands. It will become obsolete long before it is paid for. It's too late for LNG.
If Lithuania really wants to put pressure on Gazprom, they should invest heavily in renewables. Why be dependent on the US, Qatar or Russia, when they can power their economy on domestic renewable energy? Why expose their economy to global market prices for oil and LNG? It's an investment both in energy and independence.�
1/1/2015
guest I can tell you for sure that they are pushing the living bejesus out of it here in Philadelphia. Talking about turning our Navy Yard in an "energy hub". We also have lots of underutilized refinery space since 2 of our 3 major refineries are setup for light crude that doesn't really exist anymore. With the level of corruption in this city I could easily see them swinging a deal to pipe gas here and liquefy for export.
Tax free extraction from state lands in Pennsylvania, pumped to Philly for export abroad. The folks of PA get exactly nothing while our finite resources are shipped off to Europe and Asia. Central PA may have the single most uninformed voter population in America.�
1/1/2015
guest
Awareness seems that much more important to Solarcity brass then ever. Pays dividends to have Lyndon get out on the soap box. Elon too.�
1/1/2015
guest Right, producers are desperate to get their product to a market that will pay them more than $2/MMBtu. But what happens as that price drops to $1/MMBtu? The coal industry has been going through this same thing. As domestic demand for coal dries up, they get quite eager to export to international markets. But now even India IA at a place where solar prices imported coal out of the country. LNG will get price out too.
BTW, if anyone is interested in investing in an LNG pure play, look at Cheniere Energy, which has the clever ticker "LNG". It was a fast rising star before the oil bubble popped.�
1/1/2015
guest I gotta think Germany and France would buy all the LNG we could send them.�
1/1/2015
guest VSLR, which is basically a terrible "company" (semi conglomerate?) , and Sunedison (a company that has too much debt and its hands in too many pots), had to spoil what should have been a good day for the "sector". :wink: Let's see what happens tomorrow. Elon bought a lot this week. My guess is an announcement will be made any day if this whiplash keeps up. A confirmation of the holding company strategy Elon mentioned a while back, or something that clarifies Solar City's long term strategy would be helpful. Although I guess it's possible Tesla and SolarCity are avoiding saying certain things for regulatory reasons.�
1/1/2015
guest I'll leave LNG investors to make that bet. The globe needs to flush fossil fuels out of the system within 30 years. I just don't see how this is a good use of public funds to build out infrastructure that will need to be shut down within 30 years.
BTW, German is netting about $2B per year on net electricity exports.So with batteries coming online, it looks like they have alot of excess capacity. So if the gas plants aren't already built, why should they ever be built? Just more stranded assets in the making.�
1/1/2015
guest In natural gas related news
http://abc6onyourside.com/news/local/breaking-house-explosion-at-the-800-block-of-lock-avenue
Why Natural Gas May Be as Bad as Coal
Methane Leakage from Natural Gas Production Could Be Higher Than Previously Estimated - Plugged In - Scientific American Blog Network�
1/1/2015
guest Those Germans are a crafty bunch.
Get out in front of solar so you can reverse the electricity faucet with France, then try to deregulate the whole area so you can sell like crazy at peak and take all the profits.
Setup a European currency to devalue your home currency and hurt other nation's imports while each individual nation still has their own borrowing rate.
Genius!�
1/1/2015
guest Heres What It Would Take for Solar Installers to Adapt to a World Without the ITC | Greentech Media
according to this local installer, everyone is screwed unless they can hit 2.80/watt in total cost. He's thinking growth is going to be wishful thinking post ITC for a while.
Solarcity is expecting to beat 2.50/watt already. And if I heard them correctly on q1(or q2?) conference call, they are going to revise that guidance down to 2.30/watt. This means Solarcity is only going to gain more demand as the distinctly lowest cost option highest margin installer.
It might take a second to see all of the massive implications but they are many in a very positive way.�
1/1/2015
guest The feasibility of getting down to a profitable $2.10/W total install price isn't the problem, Germany has been there for a while now. The issue will be America not having a cohesive energy policy nationwide that creates enough investment certainty to get things fully up to scale and cheap. Obviously there are entrenched forces that will hold back this progress and when you have a capitalist system rather than socialist, it's going to be tougher to have similar support on the federal or state side. All these ups and downs and ITC/NM uncertainty are keeping us from having a normal functioning market where competition gets us running efficiently nationwide all the way up the chain of operations. Germany set their feed in tariff payback at $.68/kwh and stepped it down over the years to $.11 or $.12 today, that's it. The certainty of that FIT let the market function and got them to full scale almost immediately. Now their soft costs are about as low as you can get, a good $.60/W less than us on a straight install.
SCTY is within a year or so of getting to this kind of scale, but installers outside of CA and a few other hot spots aren't. There's no reason southeastern PA should not be a hotbed of solar installs at $2.25/W right now, but the best you can do is around $3.30 because we're not to scale and you have to do all the legwork. Most people aren't interested in that, they want savings and simplicity. That's why SCTY will dominate every new market.
Keep in mind, SCTY will never get down to the cost level of local bare bones installers at scale. SCTY installs quality panels, do all their installs by the book, provide excellent customer service and have a huge sales force. So what you're talking about above is never going to be the case for straight installs. SCTY will always be a premium player in the install world and leader in the PPA world plus whatever convoluted solution is needed next to make progress(batteries, microgrids, etc).
That being said, it seems pretty obvious to me that with install costs at $1.92 today and the PPA model to scale there's likely no stopping the machine. If they can transition from this heavy sales cost down to something rational and cheap, it's game over and their overall share should only grow(if you can even imagine that). I just don't see there being a better product out there over the next few critical years in the non-purchase market. They should be able to put up huge numbers in new markets and the local installers can then backfill the other 50% at a cheaper rate for all the people that want to run their own show.�
1/1/2015
guest I worked for years as a solar power inspector. SolarCity as an organization simply executes, by that I mean, they are a paradigm of efficiency. As building codes and utility requirements change, they adapt and get the job done. More than this, SolarCity employees are true believers.
Importantly, solar competes at a retail level, SolarCity is competitive today. Their sales organization reminds of Alex Baldwin in Glengarry Glen Ross, a boots on the ground, drive through the finish line, no excuses.
I'm going long.�
1/1/2015
guest Up 4% pre-market on news that a big private equity firm is investing $100M�
1/1/2015
guest Silver Lake Is Said to Invest $100 Million in SolarCity
As an investor looking to buy at the end of December, I'm hoping the world takes this with a grain of salt.�
1/1/2015
guest Curious to see the amount of short covering that will happen at the open. Hoping for a big run.�
1/1/2015
guest It is a highly specific story to not be true. Without knowing most of the terms of the notes, it is hard to say what it means. If SC doesn't have a liquidity problem, why would this deal be in the interest of shareholders?�
1/1/2015
guest I think SolarCity will take that same level of intensity and discipline it applies to cutting every cent out of the installed cost per Watt and apply that to cutting every cent of sales cost per Watt. So in Q3 sales/W hit an incredible 64 cents. They've got the opportunity to cut at least 24 cents out of this, and that's a whole lot more fat than in presently in the $1.92 for installation. Cutting 2 cents out of sales has the same savings as cutting 2 cents out of installation.
By targeting 40% in 2016 rather than 80% growth. They will have the lattidute to pass on the 20% of prospects that are most expensive to acquire. If the 80/20 rule applies here, then passing on this 20% could help them avoid as much as 80% of their excess marketing and sales costs. Moreover, this 20% driving 80% of the cost very well could have come at negative marginal value. For example, if average NRV per customer is say $1.12/W. And you spend say $2.40/W trying to get this most expensive 20%, then marginal NRV on this segment is negative, a loss of at least $1/W. So when they cut this segment, while that slows their growth in terms of installed MW, it may actually accelerate growth in NRV. For example, installing 1.3 GW retaining $1.4/W is worth $1.82 B in incremental NRV, while installing 1.6 GW retaining $1.1W is worth $1.76 B in incremental NRV. I don't know what internal assumptions SolarCity is making, but I do suspect that they backed into 1.25 GW as about the breakeven point with growing faster at higher sales cost. They should actually state the target as something like $1.75 B in incremental NRV, not 1.25 GW installed, as this would allow management to make appropriate tradeoffs for volume versus profitability.
So my expectation is that we will see sales/W drop to 50 cent by Q4 and 40 cents by 2016Q1. We'll also see a few more cents come out of installation and G&A each. All combined, I hope to see $1.4/W or better retained through most of 2016. SolarCity has alot of sales and marketing fat to cut, and I believe they will do it.�
1/1/2015
guest That 2:30 a watt figure came from an analyst who figured what they would need with a 40% growth to become cash flow positive. Linden told him that he was good at math so it seemed like that number was pretty close but not official guidance yet.�
1/1/2015
guest Silverlake Math
Working with known data.
Their $100mln investment being a convertible bond, they are senior to equity. So silverlake gets their money fully paid off before anything gets paid to equity shareholder. We all know that SolarCity has a pile of about $2Bil NNRV. Effectively, return of their capital is "guaranteed".
The convertible option is akin to a LEAP call option. Assuming the price scales the same way between now and 2020 maturity vs now and 2018. Working with market data, we have a mid price around $8.30 for Jan 18 leaps. At $33 conversion price you get 3 options per $100. In other words we have $25 dollar value per $100. As this is for 2 years, on an annualized basis we have 12% yield.
At 12% yield, Silverlake buying this convertible bond is no different than buying the existing convertible bonds in the open market. It shouldn't be either because why would Silverlake leave money on the table? In fact for buying a lump sum, they are getting a higher yield than the existing bonds.
In summary, SolarCity raised additional capital at distressed levels. Perversely, this adds more proof that the firm is distressed.
Sorry to break the bubble.
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SolarCity installation crews are ultra-efficient, best in class. There is no question about it. At $1.92/W install cost, the numbers speak for themselves.
The real issue with SolarCity is various value leaks that happen at the corporate level. For example take a look at the latest 10Q. There is this line item in the Statement of operations: "Other expense - net" which happens to be a money sink of $16.8Mil in the quarter. Digging into the report to find out what it is -
There are many such leaks, which makes the cost that they show not add up to the ultimate shareholder value that they are generating.
As a shareholder you own all the leaks. Not just the installation crews.�
1/1/2015
guest The Clean-Energy Revolution Gathers Speed - Scientific American
�
1/1/2015
guest Yeah, its very common for investors to dump $100M into a company in exchange for zero board control when they feel its a failing business. This stuff is gold Jerry! Gold!
Edit: Also nice to see SCTY leveraging interest rate swaps to flatten the risk curve. We should see a nice "return" on this when rates go up next month. Just another indication of how far ahead SCTY is relative to the yield co based installers who need to sweat every little rate/market shift.�
1/1/2015
guest SolarCity and Silver Lake Kraftwerk Announce $100 Million Strategic Investment (NASDAQ:SCTY)
So here's the official PR on Silver Lake deal. The $113M bond should convert into 3.42M shares by Dec 2020. So this represents a 3.5% dilution of shares.
While I am not clear why SolarCity needs to raise capital from equity at this time, I would point out the following. To raise $113M through a secondary offering at $26/shares would require the sale of 4.35M shares for an immediate dilution of 4.5%. Thus, this offer exposes shareholders to substantially less dilution.
It's tough to take any sort of capital raise at such a time when the market is hating on the stock. But for the foreseeable future SolarCity does need capital to finance onstallations. Raising debt increases leverage, reduces NRV and increases risk for shareholders. Tapping equity causes dilution, but it improves NRV, and decreases leverage and risk to shareholders. So this zero coupon convertible deal tilts more to equity than debt. As a shareholder, I prefer modest share dilution to mounting leverage. We can take some risk off the table and continue to grow this franchise.�
1/1/2015
guest Musk with another $5.3m buy on the 16th.�
1/1/2015
guest It's a good deal for both. Silverlake gets guaranteed return of capital with a juicy option. SolarCity shareholders get lower dilution.
Nevertheless, it's not a 'show of confidence' like the way NY Times tried to spin it.�
1/1/2015
guest This is not a leak. This is how a business manages finances. The only reason to take a loss on an interest rate swap is because this is a hedge on interest rates and the market has simply reprised the instrument. This hedge protected us from interest rate increases but as expectations shift downward in the maket it loses value. Had the value gone up, the company 2ould have been in a much worse rate environment. So this is good news.
Also the only reason to take a loss on prepaying a loan is if you can lock in substantially better financing.
So both of these issues are about navigating long-term finances to a better situation. And it looks like our CFO is being quite proactive about managing interest rate risk. This is not a leak; this is about protecting shareholders against financial market risks.�
1/1/2015
guest This deal seems to be proof that SC had to cut back growth as they lost access to the bond market. Going to cash flow neutral seems to indicate a much lower future install rate.
Clearly the bond market does not value SC contracts as high quality. How does SC regain borrowing ability post ITC? I don't think I understand where the financing model failed.
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The point that there are a lot of overhead and risks not shown in cost per watt installed is valid. Sunrun may pay more per watt, but that mitigates a lot of risk. It also means in a post ITC retraction Sunrun will be able to take advantage of low bids, where SC will have the same cost structure.
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Silverlake bought equity with only a little downside risk. Seems smart.
It's only smart for SC if they have lost the ability to borrow at good rates. Which they have.�
1/1/2015
guest Fine, it is not a leak. It is a cost of doing business, which is not captured in slide deck presentations. And hence my assertion that the costs and EVC in the slide decks are deceptive. They don't give the full picture.
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You seem to be speculating that they did this deal instead of another ABS (and they are unable to do an ABS). Seems like a stretch. Not sure why are relating these two things that way.�
1/1/2015
guest Every time SC has bond sale there's a line out the door. Someone just bought $100M worth of LEAPS. What's the problem?
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Looks like SpaceX is about to win their first contract(of many) with the Air Force. Sanctions on Russian rockets may give SpaceX and ironic military monopoly in the short term.
Guess SCTY shouldn't have too much trouble finding purchasers for their bonds!�
1/1/2015
guest Of course it is a show of confidence. Any investor who is not confident that SolarCity will survive and grow over the next five years would be unwilling to put $100M into such a deal. The return of capital is only as good as the company itself. So they absolutely believe in the solvency of SolarCity. Moreover, to get that 12% yeild you estimate, the stock would need to trade above $58 in the next 5 years. Sure they can try to monetize this by selling calls against the box of this callable bond, but their return on that depends substantially on how eager investors are to buy call options over the next 5 years. Now I do think that Silver Lake is being smart and taking advantage of company with a weak stock, but I fail to see how any investor would enter this deal if they did not think SolarCity had a promising future.
You might consider your own outlook. Would you be personally willing to put say $10k into this deal? If so, why not buy some of those convertible bonds already out there? Perhaps this is a risk profile that is more suitable for you at this time. It does not require a belief that SolarCity will grow enormously. It just has to be solvent long enough to payoff the bond, and the PowerCo Available Cash over the next 5 or so years may be sufficient to assure solvency and convertible debt repayment. If that fits with your outlook, buying convertible debt may be worth considering.�
1/1/2015
guest Then you should be pissed that SC is diluting equity for no reason.
You bring in spaceX because you believe SC is a story stock. The market disagrees.
The good news is that Silverlake would not invest without the confidence that SC will do what is necessary to cut costs.�
1/1/2015
guest The bond market does not like to be treated as a cash machine. It expects equity to pitch in as well. So a certain amount of stock dilution is just part of the cost of raising capital through debt.
ABS offers are a bit of an exception to that because they are backed with assets. Even so, an ABS investor is going to want to know that the issuer retains a certain amount of equity in the ABS assets. This was one of the problems with MBSs during the mortgage meltdown. Originating lenders retained little to no equity in the MBS which led to unreliable lending. The lesson learned is that it is important for issuers to retain equity in their ABS. SolarCity does this quite elegantly. The renewal term on a lease or PPA is a portion of value which SolarCity retains. This is one of the ways that investors currently benefit from renewal values. It is enough skin in the game that ABS investors can have confidence that SolarCity will manage risks and properly service assets throughout the course of the ABS to preserve the equity in the renewal term. So this is part of why ABS offers are so well received.
But the catch in this is that SolarCity really must commit enough equity to these solar installations that they can continue to turn out ABS issues. Moreover, they need working capital to build out the systems and hold them on the books long enough to do another ABS. So I think this is where convertible debt becomes necessary. It expands equity enough to keep turning the ABS wheel. The problem for SolarCity with having the stock price so badly beaten up is that it makes raising capital through equity much more costly, i.e. the dilution required to access more capital from the bond market goes up.�
1/1/2015
guest So I wonder if this Silver Lake deal motivated Musk to by shares over the last week. It seems that allowing the share price to fall even further could have resulted in less favorable terms, like a share conversion price at $30 in stead of $33.�
1/1/2015
guest LOL....Silverlake is quoted in the article as to why they invested. Read the quotes. Or maybe it's a conspiracy. Maybe they invested $100M as part of a plot to tank a company they know has a failing model? I guess anythings possible right?
What else you selling today?�
1/1/2015
guest Here is an enlightening piece with respect to renewal "assumption".
This is related to CA NEM 2.0 from here:
"Homeowners with electric service under a NEM 1.0 tariff, prior to December 31, 2015, will remain on the current NEM tariff for 20 years from the date their distributed generation system was interconnected."
There goes the renewal. Poof. Gone. It has zero value.
Now if the argument is that SolarCity will sell a new system to support the new grid policies, that sale should be credited when it happens. Consumers have zero obligation to take up that sale. It is not appropriate by any means to credit SolarCity with a hypothetical sale that might happen 20 years down the line. No company ever gets valued like that. No one.
The renewal portion is an example of deception by management. They should have put it in footnotes (like they do with convertible bonds) instead of adding it up in the math and legitimizing it.
Coming back to the topic, there is no way in hell or heaven, the ABS market or any other market will accept renewal as the equity piece that SolarCity will be holding, while it mortgages away the rest.
In pre-ITC land, the Tax Equity partners hold the equity which is substantial at 30%. SolarCity can mortgage away the rest of 70%.
In post-ITC land, the Tax Equity guys only hold 10%. So SolarCity will be asked to hold another 10 or 15% before it mortgages the rest.
That's the reason why SolarCity maintaining a healthy profit margin (including *all* of the cashflows, while excluding the renewal portion) is crucial to it's survival. Or else it will have to continually come to capital markets to finance operations. That is unsustainable.�
1/1/2015
guest
Elon is about to win a massive $70 bln military contract, with $1.5bln in projects this year alone. Elon's personally coming into a massive amount of sustained cash influx from spacex pay days now.
I feel he's maintaining his % ownership in Solarcity with recent purchases as well as demonstrating confidence in the company during this big slide period. He bought 198k shares in August, he bought 500k this/last week, and now he's committed to $10m in convertible bonds. Again, with the current influx of spacex cash coming, he'll continue to buy. He will also buy more solar bonds for spacex as well.
Its all about building confidence in Solarcity with the investment community now. Elon and family do not take well to unjustified attacks on their businesses, and this situation is no different.�
1/1/2015
guest Not to mention the 4/1 return he'll see on these investments inside of 2-3 years. The guy is socking away investments so he can cash out in 10 years for his big push to Mars. I know that sentence is bizarre, but I'm pretty sure that's what he's doing. What a nut.�
1/1/2015
guest Doesn't SC only need financing to continue to add customers?�
1/1/2015
guest Yes, and that would be unsustainable.
If SC comes to capital markets for say working capital to support growth or new capex like factories which pay for themselves eventually, that will be forgiven.
But if SC will have to come to capital markets (to raise equity or borrow against it's own balance sheet) to support day to day (new) installs, they are doomed in some time.
The Business model needs to be sustainable. That is easy to achieve in pre-ITC era but much harder in post-ITC era, especially because the missing element is precious "equity".�
1/1/2015
guest Yes, that is the part I have been wrestling with these past few weeks. I don't understand the need to keep running faster, like the Red Queen's tea party or whatever in Alice. Yes, if they stop investing they will stop growing - but still have a steady flow of income. Sure, it would be nice if that income wasn't static but grew steadily too - and it seems like it will, only at a somewhat less neck-breaking speed going forward. Investment goes better with capital, owned or loaned, to be sure. The business as such should not need constant infusion though. Unless it is a Pyramid scheme, which is criminal anyway.
But then, I am not an economist (sometimes watch one or two on tv�
1/1/2015
guest Would be the first I heard about it. What are you talking about?�
1/1/2015
guest They have the solar panel factory. Plus they could get back into selling solar as the market returns in the U.S.
I think their complex financial products gives them a relative advantage post ITC. The point of their products is to obfuscate value, after all. So they will have some buyers, even in a greatly reduced market. Perhaps they can finance the reduced demand post ITC with cash flow.
In that environment they would be profitable and cash flow positive, assuming a substantially reduced workforce. They could then return to the financial markets.�
1/1/2015
guest
Washington Post, among other sources:
(Quote truncated.)
So it's either SpaceX or RusRockXport which is banninated due to war etc.
Advantage: Musk.
Edit: Elon has a well-deserved reputation for multi dimensional chess capabilities.�
1/1/2015
guest Yes, and that contract is probably worth about $90 million.�
1/1/2015
guest Benson, what do you think the price of batteries will be in 20 years? NEM is irrelevant to the value of the renewal term. The value of the renewal term to the customer is that they can put off replacing their system for upto 10 years. The value of the renewal term to SolarCity today is that this is an obligation the customer must pay if they want to break the contract. The value of the renewal term to ABS shareholders today is that this value keeps SolarCity motivated to preserve the value of the asset and a positive relationship with the customer.
So the renewal term as value today. You seem to be stuck with the idea that the renewal term would only have value 20 years from now and only if the customer opts to renew. This utterly misses the point that it is part of a present set of obligations and actually has value right now. Moreover, what it is worth 20 years from now actually is too remote for shareholders to worry about. We expect at least a 12% annual return on such a stock and discounting out that far leaves very little value for anything. So it is the value today of the obligation that matters, not the cashflow some 20 to 30 years out.�
1/1/2015
guest Perhaps.
That's why I don't say that the company being doomed is guaranteed. Nor it's success is. In what shape and form will SC exist post-ITC is anybody's guess. Hence I call it a 'bet'.
It's neither value investment nor a growth investment. It's merely a bet that it somehow survives, without knowing what the odds are.
If Lyndon shows solid progress in all-in costs and CA NEM 2.0 comes out favorably, the nature of SCTY investment changes from a speculative bet to either value/growth investment.
Nevertheless selling panels to make money is the least likely thing to happen. When wind PTA went away apparently installs plummeted by 90%. BNEF is predicting 70% drop in solar installs in 2017. There will be a flood of panels. If SolarCity can't use it's own panels and all of their panels, it's game over, because the cost per panel goes up owing to fixed costs in the factory!�
1/1/2015
guest I look at the panel factory as a separate business. The panels have a cost per watt that is sold at a profit or loss. Higher efficiency adds a premium, but panels are still essentially a commodity.
Solarcity saw a chance to diversify with the taxpayers of New York taking much of the risk.�
1/1/2015
guest Getting off topic, but did you mean PER SHOT? ISTR that ULA charges at least that. (No expert.)
Could also mean a nice shoe-in for future contracts.�
1/1/2015
guest Post ITC, we will see some installers drastically reduce operations to be sustainable. However, this doesn't mean those that are laid off will be without job opportunities... Enter in Solarcity.
Solarcity will pick up trained labor and execs which will have a positive cost impact on the bottom line. I also believe Solarcity might already be preparing to pick up a lot of competitors employees when it happens. Enter in the new headquarters being established in Utah, the home of Vivint solar. Solarcity also pledged to hire 4000 people for the Utah operation. Maybe not a overt reason for going to Utah(as pro dg conditions are developing there right now too), but the implications are right there. Vivint is seeing Solarcity build the biggest house on its block and can't be too excited about that foreboding development.
Also, I think the ITC has the potential to be extended later this year/early next year under the export bill, so possible we might get an ITC answer very soon. Won't have to wait until the end of the 2016 to find out. Obviously, This would have a massive effect on the industry right away in the next few months if it happened that early.�
1/1/2015
guest The contract is only for one shot. And SpaceX probably has bid about $90 million on it.
This is a non-event as far as Musk, Inc.'s short to medium-term prospects are concerned.�
1/1/2015
guest Yeah, you could be right. Maybe you know much more than me, but I thought you were looking for info, tried to help and got a bit carried away.
Sorry for the derail, folks.�
1/1/2015
guest Yeah, there's almost no money to be made in a monopoly on US military satilite launches.�
1/1/2015
guest I see your point of view the way you laid it out. I don't buy it, but I see it. I don't buy it because it doesn't fit the math that they put in the slide deck (yet again it proves one more deceptive item in the deck, I digressed).
The value to shareholder is highly debatable. I tried to stay away from renewal debates in a shareholder perspective because it's highly controversial and may not add much value to any productive conversation of the rest.
Coming back to the point of bankability/financability, when SolarCity borrows money, it is doing so against a pool of "contracts" which have a defined cashflow for 20 years (and no more).
I firmly believe SolarCity (or others) will be asked to hold a decent amount of "equity" while the rest of the 20 years of cashflows are mortgaged. And hence, the renewal portion, whether it has shareholder value or not, is not-bankable.
So my point that SolarCity needs to have healthy margins, ex-renewal, to support the equity portion, still stands.
- - - Updated - - -
Anybody ever wonder, why don't they just make it a 30year contract instead of a 20year one and get over with this mess?
electracity might have some ideas
- - - Updated - - -
70% drop in installs means, there will be more than 3X supply for given demand. Who will SolarCity sell to?
In that environment, the prices could fall below operational expenses. Kind of like the oil market today vs when it was $100/barrel. Actually much worse. I don't think oil over-supply is anywhere close to 3X.
It's funny we all talk about stranded assets in fossil fuel industries. In an karmic irony, the panel factory with panels nowhere to go, the panels on rooftops with 20 year ppa's that homeowners refuse to renew could become text book examples of stranded assets.
Not saying that is the only outcome, or even most likely outcome, but it is one of the possible outcomes. In a hype based bullish growth phase, we overlook all flaws. It's good to have a perspective on how things could go bad as well. "Only when the tide goes out do you discover who's been swimming naked."�
1/1/2015
guest Possible net metering compromise in the senate brewing today in Massachusetts... Might have had an influence on stock momentum today as well...�
1/1/2015
guest I appreciate the sarcasm, but this small contract is no indication that a monopoly will occur.
The main way that SpaceX could help SolarCity is if Musk borrows against his SpaceX shares to buy SolarCity shares. But there's a limit to what Musk can do.�
1/1/2015
guest SpaceX already has a long history of stashing cash in SCTY bonds since they get paid up front for long contracts.�
1/1/2015
guest TROGDOR! Oops, sorry. Good neologism. ;-)�
1/1/2015
guest Cant take credit, borrowed the term. But I like it. :smile:�
1/1/2015
guest The Economics of Solar, Storage and Solar-Plus-Storage | Greentech Media
Article arguing solar+storage more valuable the either solar or storage alone.... I guess in this case, Solarcity is right at the nexus.�
1/1/2015
guest I looked into the bolded part.
Their so called PowerCo made a positive cash flow of $19Mil
While their cash burn from their RV slide, Q3 vs Q2, compute increase in debt and decrease in cash, is $450mil
At a nominal 10% equity to maintain the run rate, they would need $45mil!
The run rate will have to drop by more than half to self-finance 10% of equity. To be precise, the bookings/installs will have to drop to 580MW/year!
That's why improving the margins, ex-renewal, is crucially important.
If your speculation that they lost access to ABS market is correct, it is game over already.
Even if not, coming to capital markets for non-consumer-backed capital, even for extenuating circumstances creates a mess for them. It is basically unsustainable.
The only way is to drop all-in costs (including all the unaccounted costs, or leaks as I call it) tremendously. That's the only way they can sustain.
- - - Updated - - -
At 15% equity their install capacity will drop to 390MW/year
At 20% equity it drops to 290MW/year�
1/1/2015
guest Riverbend will not become a stranded asset because installs decline by 70% or whatever in the US. The global demand for cost effective high efficiency panels is strong. So Riverbend actually represents geographical diversification. I see this as a hedge against the concentrated exposure to US rooftop installation market.
Solar systems would only become a stranded asset if some other much cheaper source of electricity became available to the homeowner. For example, suppose local utilities were to become deregulated such that competitors enter at say 5c/kWh. Yes, this is a ridiculously low price even under deregulation. Now suppose you are a homeowner with a 15c/kWh PPA on your roof. You would sure like to ditch the PPA and save 10c/kWh. Do you do it? Well, to cancel the PPA immidiately, you have to pay all future contracted payments discounted 6% INCLUDING all the renewal payments. So this could be well in excess of $10,000. You suddenly realize it's not with breaking the contract as you would have to consume 100,000kWh just to breakeven. Thus, the renewal term is a very strong motivator not to break contract. This is value that the renewal term create for all related investors right now. But suppose you decide to wait until year 20 to exercise your option not to renew, and suppose competing electricity providers are still offering power at 5c/kWh. Do you take the offer and ditch your PPA at renewal? Well SolarCity knows they competition and offers you a 5 year renewal term at 4c/kWh. The system is fully depreciated and costs SolarCity less than 1c/kWh to maintain, so they are quite willing to offer a competitive price. What do you do renew at 4c/kWh or go to the competition to pay 5c/kWh? Most people would simply renew. Thus, the solar system does not become a stranded asset before renewal or at renewal.
So the value right now of this renewal term is that it is a barging chip to keep customers locked in through the initial term to completely pay for the system. Later at renewal it will be worth at least the competitive price of electricity, but no more than the contracted PPA price. This is a situation that protects the PPA customer from uncertainty about long-term electricity prices. SolarCity is absorbing the risk that future power prices could be less than contracted PPA. But it is only the gap between the contracted rate and a competitive rate that is lost. To say that the renewal term has zero value at the time of renewal can only be true if the competive price for electricity is 0c/kWh. Indeed, if electricity becomes free in 20 years, the whole energy sector is doomed! But more realistically the competitive residential price of electricity in 20 years will still be high enough that somebody is paid to provide the service. I might believe 6c/kWh is possible in 20 years, but if that has anything to do with solar, batteries and aggregated DER, I'm willing to bet that SolarCity is one of the players bringing it to market. Even if SolarCity loses that race the renewal terms would still be worth nearly 6c/kWh at the time of renewal. Personally, I think competitive residential rates will be more than 11 c/kWh in nominal dollar 20 years from now, so it is hard for me to see how renewal terms would lose more than 50% from their contractual value. Remember that inflation alone over the next 20 years take the average grid price from 13c/kWh to 21c/kWh, so you really have to belive in quite strong deflationary pressures within destributed energy technologies for the real price of electricity to be cut in half. Companies like SolarCity may make that happen, deregulation in utilities may make that happen, but utilities as regulated monopolies protected from competition will not go there. So I would suggest you give some thought to where you see residential electricity prices going in 20 years. It may give you a little more confidence in the value of renewal terms.�
1/1/2015
guest jhm, Appreciate the comments.
I have no idea what the global panel market situation is. Just looking at stock prices of a few popular names doesn't look very promising. Obviously I didn't look into the situation and I might be missing something. Do you have an idea on global supply/demand dynamics?
What happens at renewal is anybody's guess. No I didn't say that. Lyndon said it himself
Regardless, as I mentioned before, is renewal a real value-add to shareholders or not is less of my concern. My bigger point is the bankability of it. Unless I see proof otherwise, renewal portion is not bankable. For SolarCity to survive it have to have a bankable model post-ITC. Meaning SolarCity should be able to absorb any equity gap between tax-equity-partner-contributions and asset-backed-debt. That point you have so far not said anything about. So I assume you accept it. If so, you accept the vulnerable situation that SolarCity is in in meeting the reality of post-ITC world.�
1/1/2015
guest In spite of stock prices all the major panel makers are posting great results - JKS, JASO, CSIQ, FSLR, SPWR and great results are expected from TSL next week. All the Chinese and CSIQ are expanding capacity from 4GW to 5GW. JKS says they cannot expand enough to meet demand in 2016 so they will be production constrained for the year.�
1/1/2015
guest Isn't that due to a one time push for 2016 though? What happens when global demand ex-US stays constant (or goes up at a 'normal' pace), while US demand falls 70%?�
1/1/2015
guest Unless I misremember, the 'normal' pace of global demand is accelerating.
India, China of course, South Africa, Chile - heck, even Saudi! All increasing build out of Solar as fast as they can.
What this means in absolute terms, I don't know.�
1/1/2015
guest That is not happening with India's newfound solar target. There is no longer a go up at normal pace. There is enough market in the world to absorb the additional panels and then some if the US stops growing or takes a temporary dip.�
1/1/2015
guest Have you folks really fallen so hard for this guy's shtick that you're debating if global solar panel demand is going to increase? Seriously? Wake up, you're being trolled.�
1/1/2015
guest It seems the market is beginning to realize that SolarCity is very different from VSLR, SPWR, and SUNE. Elon, SilverLake, and Bank of America will guarantee SolarCity has access to as much cash as the company needs to be very successful, even if the broad solar market runs into problems. Also, GM reps sort of just hinted GM is planning to partner with Tesla for future GM vehicles. If this turns out to be true, it is a very big deal for Tesla and SolarCity. It also means the unions are losing their influence.
Elon is worth around $10 billion. In a few years he will easily be worth at least $20-$40 billion, especially once SpaceX launches become more frequent. It's not hard to see how SolarCity will weather almost any storm.�
1/1/2015
guest Why don't you add some value to the discussion by showing global demand instead of name calling?
I said - I don't know
I did NOT say - There is no demand
Maybe not everyone is as enlightened as you. Educate us please.
You want a hype bull. No, you *need* a hype bull. It's not my fault you are not getting it. Quit it.�
1/1/2015
guest Making sense of leverage in value creation
SolarCity uses two forms of outside financing in value cration: tax equity investments and non-recourse debt.
The gap between gross retained value, $1.78/W, and net retained value (per ECV analysis), $1.21/W is due to non-recourse debt. In the most recent quarter, this provided $251M in capital for ECV, or $1.27/W. The present value of the cost of that leverage is just $0.57/W, the gap between gross and net RV. So in sum, SolarCity gets $1.27/W in project funding at a cost off $0.57/W in retained value. This seems like a fair trade.
How about tax equity financing. This provided $307M in project capital, or $1.55/W. These investors get to reap the 30% ITC tax benefit, about $1.39/W, plus 30% to 40% of lease/PPA revenue in the first 6.7 years and 7% there after. So combining ITC plus distributions from leases is a pretty rich cash stream. How much retained value does it draw? So far my best estimate is to compare the gross retained value of MyPower loans to leases. Essentially the cost to the customer net of ITC and small SREC is the same. But with leases, tax equity partners are providing ITC financing, while MyPower customers are providing this service directly. That is, they make a large payment in the second year when their tax return comes back. So MyPower has $3.66/W in GRV, while residential leases yields $1.89/W. I suspect that most of the $1.77/W is due to tax equity financing. In sum, tax equity financing provides $1.55/W at a cost of up to $1.77/W to retained value.
So it appears that tax equity financing is substantially less efficient than debt financing. SolarCity may do well to minimize tax equity financing. Moreover, ITC could reduce this inefficient financing by two-thirds. While it is not a plus to lose ITC, there are better ways to finance. Giving the customer to opportunity to retain ITC is a more efficient way to harvest the tax credit.�
1/1/2015
guest
I'd be interested to hear your distilled argument concerning global demand if you could kindly reiterate.
I'm guessing that the overall feel is that solar will continue to grow even if ITC should fade away. Also, would think that there will be a battle to ensure that it fades at the right rate so as not to stifle or halt growth. I get that debate is healthy, but it is nice to state your overall distilled argument every once in a while.�
1/1/2015
guest A 300W solar panel costs $150, it's already game over. You can twist and distort the story any way you choose, that's not gonna change reality. When someone's run out of argument to the point they're trying to convince you global solar demand will pause, it's time to pay them on the head and walk away.�
1/1/2015
guest No, I do NOT have an opinion about 'global' solar demand. I was asking jhm (and others) for info/opinion.
I heard from a trusted source that BNEF predicted that in 2017, 'US' solar installs will drop by 70%. From the same source I heard that wind installs fell by 90% when wind production-tax-credit (PTC) expired.
We are discussing what will happen to Buffalo produced panels and the factory in case SolarCity is unable to absorb all it's production for itself. The prevailing view is that they can sell the panels to others. I am NOT contesting it. I am questioning it. As to how people are coming to that conclusion and seeking more info.
I am a once burnt bull in SCTY. I want to be sure of everything before accepting a prevailing view. Hence I ask for info and question the view. Especially the bullish view because the bullish view is what costed me a ton.
Side note: my intention is to get back on to the long side, but only after being satisfactorily being informed of all of the dynamics to the fullest. And when certain conditions are met. Some bulls here seem take my cautious approach, my questioning of the bull view, and my presentation of bad data as an attack. Sorry, too bad. I couldn't care less. The 'add to ignore list' is a great feature. I just now added the first one.�
1/1/2015
guest Cool, so I didn't really get that you were being cautious. That helps! But now I'm under the impression from this bolded portion of your quote that you've ignored me?
I'm cautious as well, but feel that SC is doing the right things to get more market share and higher margins; but maybe those don't always seem to add to shareholder value the straightest of lines.
�
1/1/2015
guest No, sorry, not you. I put someone else attackinh me in this thread on the ignore list.�
1/1/2015
guest Benson, you absolutely missed my point. Look at your last sentence. Whatever price you may be willing to pay for a new system. SolarCity can beat it on a fully depreciated system, plus additional batteries if that is called for. The marginal cost to SolarCity is less than 1c/kWh plus batteries. That absolutely beats the cost of any new system. So SolarCity is in the position to bid down below the price of any new system.
The thing that is uncertain is what the price of grid power will be in 2035 and the price of a new solar+storage system might go for in 2035. What is certain is that a fully paid for system can beat both prices. This is not simplistic this is just basic economic reasoning to construct a bounding argument.
Before we can address your concern about what you call "bankability," I need you to define what you mean and why it matters. Obviously, I have missed your point.�
1/1/2015
guest Solar Stocks Continue to Plummet in a | Greentech Media
This is a very good discussion of solar investment issues.
Note here that in the US the installed base of solar is 20GW and it's growing 25% this year. That's 5GW. Elsewhere I have seen that utility solar is declining while residential solar is accelerating. Even so, we need to note the challenge SolarCity faces in trying to sell 900MW in 2015 in a market of 5000MW. That's an 18% marketshare across the whole US solar market. As a market leader, SolarCity will find it increasingly difficult to grow faster than the entire industry. SolarCity is growing faster than the industry, but it becomes increasingly expensive to take market share. This is one reason why it is important for SolarCity to Crack the code on small to medium size commercial. This is an undeserved market to expand into.
Note also that while the US is installing 5GW this year, the rest of the world is adding 50GW. This global market is growing at 30% to 35% per year. Solar component makers are ultimately competing for global demand which is more than 11 times the demand in the US. Even if demand slumps in the US for a couple of years, there is plentry of demand outside the US. So a slump in US installations would hurt US installers, but not solar component makers. Thus, as a vertically integrated installer, SolarCity may experience tightening margins as an installers, but the margins on making panels and brackets should not compress. This gives SolarCity better resiliency than a non-integrated installer.
Let's be clear. Much of the global demand for solar is based on simple unsubsidized economics. It's simply cheaper than oil, coal and natural gas. While government policy impacts energy investments practically everywhere, the basic economics of solar make it compelling even to politicians.
This is the disconnect that worries me so much at this time. Sure we can agonize over the details of SolarCity�s business model, financials, and execution, but we are in a macro market situation a that is very unfavorable for energy producers. All the fossil fuels have lost at least half their value in the last twelve months. This is a disaster for the energy sector. Sadly, too many energy investors lump solar right in with all the other fossil fuels and fail to understand that it is the success of solar and wind that is undermining demand for fossil fuels. This is extremely bad headwind for solar. I wish I knew how long it will take for the market to figure out that solar is simply taking market share from fossil fuels. Once this is recognized, we should see a shift of capital from fossils to renewables. Indeed I think the divestment from fossils will happen even faster than it will right now. Suppose an investor were to recognize that there is no long-term hope for natural gas to remain above $2/MMBTU or oil above $40/bbl? There are lots of investors that still believe oil, gas and coal will recover. But they can't. If they were to do so briefly that would only accelerate that transition to wind, solar, batteries and electric vehicles. There is no hope for long-term fossil fuels. Unfortunately the bearishness that is proper to fossil fuels is spilling over and poisoning the valuations of renewable stocks and bonds. What is needed is longterm investors who see how this transition will play out and are patient to watch it unfold. This is the time to be smart, when others are fearful.
This lends some insight into why NRG spun off their green company. The disconnect for fossil investors was just too great. They could not see burning good cash building up renewable growth assets. It's an amazing thing that such an investor would be thrilled to put cash into building out a gas pipeline to collect stable rent over the next 40 years, but is somehow worried that a solar investment is too risky to play out over 30 years. They simply do not see that demand for gas will just keep declining each year as more solar accumulates to the point that the pipeline will go severely under used. NRG was simply unable to bridge this outlook gap to bring fossil investors into solar investments.�
1/1/2015
guest http://mobile.reuters.com/article/idUSKCN0T82ZO20151119
"The idea that I want to reduce the FICO score because I'm desperate for demand is just a bunch of ********," Lyndon Rive said.
Add:
Again, I've said this earlier in the thread, Solarcity is also working on things that go far beyond limited frequencies on the electromagnet spectrum with their panel development...(here is a related example) might really need to think about renewal/upgrade from this perspective.
Scientists developing solar panel that doubles as a Li-Fi receiver | Network World
ASU's white laser technology one of year's top breakthroughs | ASU Now: Access, Excellence, Impact�
1/1/2015
guest Interesting and in my view, very accurate article. I suspect the conference in Paris will probably determine what direction any stock tied to clean energy goes over the next few months/years. There was a lot of talk about banks freeing up billions of dollars to invest in companies that will positively impact the world and address climate change. I wonder if banks/ impact investment funds, are waiting until its confirmed what the rules of the game will be going forward, and where countries stand in terms of support.�
1/1/2015
guest its clear why these investors go the fossil fuel route: subsidies to hilt that are in perpetuity pretty much globally. Tax payers are required to pay for oil and gas through tax code permanence. In such a fixed game that will take decades to breakdown, the safe bet is on a fixed game.
the problem is the paste is already out of the tube with advanced renewable technology. You can't just keep doing the same old oil and gas thing anymore. It will fail. They will try to go out with a bang, but the dust settles and we are a new energy economy. We are currently starting this downward spiral. Uncertainty is rising as money is thrown at the implosion. But again, we can't go backward now that we have this tech in the marketplace improving the energy infrastructure.
As such and tying it back to this thread, solarcity is uniquely positioned to take advantage of this situation.�
1/1/2015
guest I hope so, but regardless the banks really need to get there s*** together regarding stranded assets. Fossil power plants being built today will be stranded. Oil and gas infrastructure being built today will be stranded. These will be stranded not because of global warming, but because of technological and economic obsolescence. Around 2030 the fleet of gas vehicles will start to decline. By 2035, the fall off in demand for oil will be about 5% per year. Peak global demand for coal is happening right now. The only reason demand for natural gas is rising is because a portion of decline in coal demand is shifting to natural gas. But wind and solar are taking share from gas and coal combined. So once coal has fallen far enough, gas will fall too. So coal peaks this decade, gas peaks next decade, and oil peaks in the following decade. But from here on out there is price pressure all the way. Prices collapse before quantities collapse. So if bankers don't see this, they will make a lot of bad loans.�
1/1/2015
guest Exactly right. The tech is just at the beginning of its innovation curve. You can't say the same about oil and gas efficiency. This is cold hard reality of things will evolve, especially over the break even period of a nat gas peaker. Literally any peaker built today and in the future will become a stranded asset over the next 10-15 years along with all the others.
Current solar is just energy panel 1.0�
1/1/2015
guest One slightly crazy thought. Maybe the reason stranded assets aren't being accounted for is because banks and hedge funds don't know how to account for them?�
1/1/2015
guest Think about this, there has been 100 years of financial infrastructure developed around oil and gas. An entire Wall Street, an entire education system... An entire culture... Codified around it.
It's hard to break such a hardening. But, it will happen whether some like or not. And most likely they will go down with a spectacular implosion when it does. Such times are also massive opportunity for those that understand the reality. And that's the true market.�
1/1/2015
guest Once you get a sense of where this energy transition is headed, the next question is which companies are best positioned to lean into that transition. For my money, Tesla and SolarCity really stand out both for how they are currently positioned and for how nimble they are. Batteries and peak shaving will be the next big thing. Demand charges are common in commercial and industrial rate plans, and in places they are huge, $20/kW/month. This becomes easy picking for batteries and other demand charge defeating technologies. Utilities are pushing this out to residential ratepayers as well, but what they don't seem to get is the demand defeat technology will eat up arbitrage opportunities these plans create. That's just one example of how incumbent energy companies are miscalibrating, while Tesla and SolarCity launch into these opportunities. Can you make a permanent business model out of demand defeat technplogy? No, eventually utilities will lose too much money on demand charges and pull back on them. That is, if everyone did peak shaving, it would undermine the profitability of the utilities. They would be forced into generating too much power when it is expensive and too little power when it is cheap. So this is not the end of the energy transition. It's just a lucrative byway for Tesla and SolarCity to exploit, just like NEM was lucrative for SolarCity to exploit. By no means is NEM the end of the energy transition. So you don't make a permanent business model around it. You just exploit it while it is available. Suppose utilities where allowed to set whatever FiT they want, which has happened in Australia already. At first, the utilities will be tempted to set really low FiTs. The consequence of that is that solar owners find it economical just to add more batteries. In the process the utility loses value even fast. It misses the opportunity to buy low, minimize transmission costs and sell high. In the process, they lose market share at a faster clip while loading up their cost structure. So while the utilities miscalibrate FiTs, SolarCity will steal profitable market share. We will see that soon in Hawaii. How long will that miscalibration last? I don't know, but the longer it takes, the more share SolarCity will take. The end game is that utilities will learn to optimize the value of DERs through real time trading or something quite close to that. As long as utilities resist trading with solar and battery owners, we know that SolarCity and Tesla will have an edge. They will be exploiting each miscalibration. This is why we should not get upset when utilities or other incumbents do stupid stuff to try to fight SolarCity. It's the miscalibrations that deliver more market share to disrupters over the long run. So get a view of where this energy transition is headed. The ones pushing to get there first will win.�
1/1/2015
guest It's worse than that. They know how to impair assets, write them down and divest them. Remember what happened in bank during the mortgage crisis. Banks sat on alot of dubious assets, but the last thing they wanted to do was write them down and let investors and regulators know that their books were over valued. Early on they had opportunities to divest questionable assets, but BAU dictated holding them until it was too late. Then later it was a public mess cleaning up these "toxic" assets. In my view, utilities are sitting on twice as much generation capacify as they need. They like to tell investors that this gives them the flixibiluty to switch between coal and natural gas to whatever is cheaper. But this is missing the point that they just as well divest these assets and buy whatever is cheaper on the wholesale market. They've got double the exposure to potentially stranded assets, but they want to play switching fuel when both fuels are plummeting in price. All this is just a side show to get a couple more years of BAU. I do believe this will end badly and will likely result in a taxpayer bail out.�
1/1/2015
guest
Agreed. It's why I've taken an accumulation strategy.
Climate Change: New York vs. Exxon and the Coming Earthquake in the Financial MarketAssaad W Razzouk
the financial impact of fossil fuel divestment (and carbon pricing)...
Climate change and shareholder disclosure: More investigations on the horizon? | Dentons - JDSupra�
1/1/2015
guest So if these actions succeed to dislodge pension funds and the like from fossil fuel related investment, there will be a need to find other investments, particularly those with stable income.
It think it could be helpful for SolarCity to create suitable income producing securities. The first of course are ABS offerings. These are really beneficial to SolarCity because they generate $1.27/W in capital for a cost of $0.57 of retained value. Shareholders net $0.70/W in retained value from these deals. Tax equity investors are taking a disproportionately large cut of retained value. I believe there is an opportunity to lock in another equity tranche that would be more financially efficient.
Specifically, SolarCity could issue prefer stock that pays a dividend based on the PowerCo Available Cash per cumulative installed MW. Note PAC was $112M on cumulative 1674 MW installed. Thus, a dividend could be based on $0.0669/W. For example, a preferred share based on 100W would have a $6.69 annual dividend this year. Additional prefered shares could be issued each quarter as more MW accumulate. These shares would trade in the open market to get the best yeild. If the market prices them at a 6% yield then they are worth 100W of NRV. However, because they are prefered and get dividends before common shares do, they should fetch a yeild lower than 6% in the maket, and doing so means they generate more capital that retained value claimed. The difference is value that accrues to common shareholders. Additionally, this market yeild send a positive signal to bondholders and common shareholders as to the value of NRV. I would also point out that the value of renewal terms transferred to preferred shareholders. So the market price of preferred shares would indicate a market value for renewal terms. The upshot of this sort of investment is that one gets an equity position in the PowerCo with very little exposure to DevCo, manufacturing, or general overhead. You get a liquid investment in the value of 100 W of installed solar systems. I suspect this equity would come cheaper than tax equity, and would help fill the need for a constant flow of new project based equity.�
1/1/2015
guest http://www.forbes.com/sites/williampentland/2015/11/20/burned-by-the-sun-why-investors-fled-sunedison/
This is article exactly explains how entrenched monopoly utility corruption is. Ratepayers are scared of increases they can't do anything about. Hedge funds like the government protection of corrupt commissions protecting utiltiies from market forces. A sure thing. A fixed game.
solarcity is antithetical to this highly subsidied, bailed out, and most of all anti-market business model. The implosion is all but programmed in. President Roosevelt said in his in inaugural speech once that we must have a second bill of rights. One of the rights being freedom from monopolies. No less true of a statement today.
ENERGY: Germany enters brave new world of decentralized power -- Friday, November 20, 2015 -- www.eenews.net
germany moving toward decentralized grid... Article sites Solarcity as business model.�
1/1/2015
guest I did not get any reaction to this post, but I have gone back and reworked the tax equity estimates. What I find and now believe is that Tax Equity Partners are providing 6% financing, plus absorbing some risk around renewal terms. So this is a fair deal.
Suppose that out of 198 MW deployed 85% or 168.3 MW are lease/PPA contracts. TEP is providing then $1.82/W in capital for leased MW. I figure that for tax purposes, these systems are valued at $4.62/W, which accords with the direct purchase price. So the 30% ITC is worth $1.39/W. (Note that if SolarCity were to offer systems at a lower price for direct purchase, it could run into ITS problems justifying this ITC value. So blame high purchase prices on the IRS.) Next, I used the ECV table to calculate the present value of distributions to TEP. This works out to $0.44/W. So combining ITC and distributions under 6% discount, the value to TEP is $1.82/W. So TEP is providing $1.82/W in capital and receiving the same with 6% yeild.
Applying the same sort of direct calculation from the EVC table to Non-Recourse Debt, I get $1.27/W in capital for payments worth $1.06/W discounted at 6%. Thus, 4.5% financing allows shareholders to gain $0.21/W in NRV.
In sum, I am comfortable with costs of financing. TEP is at 6% and NRDebt is at 4.5%. With TEP there is no net loss to shareholders and 7% of renewal risk is absorbed, and with NRD their is a gain of about $0.21/W. So I believe shareholders come out ahead on both sources of project capital. Even so, shareholders would come out ahead if the uptake of MyPower and direct sales were higher. It may be smart for SolarCity to offer points on MyPower loans so that customers can opt into lower interest rates while generating more cash upfront. This could encourage greater uptake and better cash flow, both of which would improve the ability of the company to grow on a cash positive basis.�
1/1/2015
guest
Thanks for the work, jhm. I'd be interested to hear Brad go through this on analyst day. I'm sure one of those guys will be bringing financing up with all the media/hedge fund manager spin out here right now.
New York is transforming its energy systems. Meet the in charge. - Vox
Also, this is a fantastic interview with the energy czar of New York. Key points: New York set up for DER because of hurricane sandy experience, utiltiies don't own generation capacity, and no oil and gas business' in the state(no contstituites to worry about). This is a formula for the advancement of distributed grid in New York right now.
btw, Solarcity has a substantial aggregated solar+storage project in progress there as well.
Add:
I just listened to the conference call again. I think a communication issue was a result of market reaction to the conference call. The message should have been: we are now transitioning into next phase of growth structure post ITC. We are now very happy where we're at in being able to continue to compound growth in 2017 compared to all other competitors in our sector at that time.
The rest revolves around this. The one analyst talking about the million customer goal got at response that sounded like they are abandoning it. However, they are not making it a priority to the growth strategy of reducing costs and rebalancing compounding growth to get there effectively. The million customer goal is still there, but will be a result of new growth phase not as reason for it.
Also, commercial installs are massive right now. They are guiding for 70-90Mws. That is a national record. I did a little more in-depth research on commercial/govt/education solar providers and solarcity is really separating themselves. I personally called all top companies and firmly judge that solarcity is at the top by a good margin as far as customer response as well as suite of options provided. It amazed me how many companies provide no, or very few options compared to solarcity. Im predicting solarcity will really break away on market share in commercial in 2016.�
1/1/2015
guest Argh, I think I made a mistake above. I assumed that the value of the system for tax purposes was $4.62/W. I was adding the cost 2.84 plus gross retained value 1.78, but this largely excludes the ITC credit. Grossing up by 30% gets to $6.60/W, whence the ITC is worth $1.98/W, not 1.39 as I presumed above. If this is correct, then TEP pockets an extra $0.59/W. Thus they provide $1.82 in capital and walk away with about $2.41/W in value most of which is reaped in the next tax return. So this about a 32% ROI.
So all this uncertainty revolves around the tax value of the solar system. If anyone can get a better estimate of this, I'd greatly appreciate it.�
1/1/2015
guest What are your thoughts on the effect of mix on your numbers right now? Commercial is a little different then residential in this respect. They are ramping commercial up significantly at the same purposefully tapering residential around 210mws/quarter. Remember, they are building commercial/residential crews on projected MWs installed for the quarter, so this is a deliberate rebalancing of the mix, especially after they've activated the $1billion commercial install fund this year. What is the impact of this new mix that could give more context to the numbers?�
1/1/2015
guest jhm, I didn't get a chance to sit down for tax equity valuation. But I think your suspicion that they are reaping a lot is correct.
This cameup in Q2 call at the 1:00:00 mark as they were discussing the ITC preparedness: Lyndon Rive: "It's a combination of cost reduction and less cash going to the tax equity investors. That gets us to the $0.60 a watt."
And in Q3 CC at 56:50 mark Brad Buss says "remember that it starts with that tax equity fund, right, that's the root of all evil because that deals with all the way through to the ABS."
His characterization of Tax Equity somehow stuck with me. Not sure if that was just a passing innocent slip of tongue or if he really meant some thing.
It's a shame that the management doesn't talk about returns of Tax Equity folks. But I do think this is somewhat of a hidden trick that will play out in helping them get through ITC. In a way the lowering of ITC might turn out to be positive in disguise as it forces them to get out of the tax-equity payouts.�
1/1/2015
guest Thanks for the context, quotes. It's actually encouraging to me to hear Buss speak this way about TEP. It suggests to me that there is some tension there. If the TEP are reaping too high a return, then management should be working on ways to get around it. There ought to be cheaper ways to get equity like preferred stock and cheaper ways to cash on ITC credits, like MyPower loans where the customer retains it. But it sounds like management is struggling to break free. So I guess the one silverlining to ITC stepdown would be cutting TEP by 2/3.
- - - Updated - - -
The mix makes it all the more confusing to try interpret EVC and even cost per Watt. The installed cost per Watt could go down simply by virtue of mixing cheaper commercial installations into the average. The gross retained value is fairly low for commercial, but this might be okay if the cost per Watt is in proportion to that.
So I've asked investor relations if they might provide EVC analyses broken out by segment, PPA/lease, MyPower, and Commercial. I'll be surprised if they actually release that, but they need to know that investors care.
Strategically, I want to see SolarCity move aggressively into Commercial. I think there are huge opportunities to help business defeat demand charges. So batteries, solar and smart demand devices figure into this, and will save businesses big bucks.
But in the meantime, the mix adds confusion.�
1/1/2015
guest The biggest problem with SolarCity is really the amount of deception that they lay on naive investors.
Over the course of last 40 to 50 pages, I highlighted many of their deceptive tactics (characterization of situation in Hawaii, and in California, they BS cost metrics that don't account all costs, and their epic EVC metric, etc.).
Of all the deceptions, the very biggest is the Retained Value metric.
For the longest times, SolarCity published only Gross Retained Value and simply called it 'Retained Value' without a qualifier. They tried to spin it as that is the shareholder value that they are creating. All three analyst reports I read (2 from prominent big banks - JPM, DB) all directly used this Retained Value metric and projections of it to come up with stock price targets. Much of the financial media analysts/reports/bloggers all directly used this metric.
To be fair, SolarCity said that this is not net of debt. But consolidating RV with their balance sheet is so damn difficult that no body cared to do it.
I myself struggled with consolidating the Balance Sheet with RV but failed. I asked around but it wasn't of much help. It was too damn difficult. The business model and financials are too damn complex. Moreover, when the growth rates are 100% and RV is keeping pace at the same rate, who cares if there is debt? Even if debt was half of RV, it will be more than covered within a short span of 6-months was the thinking. The growth rate was dizzying. It covered away all flaws.
Only much later, in 2015 Q1 did they really consolidate with the Balance Sheet and publish the truly meaningful Net Retained Value (NRV). So why didn't they do this earlier? Just deceptive game, it is to selectively show data to spin things in the brightest light. Just taking advantage of naive crowds through financial gimmickry. Basically their cost metrics in the slide deck is the same game played all over again, selectively pick the cashflows and hide the true picture.
In 2015 Q2, when results were announced on July 29th, the investor community for the first time had an opportunity to really assess how the shareholder value is increasing. This I believe is the real kicker which set in motion the strong decline of the firm (together with external macro factors) starting in August.
When Q3 came out, the growth rate dropped to 40%. But this also shed additional light into progress of NRV and how it is not adding up with their announced cost-structure. Now you look at NRV, net out the renewal, net out the convertible bonds, and look at a per share basis, it is measly $14/share. And it is growing at an annualized pace of merely 16% or so.
This is a far cry from all the shareholder value, and the growth rate, investors thought they had in investing in SCTY. The stock promptly plummeted inline with new found reality.
This 40% growth rate is very enlightening, as it sheds light on a lot of issues, gimmicks and games that management has been playing. Growth is a very deceptive thing, it hides all flaws.
To repeat a Warren Buffett quote: "Only when the tide goes out do you discover who's been swimming naked."
I really learnt a lot through investing in SolarCity. Investing in growth companies, especially with new age financials and metrics, is a dangerous game. You never know what the real value to the shareholders is. When reality sets in and expectations are reset, there will be massive corrections in stock prices. I guess many people learnt this lesson in the tech bubble. I learnt it through SolarCity.�
1/1/2015
guest I've been thinking about that Buffett quote the last few days. SolarCity seems to have a swimsuit on (if only a small bikini).
SunEdison looks like it is going to zero. I don't know if SolarCity can take any advantage of that.�
1/1/2015
guest Just a not on determining the average price per W. Ultimately the customer plus ITC plus any other incentives pay the full price for the system. So adding customer revenue, SREC, and other rebates and payments and discounting 6%, I get $3.225/W which only leaves out 30% ITC. So dividing by .7, I get $4.61/W at the pre-ITC price.
This approach is within a penny of adding cost per Watt, $2.84, plus gross retained value of $1.78. GRV nets out ITC, but cost per Watt includes it. So ITC should wash out in the sum, $4.62/W.
So I had gotten concerned that I may have missed something, but I thing both approaches are pretty much correct and yeild similar results. So I think $4.62 is pretty close to the right number, and $1.39/W is the ITC. So with this, I maintain that TEP are providing 6% financing, which is quite fair. So I'm not going to hold TEP or management in undue suspicion. There may well be tensions between management and TEP, but it does not appear to be a situation leading to diadvantage for shareholders. It could just be friction for management to deal with.
Sorry about the back and forth. I'm just trying to check my work and get this right.�
1/1/2015
guest From what I gather, SUNE and several others are deriving their growth from yield cos they essentially operate themselves. Masturbatory sales practices aren't real growth. SCTY is doing it the hard(expensive) way by actually building up a "subscriber base". Pretty obvious to me who wins out as we move along the next few years and all these other installers get squeezed just as bad as the SCTY shorts. Sometimes I think I'm being a bit too rosy on the outlook, but really who else has a nationwide full service model that is going to survive this tumult? Nobody that I can see.
Pretty clear that a full ITC stepdown would be good for SolarCity and their marketshare in the long run. Who else can say that?
SCTY is on pace to top their customer count and install cost goals. The details can be spun in any number of way as you can see above.�
1/1/2015
guest Elon Musks Connection to SolarEdge Casts Long Shadow on Stock - Bloomberg Business
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1/1/2015
guest The biggest problem with solar city is their financials are one of a kind because they invented their business model. They are not deceptive like chanos and his cronies that intentionally misrepresent their business model.
Ever since Brad took over as cfo they have been trying to explain their financials better.
There will be a massive correction with solar city's stock and I fear your gut will truly wrench when it happens. It might take a couple months or a few years. I hope you go long with short term options at the exact right time
I'm selfishly hoping it stays low for a couple/few more months so all this work I am putting in can be magnified through scty leaps. Working to expand my business from one installation crew to two! I am a bit smaller than solar city's 40k+ employees.�
1/1/2015
guest Paris 2015: Australia's quiet climate commitment to decarbonise the economy
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1/1/2015
guest SEDG is up 20% from the bottom. They should have some good news next year as the primary inverter for the Powerwall.�
1/1/2015
guest Harness power of the sun - 48 Hours - Rotorua Daily Post News
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1/1/2015
guest Now that install costs are down to $1.92, why wouldn't sales cost start their slow drift down to $0? Why would a savvy consumer not seek to purchase this product online with no sales soft cost associated based on the recommendations of loved ones?
Clearly Germany got to this sales-free word of mouth plateau very quickly, hence total retail install prices of <$2/W all-in. At what point will that sales-cost-free option exist from solarcity.com?�
1/1/2015
guest Canada's Oil-Rich Province Is Bringing in a Carbon Tax and Justin Trudeau Is Thrilled | VICE News
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1/1/2015
guest Wow, so you are a local installer. That's a good data point to know.
You created this account in Jul 2012. I wonder if you have been actively following SolarCity since then.
There used to be guy named sleepyhead. He was quite popular in these threads. He was dead against SolarCity. He was quite an evangelist at that, to a point he thought it's his 'mission' to educate people on SolarCity's evil practices, as he puts it. I was equally evangelical on the long side and pickedup a few fights with him and got into trouble with moderators. He used to say that SCTY will get into $20's if there were to be a recession. He was quite bold in saying that when the stock was still a high flyer. We longs took his predictions as mere provocation. In fighting with him I got kicked out twice. (Overtime I learnt to behave and keep my third login).. Oh well, here we are in 20's and there is not even a hint of a recession. And since the plummeting, his arguments have been literally haunting me.
In anycase, his chief argument was that SolarCity has no chance to compete with local installers because of its bloated corporate structure. For instance he computes that the sales/marketing costs and GA costs are near 0 for local installers, while it's quite heavy for SolarCity. He used to argue that the only reason why SolarCity is able to push sales is due to its gimmicky lease/ppa's and people would be much better off if they were to buy systems outright from local installers (by taking on financing if needed). - What are your thoughts on this perspective?
Being a local installer, while still being long on SCTY, I guess you see room for both types. But I will appreciate any detailed thoughts you have on that.�
1/1/2015
guest Full disclosure, I am an installer but not for solar (yet).
I remember so sleepy head quite well I remember so sleepy head quite well and I have been following Solar City since about 2013.
I thought his arguments then were very flawed and I still do. He was very educated on solar and was well of enough that buying panels was an option.
I believe for a long time people will remain largely uneducated and more importantly they don't want to have to think about solar once it's installed. As you know with scty once your panels are up they take care of all the monitoring and repairs.
People are so against these ppa's and claim they are such a bone head move. They are buying electricity at a lower rate than everyone without panels on their roof and as long as that's the case I think you will have people gladly taking the 0 percent down solar option.
I think sleepy feel into the very common trap of thinking that everyone else was like him.
I have seen this in Real Estate many times. People remodel their house in a way that it loses appeal to the majority of the market. Or buy a rental property and then they fix it up as if they were living in it. I have seen people buy a mobile home for rental and then put in hardware floors, tile back splash in the kitchen etc,
I'm getting off topic but I think it is similar with solar, is a ppa the best financial decision in every situation-no
Is it smarter than buying electricity from the Utility-yes
I have been very wrong about sctys stock price and paid the price with options expiring worthless but I believe I am still right on the company, time will tell�
1/1/2015
guest No you're not getting off topic, this is the SCTY Investors thread and you're hitting on the single most important knowledge gap. SCTY doesn't provide even remotely close to the same product that a local installer provides and no one can seem to understand that.
Both are wonderful ways of going solar, but SCTY is for the everyday folks who want to go solar without becoming "one of us". They have no interest in the minutia or upkeep, they have a million other things to do. And if that is the case, who else can provide what SCTY can provide? No one that I can see. That's their differentiation.�
1/1/2015
guest Over the weekend I've been playing around with a financial model for leases under 10% ITC. I wanted to how it might be possible to get to a 40% return on equity.
The first problem is that ITC step down removes a lot of upfront capital from the cashflows. Offering zero down financing with a 2.3% escalator pushes alot of the customer payment stream way out into the future as well. This is fine if all you want is a 6% return on equity, but to get to 40%, you've got to get customer payments to arrive earlier. There are but two ways to do this. Reduce the escalator, which also increases the price per kWh at the beginning or take a customer down payment. Of the two, cutting the escalator has the biggest impact on advancing the payment stream. Keep in mind that the 30% ITC functioned like a huge down payment that the customer did not have to make. So basically I see escalators as basically dead in a post ITC world in which SolarCity pursues high ROE.
The second thing that ITC stepdown does is reduce the total price that the market can bear. Consider this under a total price of $4.62/W with 30% ITC. The customer pays for about $3.234/W. So no matter how you finance it, customers are not likely to be willing to pay much more net. So if ITC is just 10%, the gross price goes to about $3.60/W, so that net of ITC the customer is still at $3.24. Moreover, the 10% ITC under this gross price is only worth $0.36/W, whereas under 30% and $4.62 gross, it was $1.386/W. So we see that the stepdown does far more damage than just reducing the ITC by 2/3. It reduces it about 74%.
As depressing as all that may seem, it is still possible to achieve 40% ROE. I will now describe one scenario which does this. So we assume $3.60 gross price. ITC contributes $0.36 upfront. A customer lease will finance a $3.24 contribution assuming 0% escalator, 0.5% annual performance decline, 6% discount, and nothing down, all over a 30 year term. This leads to an annual payment of $0.234/W or $0.167/kWh. Next, SolarCity kicks in $0.44/W equity, 20% of the total $2.20/W cost. This leaves $1.40/W to finance at 4.5%, over 20 years, for an annual pament of $0.103/W. This financing is just 64% of the cost of the system. Thus, for the first 20 years, SolarCity nets $0.131/W per year and upto $0.234/W per year for the next ten years of renewal term. Under a 40% discount rate this has an NPV of $0.01W, so we know that this setup is consistent with a 40% ROE. Using the customary 6% discount, this has a NRV of $1.55/W. Moreover, within the initial 20 year term this has a NNRV of $1.04/W.
So conceptually it is posible for SolarCity to hit a NRV of over $1/W with a 40% ROE. But it should be noted that PPA customers will be asked to pay more upfront per kWh with the promise of little to no escalation. Additionally, SolarCity will need to drive its costs below $2.30/W. I believe they can do this, but interestingly this is not the big driver to getting initial PPA rates low. I do think it is reasonable for equity to kick in 20% of the upfront cost. This assures that the company is not too highly leveraged. If equity kicks in a bigger share, then ROE is substantially reduced. It equity contributes a smaller share, this can boost ROE, but it puts ABS investors at risk and thins out PowerCo Available Cash.
There are lots of ways this basic scenario can be tweaked to make it more friendly to customers. A 1% escalator would reduce initial PPA rates to $0.151/kWh with no loss of NRV, but NNRV drops to $0.97/W and ROE to 33%. It's not clear what consumers will require in the post ITC world. All installers will be pressed to pass more net cost onto consumers, and utilities will likely push rates up faster with less threat of competition from rooftop solar. If so, we could see the competitive price for PPAs jump above 15c/kWh.�
1/1/2015
guest jhm, Excellent analysis. This sort of analysis is very much needed.
You are suggesting that SolarCity will kick in in $0.44/W equity. That translates to $440Mln for 1GW installs.
Have you looked at how cash/debt changed over last 4 to 8 quarters? Over last 4 quarters, they burnt cash at $80mil/quarter pace(on top of debt raised to finance the installs). This includes all cash coming from the PowerCo as well. This is directly looking at the Balance Sheet.
So effectively with your model they will need close to $200mln of cash infusion every quarter to run the business.
Where will the money come from? I don't see it as sustainable.
�
1/1/2015
guest I think folks tend to over-work these numbers, forget where the real value lies and to whom SCTY is presenting this value. These are upper-middle class consumers whose priorities are something like ease of initial installation, ease of maintenance, reliability of management company, downpayment, monthly cost relative to grid, and origination of hardware.
In Pennsylvania for instance, no one has the first clue what's gonna come out of my mouth when I ask them how much they think a no money down solar setup will cost them. That's why it surprised me to see SCTY installing PPAs at 15% less than grid rate in PA, I don't think these customers need to see that 15% to be sold. They're infinitely more interested in going solar with no hassle.
That being said....
If you dump half the sales cost in the current model, you're there.
If you add an optional $399 downpayment, the escalator can be removed.
Just because the current SCTY model is tight, doesn't mean there's not a whole ton of wiggle room in the value proposition vs. price. There's at least $1500 just in sales cost on the front end of every PPA. Do we really think that's necessary moving forward?�
1/1/2015
guest Yeah, it's good to check those implications. Right now most of the equity comes from the Tax Equity Partners, who not only buy the ITC credits, but kick in a little more equity as well. So TEP remains one source of equity, though this competes for shareholder equity. Another possible source would be issuing preferred shares. I like the idea of attracting dividend investors to provide an influx of capital.
But the main thing to understand about this model is that we are targeting a 40% return on equity. So it is the cashflow to equity that drives the sustainability. So if 1GW represents 40% growth, that in steady state over say 20 years implies a base of 2.5 GW. Under this model that base is generating $0.131 to $0.234 (in renewal once we get out there). So let's just assume the lower on 2.5GW. This kicks in $327.5M. So the transition is tricky, but in the long run equity is just reinvested at a 40% rate of return. So ROE is what makes this finacially sustanable.
I would also point out that 40% ROE doubles every 2 years, given the finite size of the global energy market, this does pose some saturation limits over the long run. So let's back off an say that MW installations are growing at just 25%. So now our 1GW is on a base of 4GW, and that base is spinning off $524M. Thus after reinvestment of $440M, there's an extra $84M in extra cashflow available for other investments or to be returned to investors. So the big payoff to shareholders will come once unit growth is sufficiently below ROE. Until then, everything gets reinvested in growing the business.
The frustrating thing about the present situation is that escalators have held back early cashflow. So we have to wait many years for the escalators to thicken the payment stream to the point that it solid source of funding. Slower unit growth is really important to allowing the payment stream to catch up and support growth. Perhaps an even bigger issue than that is the preflight TEP distributions. These distributions are really high in the first 7 years and then thin out considerably. So over the next 7 years the impact of TEP will back off, and we'll see a more sustainable profit stream emerge. Sadly, the company is quite hooked on TEP like a bad drug. ITC stepdown could prove to be shortest way to kick the habit.�
1/1/2015
guest Is there any particular reason why you chose 40% ROE?
Is this annualized 40%? Isn't SolarCity's claim of current IRR is about 12% and they guided to 6% post-ITC (in Q2 CC). 40% sounds insanely high.�
1/1/2015
guest One thing we may want to look into is forecasting Available Cash, because that become our base for equity funding.
Last 12 months, PAC was $112M. In 2016, this should come in range of $220M to $250M. So on 1.25GW in 2016, this provides $0.18 to $0.20 per W to be installed. With one more year of 30% ITC, escalator 1.5%, cost $2.50/W and just $0.20/W from equity, my model suggests ROE in excess of 100%, NRV $2.22/W, and NNRV $1.61/W. This would start PPAs at 14.3c/kWh and add about $0.133/W or $166M in incremental PAC next year. Something like this would help transition to post ITC wit PAC getting to around $400M in 2017.
I'm hoping Dec 15 well see some strategy like this. If we can transition to $400M PAC in 2017, I think we'll be in a good position to grow forward. SolarCity needs to minimize the escalators as quickly as possible.
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The 12% IRR is ignoring leverage. With leverage they should be getting a much higher ROE. The point of targeting a high ROE was to measure how fast the company can sustainably fund growth. The 40% ROE I targeted is consistent with 30% unit growth.
Without use of leverage a 12 IRR restrains the company to grow equity at just 12% per year, maybe a little faster with a few direct sales and prepayments. Chanos even pointed to this as some sort of critique of growth. However, most businesses do use debt to leverage slow growth assets in to yielding higher ROE. It is just silly to think that SolarCity or any other company would try to grow without any use of leverage. But there are limits to how much leverage is prudent to use. If a business uses too much, they will find their credit rating impaired and interest rates go up. Even banks have to fund about 8% of a loan from equity.�
1/1/2015
guest Jeez jhm, you trust their slide decks too much. Take a look at the official Balance Sheet from the 10Q/K documents. Take 'Cash and cash equivalents' + 'Short-term investments' for their cash situation. Track that over last four quarters.
I mean look at end of 2014 Q4, 2015 Q1, Q2, Q3. If you include the periods before, it gets distorted because they got cash from public markets through convertibles/secondary.
They are bleeding cash as I pointed earlier. You are thinking they are bringing in cash. No they are not.
Sorry, this is no fun poking holes at your model. You actually quite very well illustrated the problem with ITC step down. I don't quite get the solution.
If the escalators are taken off, and upfront payments are increased, doesn't it go against their entire sales/marketing model?
"Go solar for $0 down and pay less for your energy." This is literally on the website main page, in big, bold letters.�
1/1/2015
guest The media still doesn't understand that SolarCity didn't really lower guidance or expectations for 2016. SolarCity, unlike certain other companies, chose to be conservative when guiding for 2016, and was very clear that they are ready to "re-evaluate" guidance and plans if the ITC isn't eliminated, or other incentives are introduced. The lack of clarity about what tax incentives will exist in 2016, and going forward is the reason the entire sector has been very volatile. Only one more weeks until Paris.
A vote against actions to address climate change, is a vote for supporting ISIS, and political and social unrest.
http://www.breitbart.com/big-government/2015/11/23/obama-climate-change-summit-paris-message-terrorists/
The GOPs Plan to Thwart the Paris Climate Conference | New Republic�
1/1/2015
guest A company that sells 20 year contracts, fully funds all expenses up front, and doubles in sales every year doesn't have a lot of cash on hand? Shocking!
Shouldn't there be a net retained value counter somewhere on the SCTY website? Maybe we could make a simple one based on publicly disclosed figures? That might make the picture a little less easily clouded.�
1/1/2015
guest I realize the fundamental difference between us right now is I believe in management and you don't but. .. you are looking into the past to predict the future.
They are intentionally slowing growth which will significantly slow cash burn. They also have multiple ABS offerings coming soon which will also "distort" the cash burn. I think many people (sbenson) included (hopefully because I like him) will jump back in to the stock when they see that scty really is on a path to cash flow positive in 14 months.�
1/1/2015
guest SolarCity is a fundamental part of Elon Musk's master plan. He commit more and more of his focus and resources to solidify the success of SolarCity. He telegraphs his intentions, and then doggedly pursues them.�
1/1/2015
guest China's dirtiest city can't clear the air | Reuters.com
Indian solar park highlights clean energy goals | Reuters.com�
1/1/2015
guest I think I should clarify what I meant by cash bleed and how it relates to the future. I get that it's not easy to get a point across with snippets of info on a complex matter.
Here is an ultra-simplified model (jhm does lot better than me in modelling the detail)
For simplicity let�s forget about the renewal piece entirely. If there is renewal, it will be bonus for shareholders; if there is not, nothing is lost. So let�s focus just on the 20-year segment. jhm too agrees that the system would have been fully paid for itself by the end of 20-year cycle.
Now within this 20-year timeframe, let�s say SolarCity has 0% profit. Even then, the business model can survive itself.
Say, system costs $100
Tax Equity guys provide $30
Asset-backed financing provides $70
SolarCity doesn't have to provide any cash into this cycle (except for maybe initial transitory purposes).
Now lets say SolarCity has 10% profit, then this 10% effectively becomes SolarCity's 'equity' as this 10% neither needs to come from tax-equity or asset-based financing.
This means that, at a steady state, there should be no cash drain on the company.
But we see that over last 4 quarters there was an average of about $80mil/quarter cash drain. Keep in mind that the $80mil/qrtr is in addition to burning off the $112mil the PowerCo allegedly made over trailing 12 months.
This can be explained to some degree as SolarCity is investing into growth (greater working capital) and into future (capex). So that is putting a drain on cash. There are yet more venues of non-asset based drains like R&D and other expenses and who knows what else.
As you see breaking free of all these expenses AND preserving enough cash to provide $0.44/W of additional equity that jhm is asking for in post-itc-step-down is *quite* a tall order.
Also keep in mind there are quite a number of obligations ahead for SolarCity. Those damn convertibles that are �assumed� to settle in Equity will very much likely settle in cash that SolarCity needs to pay. SolarCity committed to some insane expenditure in the proud state of New York. Apparently, in Utah too they committed to large investments. And then, what happened to that milestone based payment part of Silevo acquisition?
The only way I see SolarCity surviving the stepdown is by drastically cutting down on costs where the equity contributed by the firm actually comes off of the profit-margin. In other words, SolrCity will not supply cash directly. In yet other words, each install would have to be self-financed, just the same way it is today. Asking for ongoing cash infusion for installs is not going to work IMHO.
In my view, if SolarCity is able to cut costs to that low, they might do lot better if they just dump away all these sophisticated financing schemes. Just compete head on with local installers. Work with a few banks to provide financing directly to the homeowners. All the leg work will be streamlined and done by SolarCity. Make a profit on the sale upfront.
All this complicated math is mere gimmickry to fool homeowners and investors as value is leaked away through all sorts of unaccounted channels. Slim down and shut all of this down already.�
1/1/2015
guest Let me be clear that I am only trying to model project financing, not the entire enterprise. Moreover I never claimed that SolarCity was cashflow positive. In fact, I said that ROE has to be sufficiently above the unit growth rate for self-financing to kick in. SolarCity has been doubling unit installations for the last 5 years. So it is a gross misunderstanding of my post to object with comments about former cash bleeds. What I am trying to get to is how SolarCity can transition to a positive cashflow future. They may well have one or two cashflow positive quarters in 2016, but the serious question is how they achieve this in a post ITC world.
PAC is very important to understand for what it is and what it is not. It is the annual cashflow from deployed MW netting out distributions and debt payments specifically tied to this book of business. It does not net out other expenses and obligations SolarCity may have. So it is not intended to represent the full enterprise cashflow, nor should it. The point is that SolarCity's book of installed MW is a complex income producing asset, and we need to understand that asset on its own terms, not overburdened taking a full enterprise view. NRV is but one valuation of that asset, and we can have as many alternative valuations of that asset as we would like for whatever purpose we may have in mind. However we arive at a valuation, it is important to know that this asset does indeed have value. Second, it is important to understand that this is an income producing asset. Customers buy electricity, pay leases and pay loans. All this generates cashflow from this asset. Again do not confuse cashflow from a particular asset with enterprise cashflow. We are not talking about the enterprise in its entirety. So this cashflow from the asset is presently $112M over the last 12 months. A portion of that cashflow can be used as equity to add installed MW to the asset. Moreover, what is not supplied by this equity must be supplied by issuing new debt, IT and customer prepayments. So in general we want to think of some portion of PAC supplying a certain fraction of the capital needed to install additional MW. Depending on what assumptions we make this will lead to a certain ROE and natural self-funding unit growth rate. So in my model and assumptions I found that a 40% ROE was sufficient for self-funding at a 30% unit growth rate. By "self-funding" what I specifically mean is that this asset can generate its own required equity to keep growing at these rates. At an enterprise level we would have to consider management's appetite to grow at a faster of slower rate than these self-funding rates. So I am emphatically not trying to resolve what growth appetite management should pursue. I am simply trying to determine what this complex asset can support through self-funding.
PAC is a very key metric. The size of PAC in 2017 will be very important to know how much equity the installed MW can fund for new installations. I would like to see management set out a path to $400M or more PAC in 2017. At the $400M level, the asset can self fund 1250MW to the tune of $0.32/W, or 800MW to the tune of $0.50/W. I suspect that management's growth appetite may be somewhere in this range. Moreover, this should be a large enough equity contribution that ABS investors will be happy to provide debt financing at a good interest rate. So this would not be a banner year, but it can be a year to set a base from which to grow into 2018 and beyond. So the path to PAC in 2017 is what we should keep our eyes on. SolarCity needs to leverage the ITC opportunity in 2016 so as to get a solid boost to PAC in 2017. For example, this is why raising the initial PPA rate from 13 c/kWh to about 14 c/kWh in 2016 is very important. This can add an extra 7% to the 2016 contribution to PAC in 2017. And why should customers be willing to pay 14c/kWh in 2016? Because the escalator will be less steep. This will help reset consumer expectations, and SolarCity can get experience changing its messaging. They need to shift messaging from "Zero down, save immediately," to "Zero down, zero inflation for life." Many consumers are already worried about escalators as are investors. It is perhaps the most gimmicky aspect of PPAs right now. But locking in zero inflation for 30 years could sound like a solid value. Regardless how marketing positions this, it is a solid play for investors to ween solar customers off of escalators as it enhances the amount of PAC added each year. And this in turn sets the whole enterprise on a path toward positive cashflow and profitability. By itself, it may not suffice, but it moves in the right direction.�
1/1/2015
guest Thanks jhm for the clarification. The asset level costs, cashflows and profits are good to model. This gives a perspective into what is possible.
As a shareholder I would want to look at the enterprise level to see if it can sustain itself. The gap between asset level cash flows and enterprise level numbers is significantly high to tip the business one way or the other.
I guess my worry is still I don't see adequate proof/info that the enterprise can sail through ITC step down ok. And that is not what you seem to be trying to answer (per your clarification). That's cool with me. Didn't mean to distract your analysis. I wasn't sure what the objective was.�
1/1/2015
guest Jhm, I'm sure you know this, but the escalator is optional. It is not required for a lease or ppa. People choose between 0% - 2.9%. It's all sliding net present value calculation. People choose what $/kWh they want along the slide. After all is said and done, the average escalator is 1.7%. Also, look at the capital investment numbers for utiltiies right now in Solarcity markets. They are projected to dramatically increase. The nat gas craze has put a big 20-30 year capital return number out there and it's not going away even if Solarcity continues compounding growth because they are already building the nat gas investments. Like you said, big stranded assets are inevitable. So, retail rates will not go down, they will continue to rise well beyond 1.7%.Secondly, we are not even close to understanding the value of these assets and solarcity's network and network data. remember, they are building out an infrastructure that is already giving realtime data on production, use, and now with energy storage, behavioral data, predictive data points, as well as everyday interaction through the Solarcity app and associated platforms. They are the link between other consumer products such as nest thermostats, smart air conditioners, heating systems, coffee makers, dishwashers, Windows, security systems, weather sensors, lighting, matress covers, and much much more... In a sense Solarcity, will have almost an app developer network with near unlimited potential.Think about he value of this network and your mind will explode. Solarcity solar systems are the seed to a vastly larger value that will only compound over time.This doesn't include any advancements to solarcity's own software or hardware which I'm sure they will have many over the course of the next 20 years and beyond. One of my many predictions is that Solarcity will start offering Internet services down the line as well. We haven't even scratched the surface of value of Solarcity systems.�
1/1/2015
guest The idea that a company growing at 80-90% annually would not require cash to move into these new markets is laughable.
New markets require $1500 in sales cost on the front end of each PPA until they get a foothold, that's wildly expensive.�
1/1/2015
guest Yes, I am in basic agreement with this. The problem that I see with escalors is not really about customer value. It's about getting enough cashflow in the first five years or so to fund the continued growth of the PowerCo. When they give customers a set of options around escalors, they really need to base this on a discount that is much higher than 6%. At least 20% to even 40%, in my opinion. What this would do is reward customers for being willing to pay more early on. According to the latest EVC, the typical escalator is 2.3%. This analysis leaves out those who buy direct, so your 1.7% figure may well be an average.
So 13c/kWh, 2.3% escalator, 6% discount over 30 years is worth $3177/kW. In the first year, this adds $179/kW to PowerCo revenue. Under 40% discount (to aim at a 40% ROE ) this is worth a mere $657/kW.
So using a 6% discount to price a 0% escalator, we get the same $3177 present value of revenue, but the first year contribution is $229 and total value under 40% discount is $792. So the customer who opts for the 0% escalator is giving the PowerCo 28% more first year revenue to invest and 21% more boost to grow equity at 40%. So that 2.3% escalator is really costing the PowerCo a lot in terms of being able to self-fund it's own growth. So this is why I think the pricing model is wrong. If they were to base the pricing on a 20% discount, then the 2.3% escalator would have the same first year revenue contribution and value under 40%, but the 0% escalator would have a $201 first year revenue contribution and be worth $697 under 40% discount. Thus the gap between revenue would be only 12% and value 6%. This would substantially improve the uptake of lower escalators and so achieve a higher return on equity for sharholder. And this is done without taking away options for customers.
Another way to think about this is on the debt side. Short duration bonds have lower interest than long duration. So with s lower escalator more of the debt can be covered with shorter duration bonds. So low escalators save SolarCity on total interest payments, and some of this savings could be passed on to customers who opt for smaller escalators.
The combination of improving return on equity and reducing interest payments moves the company towards positive cashflow and sustainable growth.
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Thanks, I'm glad it help. I absolutely agree that the enterprise level is important too, it's just hard analytically to get there all in one step. We really need much more information about management's strategic plan to get there. No doubt 2017 will be a difficult pass no matter how it is approached. But getting past 2017, I am much more confident that SolarCity can evolve and grow. Three years out and grid power is more expensive, batteries are abundant and solar equipment is cheaper, and those trends will continue to be supportive. Also Riverbend will be cranking out panels. But 2017 is the difficult pass. So strategic question is how to play 2016 to give the biggest support to 2017. Blowing cash on "warm leads" just to bulk up clearly is not in the cards. What we need are customers who are going to pitch in a lot of cash in 2017. So let's see what this strategy entails.�
1/1/2015
guest Any news out? we went from up 1% to down 0,5% to up 1,5% in 3 min.�
1/1/2015
guest Holy cow, SunEdison is up 37%.�
1/1/2015
guest SolarCity cutting ties with rooftop solar advocacy group - Las Vegas Sun News
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1/1/2015
guest This one had been hurting me quite a bit lately! But I doubled down (for like the 5th time) this past Friday and was finally rewarded this week. It's a crazy volatile stock.�
1/1/2015
guest Looking at the bonds, market has been pricing in an imminent bankruptcy by SUNE. I guess with today's news it's a tiny bit less likely that they will go bankrupt. These kind of moves happen in distressed stocks and penny stocks.
Relatively speaking, SCTY is not that distressed. It is distressed in a text book - 1000 bps above benchmark - sense. But it's not like imminent bankruptcy distressed sense.
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SUNE has an inverted yield curve. With it's 2018 bonds yielding around 35%. That's effectively the market saying SUNE will go belly up any day now.�
1/1/2015
guest Tanguy promoted to president is about increasing size of the organizational structure. More positions developed throughout the company for higher levels of promotions across the company. Now more Vice President positions, regional directors, managers, etc. in addition, international expansion will create further senior Vice President roles, etc...
again, these changes are an indication of adjusting to growth.
At first, Brad retiring caught me off guard since he's only been around for a year. But, he says its retirement time. However, I feel it's also about the growth restructuring, especially with silveo team now in massive growth mode as well, etc... I feel a younger CFO is coming. He/she will probably be in late 30's. Long term prospect going into 2017 and beyond...
I hope we hear more on DEC 15th because we all know the spin machine is going to angle this as something terrible. Already have seen the Baron's headline "Brad Buss resigns". Gotta love the effort by these baffoons.
jhm, you have to consider the Solarcity will be at over 3GWs of installed revenue generating assets YE2016. That's 50% bigger then year end 2015 numbers(in accumulated total instslls). Now this is at about 50% less capital expenditure on growth and as Peter Rive projects, at 70% more revenue then YE2015. In addition energy storage will be included within that collective of deployed assets next year as well. Aggregation services, at this point in time, are greater value/Kwh then in solar only net metering regime. Like I said before, net metering will fade away naturally as energy storage becomes more and more integrated into each system install. Increased revenue coming from initially solar only customers over he course of the next couple years as Gigafactory ramps energy storage production.
Its hard for any of us to use solar only, static state calculations to truly understand the value. Energy storage is here and will only increase 2016 and beyond. That reality is where the value ought to be calculated. I know it's a tall order, but that's where the investment proposition rests in understanding shareholder value.�
1/1/2015
guest I agree. I look forward to seeing how these additional revenue streams will play out. At this point, I don't think we know enough about aggregation schemes to model its contribution. This is another reason why I'm not attempting to model enterprise cashflows, but just contracted PowerCo cashflows. It may well be that SolarCity is scaling back PV MW guidance for 2016 because batteries will become a significant component added to both new and existing systems. This would be pure speculation at this point, but it could explain why they expect revenue to grow 70% while PV MW grows only 40%. It has been a mystery to me how those numbers reconcile.
So if anyone has thoughts on how to quantify the battery and aggregation opportunity, I'd love to hear it. One of my minimalist thoughts has simply been that offering a free or low cost Powerwall with installation of a solar system of minimal size would attract customers to request quotes and save substantial sales and marketing cost. Just saving 10c/W in sales cost returns double the money in 10 years on a 7kWh Powerwall paired with 6 kW of PV. So if a Powerwall gets people to pick up the phone, that would be enough. But that angle really does not add a revenue stream beyond PV. It's just a promotional inducement. It also does not tap into existing systems. Aggregation, OTOH, would play out differently. Suppose a utility or ISO offered $10/kW/month for standby battery capacity plus say 30c/kWh for power discharged on demand. So a 10 kWh Powerwall could generate $30/month in standby plus say 40 kWh demanded per month and extra $12 on average. So this would generate about $500 per year to be shared between SolarCity and customers. So with this kind of deal SolarCity would move quickly to install batteries in all will customers homes and include them in installs. The problem with this scenario is that I am totally making these numbers. If any on knows details of pilot projects that could help. However, such a deal may be structured, it would need to be good enough to motivate SolarCity and customers to participate.
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http://www.forbes.com/sites/antoinegara/2015/11/24/sunedison-repays-most-of-410-million-margin-loan-seen-as-cause-of-stock-collapse/
This article does a good job of explaining what has been going on with SunEdison. They recently nearly paid off a large margin loan on TerraForm Power, one of its yieldcos. In hindsight is was a really stupid way to get some short term credit to help with an acquisition.�
1/1/2015
guest City of Las Vegas plans to go to 100 percent renewable energy - Las Vegas Sun News
GOP lawmaker proposes plan to open solar market in Florida | Miami Herald
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1/1/2015
guest Stranded assets may add up to $2.2 trillion. Blame COP21? | GreenBiz
A nice overview of $2.2T in stranded assets. I'm not sure that the messaging is right to focus on fossil industry losses under climate change scenarios. That just seems to reinforce resistance. I'm much more keen on the economic opportunity to make fossil fuel obsolete. Honestly I think obsolescence to batteries, solar and wind is the much more serious threat to the fossil industries. For $2.2T they can pretty much buy every politician on the planet, but ultimately they will lose to technology.�
1/1/2015
guest All I know about SUNE is that I saw them featured in Saved By The Sun way back in 2007 putting panels up on Whole Foods as part of a PPA. No idea what they're up to, but gotta think at $3/share it's worth taking a stab. I mean, if Bernie wins that alone practically ensures them a future.
That being said.....this yieldco model obviously needs some work!�
1/1/2015
guest SolarCity leaves TASC, denies split with advocacy partner Sunrun | Utility Dive
again, Solarcity is not just rooftop solar installs, it much bigger then that. Looks like they are making the appropriate shifts to get there.
ending quote sounds like a new mission statement on that vision.
add:
Ericsson and Orange trial Internet of Things (IoT) over GSM and LTE | Multichannel
28 billion connected devices by 2021... This is a massive massive number of battery powered or plugged in consumer products that will require energy efficiency as well as cheap energy. Centralized power just doesn't provide the services to get there. Solarcity is square in the middle of what consumers and the economy at large will require. Imagine the synergies with the spacex satellite constellation around this time as well... As jb straubel says we must think bigger...
couple things to think about:
GaN Substrates Technology Market Forecast, Trends, Growth Drivers and Industry Analysis
gallium nitride(GaN) has dramatically dropped in cost and is replacing silicon. Tesla, Solarcity, and spacex are primed to experience a major step function (maybe multiple) advancement as a result. Solarcity in specific will be capable of developing mass market energy panels that can receive(as well as send) a much broader spectrum of frequencies beyond just daytime solar. A large network of distributed sources/receivers is the key to unlocking significant value. Is it coincidence Solarcity has the largest distributed solar customer base (and growing) in the world?
"Basically, we are fabricating our advanced GaN transistors and circuits in conventional silicon foundries, at the cost of silicon. The cost is the same, but the performance of the new devices is 100 times better," Lu says.
'60 Minutes' Highlights How Mobile Payment Service M-Pesa Has Changed Life In Kenya - CCN: Financial Bitcoin Cryptocurrency News
digital currency is rapidly being adopted within much of the lest industrialized nations. Ie 90% of Tanzania/Kenya uses mpesa as mobile phone currency, yet a majority of homes don't have electricity to charge phones. India has over 1 billion cell phones, yet 300 million people don't have electricity. Bitcoin is rapidly becoming can nveince of choice for a growing number of these cell phone users as well.�
1/1/2015
guest Very interesting things happening in Florida.
GOP lawmaker proposes plan to open solar market in Florida | Miami Herald�
1/1/2015
guest I've been playing with a post ITC pricing model again. I see an interesting opportunity to leverage Powerwalls for upfront down payments that improve ROE. So I will build out two different packages: PV only and PV plus Powerwall for life of system.
In both cases I'll assume, 5kW PV at cost of $2.35/W, 1380h/year, 10% ITC, 4.5% debt financing, 6% discount and no escalator. The system produces 6900kWh/year and costs $11,750 excluding battery. PPA is 20 years plus 10 year renewal term.
PV only
PPA priced at 16c/kWh with no escalator and requires NEM. On a per watt basis, ITC contributes $0.36, debt $1.49, and equity $0.50. NRV is $1.25 and ROE is about 25%.
PV+PW
To the above system we add on one 7kWh Powerwall with upto 2 replacements over the course of the 30 year lease. The customer agrees to pay $4000 upfront for the original Powerwall and gets a permanent 2.5c reduction in the price per kWh. That is, they pay only 13.5c/kWh with no escalator for upto 30 years. Contributions per watt are as follows, ITC $0.39, customer $0.80, debt $1.42, and equity $0.47. NRV is $0.81, and ROE 40%.
I believe the second plan will be quite compelling to customers. NEM is not required, and the battery adds value to the system depending on specifics of utility rate plan and aggregation opportunities. At a minimum there is back up power. Demand charges can be defeated and if there is a flat utility connection fee, only can go offgrid merely by adding a low power generator. While the second plan does not add as much NRV, it has very strong ROE, which is what SolarCity needs to propel growth with sustainable levels of leverage. Moreover the fraction of NRV in the renewal term is smaller for the second plan.
The secret to the sauce is that 30 years of Powerwalls is pretty cheap on a present value basis. I assume a 10% annual reduction in Powerwalls. So the first is $3000, the second 10 years later is $1046, and the third 20 years out is $365. Discounting at 6%, this 30 year stream of storage has a present value of $3698. At a 40% discount to achieve our ROE objective, the value is just $3037. Even if battery prices only fall 7% per year, the present value at 6% discount is just $4030. So if SolarCity collects $4000 upfront, it most likely covers the present value of all replacements. Moreover if the batteries last longer than 10 years each this goes to SolarCity's advantage to defer replacement. So by inducing the customer to pay $4000 upfront for the battery, SolarCity nets about $963 on a 40% discount basis. This is like a 40% advance on the equity that SolarCity kicks in.
To sweeten the deal for the customer, I am suggesting a 2.5c/kWh reduction in the PPA. Without that, keeping to 16c/kWh would boost NRV to $1.37/W. The difference of $0.56/W, or $2802, goes to the customer. So the customer gets 30 years of Powerwalls for a net cost of $1200. This is also like pricing the PV system at $3.10/W versus $3.66/W. Customers who are willing to put $4000 down on a $20k system will probably demand a lower system price. Since they have equity in the system, they will likely appreciate not having an escalator, and uptake of the renewal terms at 13.5c/kWh is very likely. Additionally, the final battery replacement would be contingent on renewal as an added inducement. Of course, the battery is pretty cheap at that point so SolarCity can sharply cut rates if competitive pressures dictate.
So all in all, I think the PV+PW deal would be pretty compelling for those who can swing $4000 upfront. Moreover, if a customer is unwilling to pay upfront for a Powerwall, it is pretty costly to finance on the back of a PPA. Because the cost of batteries will be declining, the smarter mover would be for a customer to buy a single PW and use a simple amortizing loan. Why my PV+PW plan works so well is that you get cash upfront from the customer in exchange for a declining replacement obligation. And this is being exploited as a kind of loan from customer to energy service provider to fuel a higher ROE and self-funded growth.
For those that worry about the complexity of leasing schemes, know that it is always better for the shareholder to get cash more quickly from the customer. So the added complexity of tying a prepaid battery lease to a solar lease actually works to reduce risk to shareholders. There is of course the risk that battery prices do not decrease, but in that sort of scenario electricity prices are still climbing quite a bit so renewal update risk declines to mitigate the battery price risk. Again, it's usually safer to get cash quicker.�
1/1/2015
guest Wow, I can't believe this Gordon Johnson person is allowed to say what he says on TV. The straight out stupidity and inaccuracy is mind boggling. It is amazingly clear he and chaos are operating for a point of manipulation, since nothing they say is actually factual.
He commented on the Federal investigation into rooftop solar saying the government is looking into retained value. That's an absolute lie. The treasury began an investigation in 2012 to review a wide swath of company's valuation of installs for 1603 GRANT program funds dating back to 2009 in the wake of the Solindra bankruptcy. That's right, this investigation started during the time Mit Romney called Tesla a failure of a company. This case has absolutely nothing to do with retained value calculations. He's completely trolling this case in order to put that in investors minds that are watching bloomberg, which again is a manipulation strategy that has nothing to do with actual fact. This entire treasury investigation will blow up in his face when the decision comes down in May of 2016(but it probably won't matter because he'll sell out of his short position well before then), which has come in delay after delay and at the request of solarcity to speed up the process.
He also said solarcity solar systems are like computers and that computers become obsolete and worthless after a few years. In this example, he insinuates people will just stop paying solar leases/ppas, etc... what total bull*hit. We all know that people are buying cheaper electricity, a commodity, locking in lower rates for 20-30 years, not entertainment devices or fads.
He also brought up, as I expected, Brad Buss retiring or as he said leaving after only a year. He insinuates the company is shady and a sinking ship. Not a single mention of Tanguy Serra being promoted to president of the company. Then he goes to net metering cases, which has nothing to do with anything he mentioned before, he just wanted to pile on as much negativity as possible, as any manipulator would. They title card said he/his company had no investment in the company, but it failed to show that he had an extensive short position in it.. which is intended to deceive viewers to believe he's got no skin in the game and that he's objective about his analysis. That right there is enough to have bloomberg investigated The buffoonery is in full effect with this guy and network.�
1/1/2015
guest Did you add in the energy storage incentives solarcity would receive, namely the SGIP incentives?
Californias SGIP, or How Not to Structure an Energy Incentive | Greentech Media
Update: CPUC Decision Continues to Reward Blooms Fuel Cells | Greentech Media
add:
jhm, did you see this? Casino decision next week. If approved, they will leave buffets NV energy for good. They are appalled by Buffet's profits, yet he continues to raise retail rates... they're going solar +storage essentially "off grid"
It's pretty hard for NV energy to say solar customers are shifting this cost onto non solar rate payers when their biggest retail electricity customers are leaving the grid to go solar(w/ battery) because non solar retail rates are too high. Who is shifting the cost onto whom?�
1/1/2015
guest No, I just wanted to work with a more general case. It seems like SGIP more than covers the cost of Powerwalls, which is super where available, but does not make for a sustainable business.
That stuff with Bloom is pretty frustrating. Somebody should do some independent emissions testing and that their specs are only under ideal test conditions. Slightly higher emissions would disqualify Bloom.
NV Energy is a real winner. Customers are willing to pay millions in exit fees to break up with them.�
1/1/2015
guest And that's the beauty of distributed solar. A large retail purchaser in the desert has a million and one ways to make solar work to cover 100%. And no matter which way the utils go, the minute one major property goes off grid everyone else needs to pay more at retail to cover the lost revenue. Then everyone quickly scampers to follow and the debt laiden util caves in under its own weight and inflexibility.�
1/1/2015
guest Tibet's melting glaciers show climate crisis | Reuters.com
This page I assume will change the links, but right now it has some great info regarding Paris.
Morning Energy - POLITICO
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1/1/2015
guest
Thats interesting, thanks for that info. Lyndon Rive with Governor Brown in Paris is very encouraging. Lyndon did say Brown is the best governor in the world and will not allow distributed solar get damaged in California.
Maybe be we will see a big announcement from them both.�
1/1/2015
guest Why natural gas and oil are doomed
Why the Price of Oil is Doomed for Longer than Expected | Wolf Street
Below is my comment to this interesting and well reasoned piece. Many who are trying to make sense of the collapse of the oil and natural gas markets are failling to think seriously abould the role of renewable. They fail to see that wind, solar and batteries are the black hole of the energy markets. Happy Thanksgiving!
There is no sustainable hope for natural gas above $2/MMBTU, and this will continue to be a drain on oil demand as oil and gas compete in chemical feedstock, heating and other markets.
In a combustion turbine, natural gas at $2/MMBTU is a fuel cost of about $23.5/MWh. This means that as wind and solar approach all-in PPA rates of $23.5/MWh, they beat natural gas on fuel price alone and leave no additional revenue to cover NG generator capex or other marginal costs. This is a price point at which even fully depreciated plants can no longer compete with brand new wind and solar capacity. Thus, we will see massive destruction of demand for natural gas as PPAs descend to this level and go even lower.
How long will this take? Recent solar PPAs have been in range of $40 to $50 per MWh within the US. The cost of solar should continue to decline 10% to 15% per year. So solar could reach $23/MWh by 2020. Wind PPAs are already in ranger of $25 to $40 per MWh in the US and can continue to fall 5% or more per year. Thus, wind at $23/MWh is imminent. The cintinuing decline in the cost of solar and wind is based on advancing technology and manufacturing and supply chain efficiencies that come with doubling production ever couple of years.
Moreover, Tesla now prices their Powerpack 100kWh battery at $250/kWh. This is sufficient for SolarCity to price a utility scale dispatchable solar facitity capable of storing all its energy to be dispatched after dark at $145/MWh. This beats a new gas peaking plant with $160/MWh LCOE with natural gas at $2/MMBTU. Battery costs should fall just as fast as solar. So fully dispatchable solar should fall below $70/MWh. Thus, dispatachable solar and other applications of battery will out compete gas peakers very soon. This deprives natural gas pretty much any longterm market in stabilizing the grid except perhaps to address seasonal demand. The presence of sufficient batteries in the grid will impose an arbitrage bound on the daily spread between high and low electricity prices. That arbitrage bound shrinks with the price of batteries and other storage technology. So longrun any grid stabilization demand for natural gas shrinks with each passing year. It will be cheaper to stabilize the grid with batteries.
The problem with natural gas prices above $2/MMBTU is that it simply hasten the rate at which wind, solar and batteries are brought into the grid. Once installed, these assets will permanently destroy demand for natural gas. For example, this year the US will install about 5 GW of solar, and that is enough to displace demand for 82 trillion BTU per year for the next 30 years. And in 2016, the US will another 7 to 9 GW of solar. If gas prices were to recover to $3/MMBTU or higher next year, that would only boost solar and wind installations even higher in 2017.
Any investor who is looking for a floor for natural gas, coal or oil will need to give serious attention to where floors might exist for wind, solar and batteries. As far as I can see there are none, and these new technologies will continue to exert deflationary pressure on all energy markets for decades to come. Wind, solar and batteries are the black hole of the energy markets permanently sucking demand away from coal, gas and oil. The only thing in question is the pace at which demand is destroyed, and this is why the Saudis had to allow prices to fall.�
1/1/2015
guest up 7,7% already�
1/1/2015
guest CLIMATE: Bill Gates preps biggest clean energy fund -- November 27, 2015 at 7:54 AM -- www.eenews.net
Bill Gates to launch clean energy project on sidelines of Paris climate talks | Environment | The Guardian
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1/1/2015
guest
Elon did do a somewhat "fireside chat" with bill gates just a few months ago. Might have had a discussion about this project. Elon also had prime minister at the Fremont factory recently too. Would be very interesting if gates is investing in the Gigafactory here or in India. Would be a big development for Solarcity as well. Also a possibility gates and others invest in distributed solar globally.
a side note on the Gigafactory... Solarcity will get the solar install for the factory which is going to be many many megawatts and a big contract. Wouldn't be too far off to expect this announcement in the coming weeks/months as well.
jhm,
To add to your comment, nat gas infrastructure will be heavily questioned when the entire Gigafactory runs off renewables much more efficiently.
Gigafactory Renewable Energy Plans Slip Out | CleanTechnica
heres an op-ed letter about the $1billion buffets NV ENERGY intends to spend (buying his own gas fired turbines by the way) on nat gas plants for Nevada. Dg solar just gets in the way...
LETTERS: NV Energy's plans unjustifiable | Las Vegas Review-Journal�
1/1/2015
guest Giant Sucking Sound of Capital Destruction in US Oil Gas | Wolf Street
This is what stranded assets look like. Massive capital destruction. Apparently gas companies operate at a loss when gas prices are low.�
1/1/2015
guest By Bill Gates: Why Im investing $1 billion of my own money into clean energy research - Quartz
Bill Gates Expected to Create Billion-Dollar Fund for Clean Energy
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1/1/2015
guest Could Tesla use the Solarcity's playbook for its future (hypothetical) on-demand transportation service?
A service like but with autonomous cars to drive you anywhere, at anytime - with per-mile billing - requires to dispatch a huge fleet of vehicles 24/7 dynamically. How could the company pay for the manufacturing of millions of new cars without a customer to pay upfront?
Solarcity is currently structured with a DevCo (which sells per-kwh subscriptions), a PowerCo, and probably soon a MakeCo.
Tesla could have a similar structure with a Tesla Transport subsidiary (DevCo), Tesla Finance (PowerCo) and Tesla Motors (MakeCo).
I wonder how Tesla Energy will come into this play. It could just sell battery packs to Tesla Motors and other companies (incl. SolarCity). But if Solarcity's marketcap remains low, Elon could take the company private and bring it closer to Tesla Energy.
Code:[FONT=courier new].[/FONT][FONT=courier new] [/FONT][FONT=courier new] [/FONT][FONT=courier new]+-- Other car customers (individuals / companies like Uber...) [/FONT][FONT=courier new].[/FONT][FONT=courier new] [/FONT][FONT=courier new] [/FONT][FONT=courier new]|[/FONT][FONT=courier new] [/FONT][FONT=courier new].[/FONT][FONT=courier new] [/FONT][FONT=courier new]+-- TSLA Motors --+-- TSLA Finance ---- TSLA Transport [/FONT][FONT=courier new].[/FONT][FONT=courier new] |[/FONT][FONT=courier new] [/FONT][FONT=courier new].[/FONT][FONT=courier new]TSLA Energy ---+--[/FONT][FONT=courier new] SCTY MakeCo --+-- SCTY PowerCo ---- SCTY DevCo[/FONT][FONT=courier new] [/FONT][FONT=courier new].[/FONT][FONT=courier new] [/FONT][FONT=courier new]|[/FONT][FONT=courier new] [/FONT][FONT=courier new]| [/FONT][FONT=courier new].[/FONT][FONT=courier new] [/FONT][FONT=courier new]|[/FONT][FONT=courier new] [/FONT][FONT=courier new] [/FONT][FONT=courier new]+--[/FONT][FONT=courier new] Other solar customers (individuals / companies)[/FONT][FONT=courier new] [/FONT][FONT=courier new].[/FONT][FONT=courier new] [/FONT][FONT=courier new]| [/FONT][FONT=courier new].[/FONT][FONT=courier new] [/FONT][FONT=courier new]+-- Other battery customers (utilities)[/FONT][FONT=courier new] [/FONT]
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1/1/2015
guest I think the only reason why scty uses devco/power co is to try and explain the company to outsiders. In the end I an not sure it confuses the average Jo even more. I don't see tesla representing their company in this way but as Tesla energy scales they might have to break it out in some manner�
1/1/2015
guest Bay Area communities gearing up to create their own power systems - San Jose Mercury News
Why rooftop solar advocates are upset about Californias clean-energy law - LA Times
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1/1/2015
guest One month mark
It's been a month since the Q3 announcement. It�s very apparent to me that the stock found a new trading range of $25 to $30.
My expectation is that the stock will stay in this range for next 5 to 6 quarters until there is adequate proof that the company is able to sustain ITC stepdown. Promises from management, analyst reports won't instill confidence until there is actual proof in numbers is my view.
As I have always claimed the true support to the stock is the RV. But there are various ways to peel the RV onion. Based on what you include or exclude you can get dramatically different end values. It can even go lower than $14/share if you look at it conservatively.
In any case, Mr.Market will derive it's own value on RV and the trajectory of it until 2016 year-end and will put a trading range around it. That's the reason for a range bound trading prediction.
Further, the risk is to the downside based on various NEM phaseouts and the new policies. I don't think NEM phaseouts are adequately priced into the stock. NEM phaseouts can cause SolarCity to pull off of some states. That will both cost money and opportunity loss. Thus I think the reset of the trading range to the downside is a possibility too.�
1/1/2015
guest Agreed. Market cap is unlikely to climb above $3B for a company with $4B in net retained value and doubling in size every 1-2.5 years.�
1/1/2015
guest So after one month your expectation is the stock will trade in this range for the next 15-18 months. I find that highly unlikely. I don't think there will be an 18 month time that the stock trades in a 5 dollar range for a long time�
1/1/2015
guest Solar City was beaten down because the entire sector was beaten down. Solar City is doing pretty well compared to all other Solar stocks. When the uncertainty about the entire sector is gone, SolarCity will shine. I suspect some of this will happen in the next few weeks, especially with Lyndon speaking at the Paris talks. Everything else is irrelevant. SolarCity is very undervalued because the market doesn't know how to price it, because the market doesn't know what the solar landscape will look like in 2016 and 2017, and is therefore assuming SolarCity, along with every other Solar company will go bankrupt.�
1/1/2015
guest SCTY traded in a band of $10s, between 50 and 60 for about an year. So trading in a tight band is not unfathomable, in fact it is a very familiar scenario for SCTY.
Have you looked up a few beaten down stocks? Very few bonce back like a ball as bulls would like to hope.
- - - Updated - - -
That $4 billion RV is a sham. So is doubling every year or so.
That whole thing was ripped apart with Q2 announcement and more so with Q3 announcement. That is very much the reason for the reset in the trading band.
Oh well, even after a month, it is hard for some folks to see it. I tried to help. But somehow this is very hard to see for most all.�
1/1/2015
guest
The only problem is the gap from $30 to $50 will require either something big, or massive short covering. This is the only reason SolarCity is hitting resistance around $31. I see an obvious wedge forming. Either SCTY collapses or re-tests $50 by the end of December. In my opinion, there is too much big money supporting the stock between $25 and $30 for it to drop. Today could very easily be confirmation of a cup and handle.�
1/1/2015
guest We're talking about solar as if it's some new type of shampoo rather than the future of global energy production. SCTY is the #1 US installer with an infinitely more profitable revenue model than the rest and a value proposition no one will be able to touch for years.
It's just a matter of time. The ITC needs to shake out(either way) and consumers need to be educated a bit more on solar in general, then it's game over. To say SCTY will be trading in the 30's 6 quarters from now is to say solar in the US is about to disappear. Is that the feeling you folks are getting?
There's 4 or 5 things dangling out there that will spark this squeeze, just need to wait for one to happen and hope SCTY continues to execute in the mean time.�
1/1/2015
guest SolarCity starts search for factory workforce - Business - The Buffalo News
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1/1/2015
guest
I'd be fine with that. I will be accumulating shares for the next year or 2.�
1/1/2015
guest While I think his assessment is very off base, I agree it would be great if I had that much time to accumulate shares at these prices.
Benson, 10 dollars is twice the range and 6 quarters is a lot longer than one year
I am sorry for your losses you realized. You still have time to see the truth though, keep digging. . If you continue to follow scty as close as you are I think you will get back in at a pretty good point.
I will say Brad buss leaving has me Little nervous. I felt like I should of made some defensive moves when he sold his shares and not doing so cost me. Although in hindsight every bit of this will be crystal clear�
1/1/2015
guest Thanks for the thoughts Blake.
For the record:
- I don't think I ever said Management is outright liars. They are merely deceptive. Very deceptive I would say.
- I don't think bankruptcy is the base case scenario. I do think it is one of the potential scenarios with a reasonable probability. Pretty sure I have been consistent in saying that.
$10 on $50 is same as $5 on $25. So a $5 trading band is not that off base
Again more importantly my prediction is based on what I see currently happening (not merely predicting a repeat of the past as a technician).�
1/1/2015
guest If the past is any indication, SCTY should sit at this level for 2 quarters then tank to nothing just like TSLA.�
1/1/2015
guest Scty currently trying to break out of your 6 quarter range Benson, to be fair there is a long time until market close�
1/1/2015
guest http://www.bizjournals.com/buffalo/news/2015/12/01/solarcitys-impact-increasing-danforth-project.html.
Ladies and gentlemen, if you think politicians and business aren't paying attention to the economic impact of the Solarcity riverbend factory in buffalo you are terribly mistaken.Supplier building just announce a 75% expansion of construction due to tennant demand by Solarcity suppliers. New business is booming because of Solarcity. A new tax base. A new voter base. In addition, and this is without a single dollar spent on advertising, Solarcity already has hundreds of applicants for jobs not even announced yet. The are inundated with applicants and have already started a preliminary screening process.And we haven't even started on solar+storage sales yet and the ramping value aggregation services will bring to Solarcity power co starting at the same time the panel factory is a capacity production at the start of 2017.
To add, Solarcity solar+storage system knows when and where power is used and can offer suggestions and annual cost savings thru consumer products such as nest thermoststs smart appliances and air conditions, etc... All over the Solarcity app which is the center piece for all home energy production and consumption data, including payment system(such as PayPal and Apple Pay) as well as retail consumer product shopping. To me, Solarcity app serves a consumer like a Fitbit or jawbone UP3 coach. It will offer you smart suggestions based on your consumption behavior that will maximize savings while minimizing waste. While at the same time, providing services to the grid by being able to reduce the need to upgrade grid transformers, invest in billion dollar peaker plants, as well as massively reduce over all costs while increasing grid reliability and performance. All this excluding the significant reduction of water use and environmental damage from spills, co2 emissions, and military spending on resource conflicts and supply route security.
With all of this compounding value of distributed sources, there is no stopping this train no matter how big a utiltiy.�
1/1/2015
guest I just found this link, along with a link to their schedule.
U.S. Center at COP-21 Live Stream from Paris
Thursday Dec 10th:
1:15 � 2:15 PM CET
Event: U.S. Climate Policy: Implementing the President�s Climate Action Plan
Sponsor: The White House
Event Summary: The United States is on track to reach its 2020 target and has announced an ambitious target to reduce emissions by 26-28% below 2005 levels by 2025. This target roughly doubles the pace of carbon pollution reduction in the United States. This session will include a moderated panel in which panelists from relevant U.S. federal government agencies will discuss and answer questions about the policies in the Climate Action Plan including the Clean Power Plan for the electricity sector, fuel efficiency standards for vehicles, energy efficiency standards, and economy-wide measures to reduce other greenhouse gases.�
1/1/2015
guest There seems to be some urgent buying as price breaks above $30.50. I'm not really sure what is driving this.
The solar stocks I watch are mixed, so I don't think we are getting this from COP21. SunEdison and SolarCity are up much more than TAN, solar ETF.
Perhaps it's due to Benson's pronouncement of the stock being range bound. Shorts looked at that and thought, hell, if the stock is stuck between $25 and $30, I'm outta here. ;-)�
1/1/2015
guest Haha or maybe I am a good counter indicator
In any case I personally don't see an urgent need to jump in, in the fear of missing out.
I want to detect a range, if there is any, and trade in and out.
Done with being a long term investor (at least until 2017 Q2/Q3).�
1/1/2015
guest http://www.cnbc.com/2015/12/01/top-trader-najarian-buy-this-solar-stock.html�
1/1/2015
guest some guy on CNBC, said to by Solarcity because a squeeze is coming. I'm not interested in short term players/manipulators.
however, the HECO merger and liquified nat gas dreams are looking to be shut down as Hawaii is not backing the merger. This is huge for Solarcity since they are in the midst of distributed solar+storage aggregation discussions and solar+storage pilot programs to prove out the business model. 10% of Oahu is solar only, can you imagine the sales of powerwall right ou the gate with strong demand response market? It's going to be crazy huge market for Solarcity storage installs as well as new solar+storage as this all shakes out.
also, Arizona commission is in a huge shake up due to solar advocacy groups. Just read any article and you'll see the entire commission is under siege. In fact the attorney general has moved to have he chairperson removed immediately. Solarcity isn't messing around down there.�
1/1/2015
guest This will not be THE squeeze, there's nothing behind it. Maybe just the beginning of a reset to $35-$45.
The world is going to need to bridge a much larger gap in understanding for a the big squeeze to go down. Mid-2016 perhaps or obviously if the ITC gets extended in any fashion. The main squeeze will take us rapidly to $100+, but it's a ways off.�
1/1/2015
guest http://www.bloomberg.com/news/articles/2015-11-30/wind-solar-power-to-supply-more-energy-than-shale-goldman-says
Goldman Sachs thinks there will be more wind and solar energy added to the grid in the next 5 years than shale oil energy in the last 5.�
1/1/2015
guest TerraForm Power (TERP) is up 36%. This is one of SunEdison's yieldcos, the one that is supposed to acquire Vivnt's assets. Oppenheimer upgraded the yieldco with a $10 PT.
This may be significant to SolarCity because it goes to how the market has been undervaluing yieldco. When investors look at SolarCity through the lens of NRV or the value of the PowerCo, this is essentially valuing SolarCity as merely a yieldco, which does not pay a dividend. If the market begins to place higher valuations on yieldcos, this could easily boost SolarCity's market value too.�
1/1/2015
guest I would say that is a massive understatement, renewables already outpace every other form of new electricity production. Topping an equivalent amount of "shale energy" should be very easy in the next few years. With China and India building out solar, it won't even be close.
God forbid we actually get our act together in the US and make some kind of rational solar plan for ourselves.....
- - - Updated - - -
Really wish I could fully understand these yieldcos. Such a masturbatory economy practice seems illogical to me, but how exactly are these guys at the whim of various market forces? Aren't the profits relatively locked in when the deal's signed? Or are there no coinciding bonds issued as with SCTY?�
1/1/2015
guest The Silicon Valley Idea Thats Driving Solar Use Worldwide - Bloomberg Business
PPA haters will hate this one. Leasing is expanding to other industries.�
1/1/2015
guest California governor is arriving in Paris on Friday and will be there for a week. Lyndon rive is also expected to be there with him during this time.
willing to bet we get a big announcement this weekend or next week. Too big of a stage not to make some big news happen.�
1/1/2015
guest I hate PPA, but it's becoming clear just how necessary it is to remove the hesitance to adopt in the US. Germans don't need it, but we certainly do. For now.�
1/1/2015
guest Germans have one permit and it literally is accepted and doled out in one day. Solar in the us has something like 14 different forms to fill out for various permitting and inspection processes.
If the soft costs were the same, America would demolish Germany in terms of cost/kW (per install). Even then, no hassle, no capital investment lease/ppa would still be number choice for the average consumer as long as it's cheaper then what they currently pay utiltiies.
The reality is clear: people just don't have cash laying around to buy solar. They would rather use that money for other things. If they can drop their electric bill with no responsibility and out of pocket cost, they will do in a heart beat, even if a system costs half of what it does today.
lease/ppa/Solarcity loan-ppa-hybrid is the model for power consumption in the us. Add in grid services, it will even make more sense then ever before.
pf Drucker once said business is about one thing: creating a customer. In order to create a customer you have to know the customer. In the US, the customer wants to pay a cheaper cost/kWh at no invested capital or responsibility. That's the business reality. We all have to just get used to it.�
1/1/2015
guest The main things Germans have is certainty. Their energy transition plan was logical and immovable, all they had to worry about was how fast the FiT stepped down. We don't know from day to day which corrupt politician will do the bidding of which vested energy interest and in which fashion. In that kind of environment it's hard for the industry to get a foothold and get up to scale.
I couldn't fathom why anyone would want anything other than a low down payment cheaply financed array with hyper-low German-level soft costs, now I see the premium of PPA payments to be one of the greatest bargains out there. One I'm excited for is the ability of SCTY to fight legal/political/lobbying battles once they're huge, that should help level the playing field for the entire industry.�
1/1/2015
guest good segment at 21 minutes. not sure if it belongs here..but ...
http://www.cbc.ca/player/play/2679749564/�
1/1/2015
guest I think the bigger theme here is the Thing-as-a-Service business model. Most of us don't think twice about buying a smart phone as embedded in a multi year wireless contract. Why not just buy the phone outright? This is wireless-as-a-service. Many people think that car ownership will decline as more shared transport enters the market. This is Transport-as-a-Service. Much business software is delivered to corporations as Software-as-a-Service. All sorts of complex or expensive things can transformed from discrete purchase to a service agreement. So what SolarCity offers is Power-as-a-Service, and this makes sense because the dominant alternative is also Power-as-a-Seevice, aka, your local utility.
How far can this be taken? I recently had to replace half of my HVAC for about $6000. The installer offered 0% six-year financing. There was really no to look at other financing. We're fine paying about $83/month, but the troubling thing is how long will this system really last. It has a 10 year warranty, but I don't know whether it will last just ten years or 15. But suppose the installer offered the system as a service for $40/month with a 2% annual escalator for 15 years with optional renewals for the life of the system, all service included. Would this be a better deal for me? Quite possibly, because I have no risk of having to replace the system in 15 years or to pay someone to service it. I don't care about the privilege of owning an HVAC; I just want the damn thing to work when it get hot or cold out. Moreover, I've cooked these numbers so that the finance provider can obtain an asset with 6% yield. This is also good for the installer because it locks in a 15 year service contract in addition to an installation. But what is super cool about this is that the new HVAC is substantially more energy efficient than my old system, in part because the old system was failing. I have not bothered to analyze my power bill, but I rather expect the savings have been more than $40/month. If so, I would probably be money ahead to replace the other old HVAC system in my house. (We have two zones.) So for $80/month, I could get the whole house done and save twice as much on my power bill. (Kick in load management to shave demand charges, if I was under such a plan or was trying to live within a solar plus battery system.) As nice as 0% financing for 6 years sounds, it does inhibit me from making a bigger investment in energy efficiency. I suspect I will have to replace my old system in a few years and that I am wasting power in the mean time. I also know that this new system is much nicer. But as an equity owner of that old system, I'll probably put off replacement until it breaks down. So the installer has missed out on doubling an installation job and locking in a solid service contract. Meanwhile, Georgia Power generates power from coal to run my old inefficient HVAC system.
So I absolutely see the potential for HVAC-as-a-Service.�
1/1/2015
guest I didn't listen to Ocelot's segment, but NPR's All Things Considered had a snippet on Buffalo and the Solar City factory this evening, too.�
1/1/2015
guest Wait But Why? Had a mini-segment on SolarCity as part of its Elon Musk megathread. Not too much we don't already know but I loved this illustration:
�
1/1/2015
guest PPA believers, Have you ever wondered why SolarCity does 20 year PPAs (and hopes to renew for another 10) instead of doing the deal upfront for 30 years?
I have a theory on that but I want to hear your thoughts first.�
1/1/2015
guest When I see huge volume on $90 2017 calls, do I interpret that entirely as hedging a much larger negative bet?�
1/1/2015
guest WOW, near vertical takeoff. Any news?�
1/1/2015
guest Because in 20 years when cost of labor is through the roof along with utility rates they won't be stuck offering such a low price ppa, they can really jack the price up then!�
1/1/2015
guest Short squeeze.�
1/1/2015
guest
http://www.marketwatch.com/story/solarcity-shares-jump-as-options-trader-adds-stock-to-portfolio-2015-12-01?siteid=yhoof2�
1/1/2015
guest I want to short, but it is so damn expensive (and such a crowded trade)... Staying on the sidelines...�
1/1/2015
guest My uneducated guess is that they picked a number of monthly payments that would just make this equation work:
Principle + Interest + New electric bill < Old electric bill
I also suspect it has something to do with the output fade of the panels over time. Last I checked most panels had their output warrented for about 20-25 years, but my knowledge isn't up to date.�
1/1/2015
guest It is partly because noone warrants their cells for longer than 25 years, some for only 20 years. Generally, cells degrade between .5 and 1% per year in production, with the newer, more efficient thin film designs degrading generally faster. The warranties have some sort of language guaranteeing a certain output after 20 or 25 years, typically 80% of the initial rated capacity.
There is actually some risk (and some upside potential), since the latest technologies have not been around for long enough to see how well they will last out in the weather. If they peter out after 10 or 15 years, PPAs will be in big trouble. However, they could outlast their agreements and work for 50 years. That's just something we'll have to wait and see for. Either way, SCTY can't safely sign a PPA for longer than their cells can be warranted for.
It is also worth noting that the cables, inverters, structural supports, etc. may fail as well. Inverters I think have an expected life span of about 5 years. Being out in the weather, it can be expected that cable terminations, connections, and some other components will require maintenance and/or replacement, and those will accelerate over time. Somebody smart probably used some similar equipment installations to figure out 20 years was as long as they would want to hang on to these things. This is one reason I put 0 value on the 10 year extensions. If they could commit to it for that long, they would, because it would put more money in their pocket now.�
1/1/2015
guest Once the Buffalo gigafactory is running and the second one is under construction, I'm sure SCTY will off a 30yr option. Perhaps a soft-cost-free contract that's sold in concert with mortgages? Imagine the synergies every single mortgage bank would see.�
1/1/2015
guest That's more bearish than I thought. I have a simple minded theory.
If SolarCity presents a 30-year contract, for anybody who knows any kind of elementary math, it becomes absurdly obvious that it's a bad deal. You will be much better off buying the system outright (and finance it if needed). Then it naturally brings up the question, is SolarCity the best shop for outright purchases. SolarCity will fail hopelessly in that contest.
So by structuring a 20-year deal, it is not directly comparable to owning the system outright, the cashflows become too different. And you sneak in the comparison to the utility rate and make it appealing.
In other words, a 30-year PPA would be a bad deal and so sell the 20-year one. But turnaround and tell the investors you have a 30year deal, through renewal assumption.
Brilliant!�
1/1/2015
guest Either that or 20 years works best and is about the longest term any rational person would sign up for.
What's up with the high volume of negative posts on days the stock jumps to the positive? Should we infer something from that increased reaction to upswings?�
1/1/2015
guest High sodium content.�
1/1/2015
guest A completely rational and analytically informed person does not turn completely irrational overnight due to irrational market movements. Something is amiss.�
1/1/2015
guest You're putting a cynical spin on this again by assuming that SolarCity has some sort intent to deceive.
The renewal terms simply mitigate longterm risks for both SolarCity and its customer. Clearly the renewal term gives the customer an option not to renew, and this gives the customer negotiating power for a lower rate on renewal if competitive rates can be obtained. So the customer benefits in terms of potential opportunity cost to switch to a cheaper source of power. Cynicism is unwarranted when giving a customer a valuable option.
Second, as others have explained, panels are warranted for 20 to 25 years, and inverters are good for about 10 years. Cables an whatnot can be repaired as needed. The critical thing is that SolarCity does not want to be obligated to replace degraded panels that are no longer under warranty. So the renewal terms also give SolarCity and its shareholders an out when panels are aging badly. Notice that this out for SolarCity is a risk of longterm ownership that the customer yields. However, it is a lower risk of ownership than an outright solar owner would assume. If one thinks outright ownership is better, consider the possibly that your panels fail short of 30 years of service. Under warranty, you may still need to pay an installer for installation even if the replacement panels are included. After warranty, you have to pay for everything. So the outright owner is exposed to substantially more risk. But again SolarCity is protecting shareholders from the risk of having to replace panels past warranty. I see no grounds for cynicism here.
So the renewal terms protect both customer and shareholder from certain risks of long-term ownership. I would also point out that cynicism is a poor lens for making investment decisions whether long or short. Cynicism is a bias to infer bad intentions where none may exist. I see nothing sneaky here. A contract that give both parties reasonably protection from the risks of aging systems is prudent and fair. Certainly customers can choose for themselves what sort of financing they prefer and whether they see certain contracts as reasonable and fair.
Regarding SolarCity�s pricing on direct sales, I suspect that there could be tax implications if they were to price systems lower for direct purchase than for lease. The ITC is based on SolarCity�s selling price. If they reduce that, they reduce the ITC which is just 30% of that selling price. I suspect missing a few direct sales is worth maintaining a high ITC on all their leased systems. This gives installers that do not offer leasing a slight advantage. They can offer lower cash prices and not lose ITC subsidies elsewhere. I believe ITC at 30% is distorting prices somewhat. So my prediction is that, if ITC drops to 10%, we will see purchase prices decline and the gap between installer who lease or not will shrink. This is also one of those big differences between Germany and the US. In the US, the ITC is based on the value of the system determined by price, so this regime favors inflated prices. In Germany, the subsidy was feed in tariffs. This is a performance incentive rather than a price incentive. As a performance incentive, one is induced to install the cheapest system that will generate the most FiT incentives. We can of course argue about which sort of subsidy is most beneficial, but the fact remains that these incentives do distort economics, and in the US it induces lease installers to offer higher selling prices. So we can understand and accept the economic consequences of a policy, even if we disagree about the policy.�
1/1/2015
guest I feel his pain. I've sold stocks at a loss, thinking they were headed to the abyss - only to watch them pop right back up. A little saltiness is only natural. I think he's bought into his numbers a bit too much and is discounting the market a bit too much. Markets can be irrational for sure, but I always get myself into trouble when I'm convinced I'm smarter than the market.�
1/1/2015
guest This is an excellent point, and I think is highly likely to play a role. I think that most people don't pay as much attention to the total amount they are paying as much as how they think their monthly expenses compare. I didn't mean my comment to be bearish so much as just saying there is substantial risk to committing to providing something to someone 20 years from now with a product that has been around in its current form for only a few years.
It is also worth noting that the projected life spans of cells are mostly based on experience with arrays installed at universities and other research facilities. This is to be expected, but they are likely to have slightly better results than a consumer installation, as consumers won't be as reliable in inspecting, cleaning, and maintaining their arrays.
None of this is meant to be negative per se, but just to highlight there is some risk. People assume wind and solar are "install and enjoy free energy forever" propositions. Solar is more "install and forget" than wind, but both have finite lives and require maintenance. Maybe the latest 20% efficient cells will end up losing only .1% per year and have a 100 year usable life. Unfortunately, it's not like a mechanical thing that can be hooked up to a machine and tested for a million cycles over a few weeks. It just has to sit out in the sun for years and see what happens.�
1/1/2015
guest If you are talking about me, it took me a month of digging. And all of the digging only yielded rotten potatoes. I don't blame myself.
Much of the earlier convictions I had were really based on blind faith. I never bothered to look even the most basic stuff like subtleties of retained value (makes me wonder how many people here do) because I figured what management is saying gotta be true and is the most accurate way of looking at the world. I really took it to heart that the company was generating an insane amount of RV and multiplying it every year. Once you look at all the subtleties you will be astonished with what you find. It takes some amount of digging to see things clearly. But nobody can motivate you to do that. Even if some else does it for you, you will dismiss it off, because of the very same blind faith. So at a point we just keep disagreeing with each other but keep putting out stuff that we think. At a minimum, it has entertainment value�
1/1/2015
guest I detect neither cynicism nor an attack as "deception" the sales strategy. It's just how you sell things. As someone who has sold things, you structure a sale in a way that will appear best to your customer, even if it may not be best for them. In my book, that's just good sales.�
1/1/2015
guest Mayhaps, just smells a bit fishy to me. Can't see for ****, but I have a good sense of smell.
So looks like someone made a killing buying 5,000 $31 Dec calls yesterday and today we see someone buying 1,000 $90/95 Jan2017 calls. Hopefully this guy yesterday got people's attention and they're looking into the value. Ideally I'd like to see us stay at $30-40 through St Paddy's Day then have an ITC announcement before the big squeeze.
Anyone know about when 2018 calls will get cheaper if the stock trades $30-35 for the next 6 months? Do LEAP prices come down as you get closer to 18 months from expiration? I'm wondering because the $90 Jan18 calls aren't much cheaper than what I bought at with the stock at $43.
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Then why are you still here every day all day? If you've done the digging and it's all a ruse, why spend so much time discussing the fundamentals of a model you don't believe in and stock you don't own?
Smells fishy.�
1/1/2015
guest Believe what you want to believe, who cares.
Why should a short feel ashamed to say he is short on an anonymous internet forum? That would be absurd.�
1/1/2015
guest
Nothing is amiss, as far as I'm concerned. I have become less positive towards SCTY as a long term investment, but daily movements can go either way. The supposed "vote of confidence" from the recent options buying doesn't change my stance at all. The justification given for the investment was the "unusual options activity". Basically, this is a sophisticated options trader seeing that there would be puts in a bind short term and that there was an opportunity there. This has nothing to do with the fundamental value of the stock, just the circumstances created by a very crowded field of shorts.
I think solar energy is awesome and the greatest potential game changer for how we obtain the energy we sustain our lifestyles with. Unfortunately, I don't think SCTY will be the agent for that change over the long term. They have been great out of the blocks, but the race is only beginning.�
1/1/2015
guest That's great. A very noble way of looking at it.
As you say if the panels degrade beyond usability, SolarCity can have an out by pulling the system. In that case the renewal value to shareholders is substantially diminished.
You presented a number of arguments in favor of renewal over time. But in doing so you have proved to a very large degree that the management's assumption of 100% renewal at 90% price is quite an inflated assumption with quite a number of unknown risks.
Then why legitimize it in slide decks? Shouldn't it be offered to shareholders as a hidden bonus and put it in footnotes?
The convertible bonds that the company is very much on the hook for are listed in footnotes for heaven's sake.
I appreciate your views and analysis... But I still do believe that management is quite very deceptive.
Renewal portion is only one layer of Retained Value onion. How many here know and understand that it is based off of bookings (not installs, and not deployments). Has anyone looked at the gap between bookings and installs over last one year?
The biggest example is how they confused the investor base with publishing GRV and calling it RV for the longest times. My cynicism is rooted in fact. This is a cockroach farm. You see some, you keep digging, you find more.�
1/1/2015
guest My apologies then, I thought you adamantly refused the notion that you are short SCTY.�
1/1/2015
guest LOL
I will proudly post here when I go short.�
1/1/2015
guest We have rough information around how often that would happen. It's infinitely more silly to imply there is no value to an array with 10-15% diminished output.
100% renewal at 90% of TODAY'S price is insanely conservative in total. Especially given the option to simply move that array down the block to a new customer if the original customer chooses not to renew. What's the cost there, $300?�
1/1/2015
guest TERP is pulling back just 1% from its massive rally yesterday, and SUNE is up over 3%. So it appears that confidence around SunEdison is continuing to recover. I believe this is very positive for sentiment for SCTY. So SCTY is up another 7% on solid gains yesterday.
I've been saying the the stock price has mostly be down on sour sentiment for solar and indeed the whole energy sector. Oil and gas E&P is down 4% today. So the mood is lousy for oil and gas, but solar is getting some relief. These are important trends to follow. As the market comes to see solar as a substantially different industry from oil and gas, sentiment will improve for solar. As the crisis with SunEdison and yieldcos dissipates, sentiment for solar will improve. I continue to believe that SolarCity is one of the better plays within solar. But when sentiment is poor for an industry, this is generally not good for leaders in that industry. I see plenty of upside for the share price to improve on restored sentiment alone.�
1/1/2015
guest Have you looked at the definitions in the slide deck?
No need to answer. They are in the last few slides in the appendix.�
1/1/2015
guest This is mostly a technical run. Lots of naked shorts, and the traders have sniffed out a manipulation play based off the charts.
The climate talk momentum is good. Just need to keep the eye on net metering decisions in California and a few other states. Also, powerwall instslls and aggregation services model. ITC developments over the coming days and weeks. Possible we'll see a modification by the end of the year where projects started in 2016 qualify for the credit. Also, could see the extension legislation included and voted early 2016.
Lots of key policy in play still. This current rise is not tied to them.�
1/1/2015
guest There is a distinction between managing risk at the contract level and at the portfolio level. I fully expect that some small fraction of solar panels will fail within the span of 30 years. So SolarCity and customers need to have the contractual flexibility to manage those situations. Does the mean that renewal value is grossly overstated? No. Management thinks that uptake of renewal will be around 90%. I don't see a few percent of worn out systems compromising that view. Moreover, I thoroughly expect utility prices to continue to climb a few percent annually for many dacade, so we won't see price competion from that side. Solar panels and inverters will become an increasingly smaller component of the cost of installing solar. So in 10 years or so we should see general inflation overwhelm deflationary trends in solar components. So eventually, solar too will start to rise with inflation. So really I am not too worried about the renewal value.
I would also point out that SolarCity's presentations are very clear to break out renewal value as a component of RV. Moreover, there is an abundance of sensitivity tables to gauge the impact of different renewal and discount rates. So I think management is quite upfront about all this. Moreover, I think they are giving us a view of how they look at the business and what sorts of metrics they are trying to impact. Lyndon is a strong believer in measuring everything. He even keeps track of the hours per week he spends with his children. If that drops below 16 hours, he thinks he's not keeping up with being a good father. So if you look at these metric from the perspective of what does this say about how management is trying to run this company, you can learn things.
The hermeneutics of suspicion are very tricky. If you are looking at management from the perspective of how is management trying to deceive me, you will generally interpret each move as a deception and confirm a suspicious bias. My view is if you can't take management at their word, you should just walk away. If you short a company believing that management is deceptive, how will you know when to close your short position? If management tells investors that things are improving, you'll just read that as yet another deception and keep shorting. So it is very risky to short a company, if hold management in moral suspicion. So the best thing may be simply to walk away. Find other investments you can feel good about. SolarCity is just one little company in a pretty vast universe of investment opportunities.�
1/1/2015
guest Possible ITC extension could happen within next couple weeks.�
1/1/2015
guest Yes I'm starting to think the recent uptick is related to an increased chance of ITC extension.
U.S. solar industry in urgent push to extend tax incentive
Not surprisingly
Edit: what do folks here think about just how high of a jump we can get if ITC indeed gets extended? It looks like long term the story is pushed towards making fossil fuels more expensive and maybe removing incentives but that can't happen soon enough so extending ITC is a plausible way to address the situation short term.
I got in on some $35 Jan18 LEAPS a couple weeks ago and thinking about placing some short term bets as well. Core position is pretty far in the red but I'm just going to continue dollar cost averaging and also do a bit of gambling on the side for fun.�
1/1/2015
guest Really hard to say obviously but if an extension is announced soon it would get pretty ugly for the shorts. I'm actually not sure which would be better long term for scty but I would expect to hit an all time high if it gets extended.�
1/1/2015
guest Sunnova is the largest privately owned rooftop solar financing company. It is based in Houston, Texas, and is owned by oil investors, specifically money related to Kinder Morgan. They do not have tax equity investors as such but I suppose the PEG utilizes the ITC themselves. Basically the political argument for MLPs in lieu of ITC is selfserving for investors predominantly invested in oil and gas. Opening up MLPs to own solar and wind serves to sustain the tax incentives for fossil fuels that MLPs were designed to deliver. Personally, I would prefer REITs to be allowed to own solar assets, especially as these are deployed on real estate assets owned by REITs. MLPs are very complicated tax structures that are a pain in the but when you file taxes, and serve to transfer tax benefits unique to oil and gas related assets.
I do not trust Sunnova.�
1/1/2015
guest Solar advocates drop off 31k petitions at PUC - Las Vegas Sun News
�
1/1/2015
guest I think ITC could be one of the easiest climate change options for Congress. First of all, we know it works, and we have a pretty good idea of the pace of solar growth that it can support. Second, we know that it is generating a hell of a lot of good jobs. It is part of our economic recovery, and few politicians want to be seen killing jobs in their own district or state. Third, it is popular with voters. Rooftop solar is the most democratic energy source, and gives people real options to dependency on monopolistic utilities.
By contrast, while a carbon tax makes sense from a free market point of view, it is not clear how big a carbon tax would need to be to effect the same investment in renewables as ITC does. Furthermore, the very structure of utility markets is such that the cost of the tax will largely be pushed onto ratepayers. It would probably have the effect of giving natural gas an advantage over coal, but that's about as far as it would go. So basically ratepayers get to pay the carbon tax while little progress is made on building up renewables. Now if the revenue from a carbon tax were used only to fund renewable energy and energy efficiency, this could focus the right sort of investment to make a dint in carbon. So in review, we don't know how effective a carbon tax would be in adding solar. A carbon tax would create very few jobs if any. A carbon tax would impose an effective tax on ratepayers, would be unpopular, and would not empower people to invest in their own energy independence.
How about allowing MLPs to invest in solar? This would facilitate third-party ownership of solar assets. It is unclear how well this would stimulate the solar market or create jobs. It is less likely to give homeowners an opportunity to be more energy self-sufficient as it would not encourage direct ownership of solar. It is less likely to be appreciated by voters.
So what else is there? I guess the country could experiment with FiTs, SRECs, and whole host of one-off experimental programs. But again, it is hard to know if this would deliver that same level of climate response as ITC. One-off programs are very wasteful. They invite opportunism, but do not support development of sustainable business models or stable employment. Gimmicky programs do not encourage energy independence.
Certainly, there is much that can be done to help renewable energy to have better access to energy markets. Reducing the cost and time delay of solar permitting would be very helpful. Opening up aggregated grid services and other local power sharing markets can revolutionize distributed energy. These kinds of structural changes need to happen, but restructuring energy markets is difficult and risky policy work. It needs to be pursued, but it cannot be counted on to deliver.
So the main thing ITC has going for it is that ITC delivers. Politicians can support it and know hundreds of thousands of workers will make a difference everyday. Moreover, if ITC were extended to batteries with or without solar, that would help stabilize the grid, minimize the cost of the grid, and facilitate integration of renewables across the grid. Extending ITC to batteries would lower the cost of electricity for everyone, while reducing carbon emissions.�
1/1/2015
guest About the 20 year PPA...while I've prepaid my 20 years with SolarCity, when the time comes (assuming I still own the property), I fully expect to decline to renew. Then they will offer me the opportunity to buy the equipment at some price more than it is worth, which I will also decline.
After that, I fully expect that Solar City will not bother to come by and remove the panels...instead they will be left in place, happily producing power. There's no value in 20 year old solar equipment, and there's no value to expend the effort to remove them either. If I'm right, I get however long they last for free. If I'm wrong, SolarCity will take the panels away, and I'll be ready to replace them with Mr. Fusion (that's 20 years away, right?).
By then it'll be time to replace the roof anyway (which was done just before I installed the panels in the first place).�
1/1/2015
guest They will remove the system. Not going to give it to you. There is value in taking it off your roof. So gaming Solarcity 20 years out is a bad idea.
Now your roof is bare, you're back on centralized utiltiy rates after 20 years of rate increases. you'll just have to buy a new system at present value to reduce your new electric bill. You will see a sharp increase in your bill that will sting if you don't. Or, you could start paying lower rates with what you got and extend.
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its kind of funny that republicans put the ITC in motion. They said it was a tax break and that market demand would determine who gets the tax break or not. It's not a hand out if the market decides if solar is of value to a consumer.
Now you have oil and gas leaning on republicans to say it's a government handout that needs to stop. One republicans tax break is another republicans hand out. Go figure, when the competition starts to appear oil and gas bring out the spin doctors. especially now after the whole new Exxon cover up/scandal.�
1/1/2015
guest Exactly. Thus, I'll be in the market for a new system then anyway (once I re-roof). I'm betting Solar equipment then will be leaps and bounds over what's on the roof now, so unless they offer it for free, it's gonna get replaced. And the first call I'd make would be to SolarCity, I'd give them first dibs on a quote.
The only way I'd re-up with the same equipment is if some grandfathered tariff or something makes it really difficult to upgrade.�
1/1/2015
guest I'd be surprised if solar won't be THE roof by then. As in, replacing the roof would just mean you're installing new panels.�
1/1/2015
guest Exactly. I feel people will upgrade the time the 20 years is up. Competition will determine what the best option will be and I'm making a big bet that Solarcity will win your dollar again.
People get stuck on if a customer will renew or not. But the truth most will upgrade which I feel is much better for retained value then if all customers renewed.
We all have to remember, retained value is based on renewal only, not upgrades. I believe current retained values are not reflecting that. But more investors will understand as Solarcity comes out with innovative products that will push the industry. Solar + powerwall storage(and aggregation) is just the beginning of that innovation advantage.
about your rate offer... I'm willing to bet they will give you a $/kWh rate they determined your pre paid ppa at. Whatever that rate was they'd offer a 10% discount. I also think they will add a couple high efficiency panels or replace a few old panels to return your production levels to what you had at time of the original ppa as part of the deal.�
1/1/2015
guest 4.7 magnitude earthquake among seven recorded in Oklahoma | Earthquakes
oklahoma is the new #1 earthquake center of the world. That's right, the world. They had 7 Monday. two 4.7s in the past two weeks.
if you think this fracking and injecting the earth with waste water is viable energy policy over technological innovation in distributed solar then there is a major flaw in your thinking.
Solarcity is just inevitable. They will win the day as the dust settles in this transition to DER centric grid.�
1/1/2015
guest Either that or maybe "them that die will be the lucky ones". Or maybe someone else will make that happen but so far that one doesn't look likely.�
1/1/2015
guest $36 in Premarket, HHHMMMM�
1/1/2015
guest @woof (et al) if you sit back and think about it, as an example, 23,panels, 310 watts =7,130w array. 20 years, 0.5% degragation per year. 20 years = 91% output = about 6,500w output. add 2 more panels of 310 watts and you are back to 7,100watts. PV arrays are VERY modular. why remove the whole array when you can just add a few modules...? and add sunlight.�
1/1/2015
guest Google Buys 781 Megawatts of Wind, Solar Power in Three Nations - Bloomberg Business
Google Increases Renewable Energy Capacity in Largest-Ever Investment - Fortune
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1/1/2015
guest Loving this woof conversation! We need more of this, you guys are hitting on one of the most interesting angles to SCTY. What happens next and who is positioned to take advantage? If SCTY continues down this path and is the #1 installer for 3 or 4 years and most are PPA, the value of those relationships alone is astronomically greater than the value they're putting on a potential 10 year renewal.
Talking about 20 year old 91% functioning panels being left on a roof is a perfectly valid projection and should give us all some indication of what distributed energy will look like by the time the Sixers make the playoffs in 2035.�
1/1/2015
guest So if SolarCity offered you power over a five year term on your existing system for less than the depreciation and cost of financing on a new system, you would prefer to pay more for a new system over the next 5 years? If your roof is fine for another 5 years, you could defer roof replacement at no cost. Why would you want to replace your roof 5 years earlier than you need to? Is there some sort of use value you see in replacing roofs and solar panels before necessary?
BTW, I expect at some point SolarCity will expand into roofing, HVAC, and major appliances to offer comprehensive, integrated solutions. The timing of replacing solar panels definitely needs to be coordinated with replacing the roof. So customers will value an installer that can replace both on the same day! And that takes coordination of work crews.�
1/1/2015
guest Where is SBenson? Curious how his contrarian view is not shared when the stock is going up.
?�
1/1/2015
guest Couple days ago he said he wanted to short but it was too expensive to do so. Bet he's glad he held off now.�
1/1/2015
guest ITC extension back on the cards, says Credit Suisse | PV-Tech
extension could happen before dec 11th.
also, Solarcity investor conference call on dec. 15th
i expect significant cost guidance announcement as well as reaction to ITC extension(if it happens) and expectation to increase compounding growth rate in light of the change.�
1/1/2015
guest Nice. An early squeeze to get us back nearer all time highs just based on ITC extension and general renewables sentiment, then a bigger squeeze a year from now when people wake up to the profit potential.�
1/1/2015
guest Wouldnt be surprised if this gets to the 40's soon, chanos and gordon johnson bail and really start running this up...
add:
PV Magazine Mobil: US deployed 60 MW of storage in Q3, finds GTM
Just out, more energy storage deployed in q3 then in any quarter in us history. ~25% came from customer sided installs.
Here comes the transformation...
add#2:
http://www.power-eng.com/marketwired/2015/12/1/princeton-power-systems-selected-by-lockheed-martin-and-convergent-energy-power-for-high-reliabili.html
energy storage defers costly upgrade costs... In action... Not a concept... In action...�
1/1/2015
guest Awesome, thanks for the link.�
1/1/2015
guest Note that republicans are warming up to an ITC extension. This is what I was trying to get at. Extending ITC even for 3 years is a less bitter pill for republicans than most other proposals to deal with climate change. It has become the status quo. Oil, gas and coal are all hurting very badly in this country, so I don't think those industries would want to be kicked with a carbon tax at this point, even if that makes the most economic sense, which I don't dispute. This stuff has nothing to do with a free market. The incumbents will want least pain, and for now, I think ITC extension is least pain.
It would be nice to get this on a general extenders bill, so that it has a tendency to get rubber stamped with all the rest. If republicans really wanted to get rid of ITC they would push for a 10 to 20 year phase out plan, that has such small steps each year that no one bothers to challenge the rate of stepdown. Putting it into a general extenders bill means it could be re-extended every year for decades.�
1/1/2015
guest From a political action point of view, I wonder if it would be beneficial for solar workers to form union. In California, the utility workers union was able to undermine policy in a way that disadvantaged distributed solar. So in contests between distributed energy and utilities, there will be opposition from unionized utility labor. Solar workers need to be able to counter this. In other policy contests, solar workers need to have their voices be heard, and they are doing so. But perhaps under the mantle of an actual union, their voices could carry more political weight. Thoughts?�
1/1/2015
guest Mississippi now the 45th state with net metering.
2.5c plus cost savings utilities realize by ratepayer going solar. Add 2c to that for low income solar customers.
Mississippi did an independent study last year showing rooftop solar benefits all rate payers on the grid.�
1/1/2015
guest This is wonderful news. 25MWh front-of-the-meter and 28.1MWh behind-the-meter. 88% of behind-the-meter was commercial, which is Powerpack territory. This is all a huge step up from cumulative installed. 100MW for the whole year with 60 MW in just the last quarter. This really does look like a break out year for batteries.�
1/1/2015
guest PV Magazine Mobil: Pushing the envelope: Utility KIUC on integrating high penetrations of solar on an isolated grid
Kauai utiltiy excited for the Solarcity solar+storage project. Sole purpose is peak shaving at high demand hours. This is a big picture of rooftop solar aggregation.
Construction starts in March.�
1/1/2015
guest Based on SBenson view I bought 50 * Jan $40 calls. Looking pretty healthy about now.
THANKS SB!!!!�
1/1/2015
guest The squeeze is on. Hang on tight, we're just getting started:
�
1/1/2015
guest On a day when the market loses 1.4%, it is quite extraordinary to see SolarCity climb another 5.2%. Buyers seem to be coming back to this stock. SunEdison is also up 5.6%.�
1/1/2015
guest I bought SCTY right after the earnings dump at $30 and started buying SUNE around $9.50 (now cost averaged to $4.30). To say it's been a bumpy ride would be an understatement.�
1/1/2015
guest Elon Musk talks Climate Change and Carbon Tax at the Sorbone (12.2.15) - YouTube
Elon at COP21�
1/1/2015
guest That's a good point...but I want MORE! Right now I'm covering about 50% of my consumption with 13kW worth of panels, and am out of roof space. If I OWNED the system, I'm sure I'd trash all the panels and buy larger wattage ones in a few years, ROI be darned. But one of the untold reasons I went with the pre-paid lease, was to prevent myself from doing exactly that. (I know myself too well).
Assuming the 30 year shingles really last (and being under panels they probably will), sure I can defer if it makes sense. My point is I want newer, bigger, better toys up there, and the end of the PPA is my freedom to do just that. And before I installed those toys, I'd re-roof. If SolarCity offered that service, more power to them (pun intended).�
1/1/2015
guest Ok this makes more sense. Your sysyem is too small. As higher efficiency panels become available, it will be beneficial to upgrade so that you get more power per limited roof space.Do you know what efficiency you already have, say 19%. SolarCity is now producing 22%. So an upgrade now woulg only give you about 16% more power. If SolarCity, SunPower, and Panasonic continue to compete on efficiency and push the envelope about 0.5% per year, then 40% efficiency panels may become available within 20 years. So at some point you and other roof constrained customers will want to upgrade.
In the meantime, you could consider adding a solar carport or ground mounted panels, if you have the space. SolarCity does have an easy to install carport system. Such a structure could also be used for covered outdoor dinning or other shade feature.
I do hope that SolarCity is aware of your desire to add more watts. You should not have to wait 20 years to address this. If they were able to double you system today or in the near future, it seems they would want do so and write a new contract. Doubling your system with a new contract would create a lot more NRV for shareholders than, waiting till year 20. So there is no conflict here between customer interest and shareholder interest.
I suspect this will become more of an opportunity for SolarCity as they advance panel efficiency 24% or higher. Early upgrades need not be a waste of panels. A slightly used panel may well have value in a secondary market, particularly if one looks internationally to developing nations. At a minimum, SolarCity should be able to donate these through their GivePower non-profit and reap a tax benefit on the residual value. I think the biggest problem with reinstalling used panels is just the cost of labor. So through the non-profit channel there may well be volunteer labor to do the installing, but even paid labor in developing countries is lretty inexpensive. Remember that 1.2 billion of the world's population is without access to grid power. So if they can get their hands on cheap used panels, they'll put it to good use. If a new panel with 25-30 years of life goes for 50c/W, a five year old panel with 20-25 years of residual life should fetch at least 25c/W. One of the basic problem with financing solar in developing countries is financing over a long time horizon. Cheaper panels with shorter life require less financing. In time we should see a secondary market emerge.�
1/1/2015
guest Carbon Tax
It is a curious thing that some of the oil and gas majors are coming around to supporting a carbon tax. They think that a carbon tax would price coal out of the electricity market and allow natural has to scoop up market share.
Let's suppose a CO2 tax of $20/T, which is the starting level in Alberta and will go up to $30/T a year later. So $20/T is a nice round nominal level.
So what does the gas industry stand to gain over coal? In a steam generator, the nominal carbon tax on coal would be about $19.5/MWh, while on natural gas this is only $11/MWh. Thus, gas gains an $8.5/MWh tax advantage over coal. Presumably this is a big enough advantage to motivate utilities to retrofit coal plants to burn gas instead. Currently there are so few new coal plants being built worldwide that this play cannot be about displacing new coal plants. It's about shutting down or retrofitting existing coal plants.
But how does gas fare against competition with new solar and wind? Essentially, a $20 carbon tax adds about $1.064/MMBTU to the cost of gas. Today the price of gas is $2.184/MMBTU. So if this tax were in place, the combined cost of fuel would be $3.248/MMBTU. In a combustion turbine, you burn 11.731 MMBTU to make 1 MWh. So the fuel plus carbon cost of gas is $38.1/MWh. Now, let's compare that to utility PPA for solar and wind. We have seen solar as low as $39.5/MWh and wind as low as $25/MWh. So both wind and solar are within range of absolutely pricing gas out of the market on fuel costs alone. At this level, the capex and other non fuel opex for gas is running at a total loss. There may in fact be no economic rationale to retrofit coal to gas, rather both coal and gas plants are headed for early retirement.
So I suspect that oil and gas majors turning to a carbon tax may be seriously under estimating the threat from renewables. A carbon tax prices gas out of the market with respect to renewables and accelerates the growth of renewables. Gas majors are deluded. There is no market recovery for gas.
Shell obviously thinks it has something special to offer renewable energy as is evident in this incredibly sexist ad below. But batteries will suffice.
The Beautiful Relationship | Shell - YouTube
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One more little note. Where solar feed-in-tariffs may be based on the wholesale cost of generated power, depending on the mix of fuels, a $20 carbon tax could ado 1 to 2 c/kWh to FiTs. This is one way that a carbon tax could benefit distributed solar.�
1/1/2015
guest jhm - You definitely hit he nail on the head for why O&G companies are pushing the carbon tax. They do see it as a way to shape inevitable regulations in a way that advantages them.
However, you are missing a very big factor in your comparison of carbon based electricity generation to wind and solar. These are the PTC and the ITC, both of which I know you are well aware of. The PTC is $23 per MWh. The wind power needs to still be profitable without that incentive to truly be viable long term. The intent of these incentives is to encourage investing in new technologies, not forever subsidize otherwise uneconomical projects. The 30% ITC for solar isn't as easy to tack on to the price of solar juice, since it's based on cost of the project rather than based on production, but its absence would obviously have a substantial impact on solar electricity.
The bottom line is that the economics you use are only valid assuming government "jumpstart" incentives go on forever. I don't know when they will end, but they will eventually. Unless solar and wind costs fall by about half, that will be the end of new projects, even with a $20 carbon tax. I hope the costs do fall that much, and they may, but it won't be in the next year.�
1/1/2015
guest Profit guarantees for utilities spark heated debate | The Columbus Dispatch
�
1/1/2015
guest Sure, I am assuming that in a political environment where a carbon tax is viable other incentives for wind and solar remain. Additionally we could question whether any of the tax benefits or other subsidies
going to fossil fuels would remain intact as well. So I'm only looking at the impact of a carbon tax added to existing tax and regulatory structures.
But several points make this analysis more robust. First, the solar will continue to get cheaper for many years to come, declining perhaps 10% to 15% per year. Wind may advance as well, but not as quickly, maybe declining 5% to 10% per year. Batteries too should fall about 15% per year for awhile. So long as renewables fall in real terms, gas and coal will see their prices and market share erode. So if you assume just 10% price reduction and inflation at 2%, then in just 5 years the real price has fallen 46%. So maybe not half off in one year, but in five years is enough to mess up capital investments.
Second, I am comparing the full PPA price of wind and solar to just the fuel and carbon cost of gas generation. This is deliberately unfair comparison, because in the levelized cost of gas generated electricity fuel is a smaller fraction of total cost than capex. This is even more extreme for coal. Accounting for capex is even more complicated by the role that utilization plays. As utilization declines levelized capex grows in inverse proportion. For example, a facility that costs $1.5/W in capex with 10% discount, at 50% utilization, has levelized capex at $34/MWh, not bad for baseload, but if utilization falls to 25%, now capex is $64/MWh. A gas peaker may be cheaper at $1/W capex, but proforma utilization brings levelized cost to $114/MWh. However the average peaker only has about 5% utilization, bringing levelized capex to $228/MWh. When utilization falls to 2.5%, levelized capex soars to $457/MWh. So the point of all this is that as solar, wind and batteries just come close to competing with fuel costs, it becomes virtually impossible for gas plants to recover their capex. It is definitely not a requirement that wind and solar PPAs are below fuel costs to price a fuel out of the market. Getting to such a threshold just means that a fully depreciated plant is priced out of the market. Short of that level you have new plants priced out of ever being built and older plants that are no longer worth repairing or even maintaining. These are issues for utilities to worry about as they will be faced with massive asset impairments and write-offs. For gas producers the problem is much more immediate. Every GW of renewables added to the grid destroys long-term demand for gas and coal. They've got the problem of declining utilization, even if no generation capacity is lost.
The basic problem that gas has with solar, regardless of carbon tax, is that the lowest available PPAs for solar set an upper bound for the price of natural gas. So there can be no meaningful recovery of price for gas. Should the price of gas rise above new solar PPAs, then solar deals will be struck at a higher rate. Consequently demand for gas will be destroyed at a higher rate. So high gas prices one year will simply precipitate a glut the next year. Already gas producers are largely operating at a loss, but tthere is very limited upside for gas prices. So imagine that accessing a global LNG market will save the industry. But solar is cheap everywhere, so why should Asia pay $7/MMBTU for LNG which is more costly for fuel alone than solar at $82/MWh? Utlimately, LNG is relegated to being an expensive backup fuel, if it is going to be worth liquifying and shipping at all.
So on top of this depressing predicament for gas, a carbon tax only makes things worse visavi renewables. Perhaps gas can undercut coal with the help of a tax, but I don't see how that has much value for the industry past 2020. Sadly, this may well be the best play for gas among any set of options.
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Oh, yes, I forgot to include the cost of transporting gas to the site of generation. This, too, adds to the delivered cost of fuel. LNG is an extreme case where cost of delivery is quite high. Regardless the means of delivery, the cost of delivery need not decline as gas prices decline. So as gas prices decline, delivery costs dominate the cost to end user. A carbon tax works the same way, it will not decline as gas prices decline. So eventually you can get to a place where even free gas is not worth delivery and tax.�
1/1/2015
guest Paris COP21: Climate talks may not matter, because coal and oil will be redundant anyway : Renew Economy
Tony Seba is back at it. He's predicting all solar, battery, and EVs by 2030.�
1/1/2015
guest I hope Tony Seba is right, but I am skeptical. We need the entire world (or at least all the major economies) to convert to sustainable energy, not just the advanced economies of North America, Western Europe, and Japan. It's hard to imagine solar and wind and batteries becoming so cheap in the next few decades that all of India and East Asia and Africa and South America will make the conversion.�
1/1/2015
guest india, 2012 - 2014 terawatt hours PV consumed53% increase yearly. very forward looking PM. they are onboard with PV.
1.4 2.8 4.4
�
1/1/2015
guest I've been thinking about this. Regulatory capture resistance will be greatest in developed countries where there are the most assets to be stranded. By contrast developing countries are less encumbered by such legacy issues. Consequenrly, if energy transformation slows in developed countries, prices drop and the pace quickens in developing contries. Economic advantage goes to the countries that transition to lower cost energy quicker. So the developing world actually has an opportunity to narrow the economic gap.�
1/1/2015
guest important quote from that "�Solar has been doubling installed capacity for years. But it started from a small base, so you ask yourself how many more doublings do you need to get to 100 per cent?
�In the case of solar, all we need is 7 more doublings � and that could happen in 13 or 14 years." to bring it to SCTY. renewables up, fossil fuels down. but fossil fuel $8 trillion us dollars/year so it won't go quietly.
download "bp -statistical-review-of-world-energy-2015-workbook" excel spreadsheet.
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@JHM i THINK it was one of just recent articles from folks who have the link to Tony Seba at talks somewhat remember India was talking about 20 gigwatts PV, suddenly now about 100+ gigawatts PV (roughly 250terawatt hours/year generating capacity increase or more). I read the article within last 2 days. this may be why i read somewhere recently about Musk doing a gigafactory in India.�
1/1/2015
guest
Well, Tony also pointed out that we will use 80% less cars by 2030 because of the low cost use of self driving cars, mobility-on-demand. He said the cost will be 1/10th the cost of owning/operating a vehicle. 80% less cars... That a massive idea that I feel Elon is sold on. We can reduce the new total global fleet additions by 80% while at the same go completely electric by 2030. That's just too big off a pay not to pursue with both hands. We can see in Tesla's autonomous car strategy they're seeing this too.
Wealth becomes more distributed as transportations costs reduce dramatically as well as distributed energy such as mass market roof top solar reduces overall energy cost for all individual rate payers as well as weakens monopoly control. Tony expects distributed solar to cost less than transmission costs, so even if nat gas goes to $0, they still can't match distriubted solar. So energy costs go down as well as transportation costs which translates in a massive increase in freed up capital for everyday Americans to invest/spend.
in addition, many parking lots/spaces will be repurposed for green spaces, homes, urban solar installs and other value adding uses.
The reinforcing nature of this transition cycle is profound and just makes cents.
However, those few that lose that wealth of today are not going to go out softly and thus I expect an escalation in resistance as the breaking point nears. That can get real ugly. As they say, it's always darkest before dawn...
by the way... According to Tony, Solarcity is still in hyper exponential growth mode at 40% annual compounding so for us to overreact to Solarcity maintaining a new 40% Guidance is pretty ridiculous.�
1/1/2015
guest COP21: India signals willingness to cut coal for climate cash - BBC News
Progress. :wink:
Solarcity Riverbend Aerial update - YouTube�
1/1/2015
guest Here's exactly what Solarcity is doing with powerwall and demand logic ecosystem:
Germanys Sonnenbatterie Launches Energy Trading Platform | CleanTechnica
sonnen now pushing hard to do the same. Hard not to really question how oil and gas is going to survive ... And it has notting to do with global action on climate change... This is just good business.
add:
looks like the itc will get extended. Four possible outcomes:
--change from construction to commence in 2016 to count for the 30% tax break.
--extend one year at 30%, then down to 0%.
--extend one year at 30% and phase down by 10% each year after, 30%(2017) 20%(2018) 10%(2019)
--extend five years at 30% each year, then to 0%
add2:
ABS to be issued next week? 12,000 systems, so $150-200mln maybe?
big week this week with abs, Lyndon rive discussion in Paris, extenders bill (ITC) by Friday, and much much more... Not to mention the analyst call on Tuesday dec 15 the next Tuesday...
SolarCity Planning to Securitize Residential Solar Loans - SWI swissinfo.ch�
1/1/2015
guest Very good article. Be aware that the economics of solar are much more advantageous on an island like Kauai. Nice to see they are handling all the technical challenges of very high solar use at utility scale. Importing oil was always a very expensive and dirty solution for them and other islands.�
1/1/2015
guest http://corporate.exxonmobil.com/en/company/multimedia/energy-lives-here/video-lights-across-america�
1/1/2015
guest Gas is the new coal.�
1/1/2015
guest That just ran during the Sunday night NFL. Anti COP21 advertising?�
1/1/2015
guest It amazes me that the US Virgin Islands aren't all each on their way to being solar/battery micro-grids with diesel backup. I spend a good amount of time in St John and they have nothing but huge $1-5M villas with perfect roofs for solar and existing rates that top $.40/kWh(even more than Hawaii).
There used to be a huge oil refinery/generation plant in St Croix that I believe used to supply at least all of St John, but I believe they have ceased operations. Rates are probably only going to go higher now. As of this time last year I barely ever saw solar anywhere. Such a shame that no one is coordinating a solution to get off oil-based electricity.
Logistically I would think it's easier to do all of St Thomas and St John than to do Hawaiian islands out in the middle of the Pacific.�
1/1/2015
guest Lighting Rwanda LEDs -- SolarCity-Backed Off Grid Solar | CleanTechnica
Am article on off grid electric, the company that scty recently lead the 25 million investment round is installing 10 thousand systems a month with 800 employees, pretty impressive.�
1/1/2015
guest More like they are rebranding as clean natural gas to tell people they are all about carbon reduction. They also support a carbon tax and believe global warming is real. How come the republican candidates so adimately deny man made climate change? Where did the Republican Party break away from Reganism? My only answer is Kochs have really been pumping money into the political process in massive piles and this is the product they bought.�
1/1/2015
guest But Solar is a faux-ton�
1/1/2015
guest Agreed. I think it's a very slick and probably effective Ad however. It sort of sneaks up on you what their selling reassuringly. Only the ending had my doing a double take what I just saw...but I usually tune out commercials heh.�
1/1/2015
guest Did you see how quickly they sped over the fracking deep into the earth shot? I think this all in reaction to the Columbia university journalism student uncovering some scandalous news on them. They discovered internal Exxon documents from the 70's stating burning fossil fuels causes climate change.�
1/1/2015
guest Tyler Durden would have been proud. :wink:�
1/1/2015
guest Subliminal messaging maybe but we both know he would've preferred something much much different to be cut in there�
1/1/2015
guest Omnibus talks: Oil export ban a key bargaining chip - POLITICO
OPEC is at war - and it's sending shockwaves around the world - Dec. 4, 2015
The idea of a carbon tax makes great sense.�
1/1/2015
guest The Tea Party leader taking a stand for solar energy: 'I will do what's right' | US news | The Guardian
�
1/1/2015
guest Why did SCTY just go vertical?�
1/1/2015
guest There's huge short interest so anything can cause a squeeze. I still don't see the real squeeze happening before people wake up to the profitability which should take another couple quarters at minimum.
Keep in mind this could always be a preamble to shorts highlighting a less than exciting ITC announcement. If they pick one of those less than exciting extension options, that could be taken(spun) as a "negative relative to baked in expectations".
Edit: Also keep in mind Bernie's climate change action plan was announced today and he should do pretty well in the early(if not all) primaries. That should get people talking solar.�
1/1/2015
guest No idea. I was trying to find a video clip of the EarthToParis from earlier today.
Aimee Louise Sison on Twitter:
The New Climate Economy: No Longer Business As Usual
Lyndon Rive, Co-founder & CEO, SolarCity; Tony Earley, CEO, PG&E; and Nancy Pfund, Managing Partner, DBL Investors. Moderated by K.R. Sridhar.�
1/1/2015
guest I just hope we can break out of that $25-$30 range we are stuck in for the next 6 quarters. Fingers crossed.�
1/1/2015
guest Most curious. Oil is down 5% to $38/bbl. NG down 4% too. Yet both TSLA and SCTY are up.�
1/1/2015
guest Its potentially ITC extension on or before Friday .
Solarcity issuing big ABS.
The entire world is focused on climate change this week, lots of media/press globally.
These are just a few things that normal market activity can't couple with oil/gas swings.�
1/1/2015
guest Good points. Solar as an industry is down, TAN down 1.4%. SolarCity issuing an ABS would be a distinctive issue without much impact on other solar stocks.�
1/1/2015
guest On the same day WTI closes down 6%, SCTY is up 1.55% even with short interest supposedly ramping up even further. My 2017 call options are looking delicious.
Just to recap......there is no more OPEC, Canada is abandoning it's tar sands, Germany's utility sector has lost 60% of it's value, Saudi/US relations are in a permanent downward spiral, Venezuela may not exist in 5 years, the Saudi royal family may not be in power in 5 years, and Bernie Sanders is making a strong push for the D nomination.
Things are really getting wild, lets hope they don't try to start a war or something.�
1/1/2015
guest
Possible movement on the itc wednesday. Republicans looking to extend 46 items 2 years each. Not sure if ITC is one of them, but something to be aware of.
my feeling is if Solarcity gets just one more year at 30% which would put them through 2017, they would really be in spectacular position to take advantage of silveo factory savings in a step down situation in 2018. Lyndon mentioned today he expects 40% annual growth to continue through all of this so, we're looking at 1.75gws guidance for 2017, 2.45gws for 2018... That's about 7.5gws of total installs by the start of 2019, which will be well over 1 million customers and $2bln in annual revenue off 20 year leases/ppa/loan payments...�
1/1/2015
guest
Well, Solarcity now has $113mln of cash added to its coffers. ABS up next... Potentially adding $260-310mln in combined total cash infusion by the end of the week.�
1/1/2015
guest Is the battle really ongoing when it comes to ITC extension in the US? My paranoid side is telling me special interests (Koch brothers and the fossil mafia) had this analyzed way back as a pretty important variable for moderating the rate of change. One which they can try to control by throwing money in to politics. So you'd think they had bought the decision on this a good while back. All this assuming I'm correct in thinking they've known all along their business is in a downward spiral, but their plan is to unwind and divest in an orderly fashion, all the while squeezing out every drop of profit even as the business wanes.�
1/1/2015
guest
The twist is they want to export oil, so are willing to negotiate on renewable tax credits... That's wrinkle here.
allies will pay for American oil and gas when traditional providers are proving hostile(i.e. Russia).�
1/1/2015
guest At this point I don't know if I'm furious at whoever is running the PR ship or if I just flat out want Lyndon out of the corner office. He CAN NOT articulate the value of this company. In Paris today on the world stage and the first thing out of his mouth is....
Taxes.
Not that solar(even under a SolarCity PPA) is far cheaper than grid power.
Not that solar can help transition away from endless wars and foreign influence.
Not something exciting about Tesla and electric cars and solar and batteries.
Taxes.
Does SCTY even realize that 96% of casual readers hung up on him when the first thing he mentions is taxing them? This is the reason they're paying exorbitant costs to generate sales leads, they're not positioned properly in the media and are shooting themselves in the foot each time they trot this guy out in front of the cameras.
The whole world is watching, ready to listen to the US leader in solar and he gives them........taxes. Amazing. And then he advocates for lifting the oil export ban as compromise to extend the ITC, nice negotiation strategy.
Horrendous and condescending.
HuffPo interview even worse.�
1/1/2015
guest He's parroting Elon.�
1/1/2015
guest Elon never spent a dime on sales or advertising and when asked about the Model S he would challenge people to drag races. That's the complete opposite of this.�
1/1/2015
guest Are you sure? The title of the article says solar is cheaper then dirty power.
Also, I guess you didn't catch that he's also meeting potential business partners right now in that interview. Also the revenue neutral carbon tax doesn't tax the average person. It actually reduces taxes on every day people. It only shifts taxes onto high carbon polluters. It's something elon is promoting, and so is Bloomberg.
If a carbon tax was instated, Solarcity would immediately shoot up to 100% compounded growth. It's a very good idea for the business and would eliminate a lot of risk...
I'm not mad at his comments here. I'm glad that he's getting out there, the more the merrier for me. Yes, he does fumble around a little, but the more people hear him speak, they'll get used to it. They also start thinking about his company, which is great advertising/marketing on the cheap. Just like Elon. I'm encouraging him to do more speaking and this is more speaking.
He did talk about how policy is set up to reward polluters and not the clean energy. He also pointed out how solar reduces many of the world's ills and it is madness some politicians want to prevent it(not sure which article you posted, but it's there.)
Lastly, the press he's done thus far is far from widespread. Not many people are going to read them, so not much downside even if he was completely a dud interview.
He needs to get the big interviews again. CBS again, maybe even a special of FOX(I know, but they seem to have him on a lot over there). I think Solarcity should partner up with an HGTV show. Do an install on an episode, show the savings and potential for battery and profit sharing with solarcity on aggregation. Do a discovery channel show.
Also, undercover boss would be a fantastic avenue to get people to relate to Lyndon.
Overall, I think he's the man for the job of CEO. He's been there from day one and has lead this company from 2 people to 14,500 people in less then a decade among many of the innovations he's incubated under his watch.
He may not be the best of speakers, but I'll be damed if he's not a hard working leader. And I think we can say the same for his cousin Elon. The proofs in the pudding. Walk the walk is much better from my perspective. You can always improve your public speaking skills.�
1/1/2015
guest A Californian in Paris
Since being elected in 2010 for his second stint as Governor of California, Jerry Brown turned a 26 billion dollar deficit into a budget surplus. Importantly, he did this while driving the states RPS (Renewable Portfolio Standard) towards 33%, and implementing California's "Self-Generation Incentive Program", and developing state incentives for advanced energy storage.
These are hard facts that the Democrats will use to beat the Republicans in the upcoming presidential election. Progressive PACs will drive this in political commercials for the next year. Watching the presidential debates so far I have impressed at the number of times Jeb Bush, and John Kasich have lauded their records as governor. The Democrats must be chomping at the bit to hit them with California's record. The Democrats will be negotiating from a position of strength.
I was a little surprised by Elon's repeated calls for a carbon tax when he spoke last week. With Lyndon's interview, I am convinced it is strategic. Oh, to have been a fly on the wall at some of the behind close doors meetings in Paris last week.�
1/1/2015
guest The New Climate Economy No ... on Livestream
The New Climate Economy�No Longer Business As Usual with Tony Earley, Nancy Pfund, Lyndon Rive, and K.R. Sridhar�
1/1/2015
guest ON CARBON FEE AND DIVIDEND:
ELON came out in Paris for Revenue Neutral Carbon Tax!!!
- talks pricing externalities Elon Musk talks Climate Change and Carbon Tax at the Sorbone (12.2.15) - YouTube (people should pay for their cost of garbage - not dump for free)
- carbon tax Elon Musk talks Climate Change and Carbon Tax at the Sorbone (12.2.15) - YouTube
- revenue neutral Elon Musk talks Climate Change and Carbon Tax at the Sorbone (12.2.15) - YouTube?
This guy is killing himself to save humanity.
For folks curious about Revenue Neutral Fee and Dividend and how to get involved, the first step is information. The second step is signing up for periodic updates. The third step is spreading the word. This is very grassroots. Here are some great resources:
Dr. Hayhoe June Conference Keynote - YouTube
Carbon Fee and Dividend - Citizens Climate Lobby
Create an Account | CCL Community?
This is non-partisan. There are actually a number of Republicans who support this. Bob Inglis is one of my personal favorites, he's a brilliant orator.
My college major was Economics, I really like the free market nature, and the idea of beginning to charge a fee on unpriced externalities caused by using the air and atmosphere as a free garbage dump.
This is a cool way to begin to recover and properly price damage to the commons created by polluting industries in a fair, gradual, and non-disruptive way.�
1/1/2015
guest
It is absolutely strategic. They are most certainly negotiating behind the scenes on this legislation.
Tom Steyer was really leaning on governor brown at his discussion session in Paris. It feels like the pressure is on to keep the net metering going strong as well as other renewable tech such as powerwall and fuel cells.
if I'm going to be honest, governor brown sounded a little out of it. Half of what he said was a little scatter shot stream of consciousness. I hope this isn't how he is on a daily basis...
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It was literally 15 minutes. You think they would at least be up there for 30 minutes taking about distributed energy! At least Lyndon had the most talk time. The Pg&E CEO was basically shut out, maybe 1 minute. He didn't look comfortable up there.�
1/1/2015
guest I apologize if this has already been posted:
SolarCity CEO: Renewable Energy | ThinkProgress
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1/1/2015
guest Delighted in the resilience of this stock in what should be a brutal week for solar, or any sector really.
Strangely coinciding with the departure of SBenson from the thread. Are the shorts in Aruba for the week?�
1/1/2015
guest I get your frustration. I would just point out that carbon tax would add about 1 to 2 c/kWh to grid power which would simply be pushed onto ratepayers. By comparison, this would make SolarCity's PPA rates competitive just about everywhere in the US and substantially more competitive in states where they currently operate. Rooftop solar would compete better on an unsubsidized basis if a carbon tax were in place.�
1/1/2015
guest In all fairness I think he did his analysis and acted on it. I believe he sold 8000 shares at $29.15, that he had bought way above $40 or even above $50 on average. So that stings... I don't think he ever went short.�
1/1/2015
guest That would actually be nice for Texas because one of the reasons will still haven't gone with a PPA is because it's easy to find cheaper rates here than other places in the US. Then it would make it easier to go solar because we would actually be saving something per month than nothing at all...which is more of a point for my wife than myself, I want solar regardless.�
1/1/2015
guest Perhaps Benson took my recommendation to walk away from the stock as suggesting that he walk away from this discussion. Just to be clear, my intended point was only about investing. I continue to welcome his participation in this discussion. Of course, if he needs a break from all of it, I very much understand. I do believe that he was only reluctantly bearish and came about that perspective honestly through his own due diligence. That is the best any of us can do as investors.�
1/1/2015
guest With install costs where they are(and dropping), SCTY needs to focus on consumer perception of the PPA product and eliminating soft costs related to customer acquisition looooong before they should start thinking about lobbying for subsidy and tax policy. Especially in the public arena like Paris.
Hook them with the picture of a low-cost decentralized solar/battery future, reel them in with the value proposition of a PPA that takes away all the hurdles and saves money, THEN you can pop them with the logical conclusion that a carbon tax makes sense. Once you lead with taxes, 98% of your audience has left the room.
People in Pennsylvania don't know that SolarCity saves you money. How is that not problem #1?�
1/1/2015
guest India Will Determine Both Coal And Solar Market | OilPrice.com
Nice article on solar in India. Note the figure at bottom. India wants bring on 29% of the new PV module manufacturing capacity. Thailand, South Korea and the US is close behind at 16%, 15% and 9%. China does not make the list for new announced capacity.
I'd love to see SolarCity enter India with a Silevo plant.
India aspires to 100GW solar by 2022. 40GW of this is for rooftop solar. High efficiency panels are particularly good for rooftop applications.�
1/1/2015
guest Maybe I'm just angry this week, but these tax/subsidy solutions are really getting to me. Reading this complete BS MIT article has half of me wanting a carbon tax and half of me wanting all subsidy to disappear so the real battle can begin.
I say we push for a very favorable extension of ITC plus a huge expansion of the DoE renewable energy grant/loan programs in exchange for lifting the oil export ban. I'd like to see:
Tar sands stay in the ground
LNG exports be very very strictly limited or kept as they are
Allow for strictly regulated expansion of oil fracking and export
ITC to drop from 30% by 1% a year starting Jan2018 accelerating by 1 additional pt per year based on residential installation volume
ITC for utility scale extended, but drops faster linked to install volume
These clowns are completely willing to sell the entire future of the oil&gas industry for a clear path to 10 years of profit, I say lets give them what they want. It'll be just like the insurance companies under Obamacare. They think expansion is such a boon, but then people wake up to realize there's no need to let these leeches siphon off 5% and create a poor economic model to boot.
Hillary could negotiate this in her sleep. Then we get to 5% solar and everything crashes just like in Germany. Once the rats are busy fleeing the sinking ship, we won't have to deal with all this rampant disinformation.
Edit: To be clear, I'd like to see minimal subsidy anywhere and the oil&gas interests on the ropes at the end of this 10-15 year period.�
1/1/2015
guest One of the big economic risks of the energy transformation is that fossil fuel markets are plagued with a really long-term oversupply problem and massive stranded assets in the face of advancing renewables. I believe renewables will ultimately displace fossils, but that still leaves us with economic risks along that path. The idea that the globe can just subsidize renewables will leaving subsidies and non-payment of negative externalities in place for fossils is problematic. Subsidies lead to oversupply, and oversupply in fuel markets leads to fuel prices so low that it compromises the positive ROI for fossil investments.
A critical value of imposing a carbon tax is that it will discourage future investment in fossil resources and infrastructure. Decreasing this global investment in fossil energy does two things. It minimizes the economic risks of perpetual oversupply and stranded assets, allowing those industries to scale back in a more orderly way. And it frees up the capital that would have gone into bad energy investments to be invested in other more beneficial pursuits. We seriously need trillions of dollars not to be invested in coal, oil and gas, and all the infrastructure that delivers these.
I am inclined to believe that renewables can solve the problem of decarbonizing our global energy systems. So it is not climate change that really worries me. But renewable advances alone are hard pressed to avoid a massive fossil energy bubble. The global economy will be much better off if we can avoid malinvestment. This is why the governments of the world need to stop subsidizing fossil fuels and properly tax externalities. A positive side effect of this would be increased uptake of renewables, but the main effect would be to safeguard the global economy an enormous energy glut and capital destruction.�
1/1/2015
guest That may end up being literally the understatement of the century!
Problem is, it should be abundantly clear that the fossil fuel industry is incapable of "minimizing economic risk" in any way whatsoever let alone "scaling back in a more orderly way". That's not the model in the US. If German utilities can't deleverage and move off fossil fuels in any fashion at all(let alone orderly), what makes you think we can handle such a process in a country that let Ken Lay dictate energy policy for 3 years?
Give these guys options if you like, but don't think they're in any way going to change their overall strategy. Your vision is the ideal, but there's absolutely zero chance of anyone going quietly. Coke costs money. Hookers cost money. Scaling back is not an option.�
1/1/2015
guest Great conversation. I have my fingers crossed.
Climate Change and Millennials: The Future Is in Our Hands - Scientific American Blog Network
I think there will also be acknowledgement of the other economic victims of the transition to clean energy. Coal mining regions for example and unemployed workers across oil and gas industries will all become refugees in a sense too. I hope it will bring people together to spread the future wealth from the abundant new energy age.�
1/1/2015
guest Is that a hard number, Jim - good to use for other calculations? I'm wondering what 2� x {???}kWh/yr would mean to the average US household's budget. This would be, of course, for electricity cons'n only - still have to factor in fuel price changes and a cascade of other price changes...and all that's before the substitution effects. But it would be good to start somewhere.�
1/1/2015
guest Ha! You think these guys are young enough for hookers?
How about the idea of cutting subsidies to fossil fuel? The IEA estimates about $500 B in annual subsidies for fossil fuels, while the governments of the world are try to commit to $100 B for renewables. Basically, if governments just cut their fossil fuel subsidies in half, that alone would probably have a bigger impact than subsidizing renewable and would save taxpayers money. This should be on the table in lieu of a carbon tax.
Consider that 15% of the carbon emitted was subsidized to the tune of $110/T. Clearly, a carbon tax in range of $20/T is not going to close the gap on net subsidy.
Of course, cutting subsidies is not much easier politically than raising taxes.
Phase-out fossil fuel subsidies, says IEA chief : Renew Economy�
1/1/2015
guest A revenue neutral carbon levy (i prefer this word to tax, as tax implies the state wants to increase taxation, while what you really only want to do is to affect peoples behaviour) starts a virtous spiral. It doesn't have to be huge to start with. It should be done like this: Impose the levy, weigh it according to how harmful the product or activitity is AGW-wise. Every 3 months sum up all the funds the levy has collected, split these equally among all citizens, deposit in to their bank accounts, send all citiziens a statment saying something like "Here's your part of the last quarter's revenue neutral carbon levy, do with it what you please". People are going to catch on quickly and 1) reduce their use of products and services that have gotten more expensive due to the levy and 2) use that money to enable themselves to use even less of those products (could be an EV or more fuel efficient car, insulation for the home, heat pump, solar panels - you name it).�
1/1/2015
guest It's illegal to feed them coke. Can we feed them Koch, instead?�
1/1/2015
guest In steam turbine, coal emits about 2.15 lb/kWh and gas 1.21 lb/kWh. (I got this from US EIA.) So a tax of $20/T is $0.0091/lb. So this level of tax on coal would at $0.0195/kWh and gas $0.011/kWh. Gas CT would be a little higher and Gas CC would be a little lower. So depending on the specific generation mix, a utility is likely to have an average tax between 1 and 2 c/kWh at a nominal $20/T carbon tax.
Many utilities have a pricing mechanism to simply pass fuel costs onto ratepayers. So initially I see this being passed to ratepayers. If the utility makes other changes to minimize this tax burden, presumably this would work to the ratepayers favor. But such presumption can be horribly wrong when it comes to regulated monopolies.So it's not clear to me what all the knock on effects could be.
In the US, residents consume about 11,000 kWh /year. So families would be hit with a $110 to $220 increase in their annual power bill. This is what makes it such a tough sell politically.
Incidentally, Australia had a carbon tax like this just long enough for political rule to turn to conservatives who reversed the whole thing and have become major obstacles to renewable energy. So a carbon tax can be quite risky politically. It might make the best sense economically, but it the initiating politicians get kicked out of office, things can get much worse. This is why I think extension of ITC is the path of least resistance in the US.�
1/1/2015
guest OK, that gives us something to hang a hat on: $110-220/yr/household. And that's at a $20/t levy; some indications are that $50/t is a target eventually to try to achieve.
Using those numbers, though, provides a start for which direct taxes to cut for same households, in order to keep the pocketbook burden the same.�
1/1/2015
guest Off-grid suburb a 'perfect storm' for energy giants
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1/1/2015
guest The longer gas prices stay low, the easier it will be for politicians to vote to increase the gas tax. Gasoline under $2 a gallon is bad for everyone. The last thing the world needs is for people to expect $2 gallon gasoline to be the norm.�
1/1/2015
guest I'd rather see a much higher gas tax to pay for infrastructure than to have the solar conversation revolve around a need for carbon tax. Perception is already so far out of wack and saying the word "tax" will only make it worse. Do all this **** behind closed doors at least!�
1/1/2015
guest Ah, yes, I forgot that this is supposed to be revenue neutral. So let's suppose this works out to $400/year per family. So this $400 needs to be matched with a $400 reduction in income tax (or some other general tax). Given that income taxes are progressive based on income, if not carefully allocated, the matching carbon tax could be a bigger benefit to higher income families. Many families do not even pay income taxes. So to avoid having the carbon tax become regressive it may need to be a fixed tax credit of $400 per family (with adjustments for dependents). A family carbon tax credit would then reward families that conserve power usage more than others. So that could be a big help for lower income families that do not use AC or live in large houses.
However, there are geographical differences that impact the fairness of this. Use of HVAC varies geographically, for example. To some extent that is just part of the cost of living in a particular area. Harder to deal with is the fact that most ratepayers have no choice of utility and no influence over the energy mix that their utility sources. Thus, ratepayers still get taxed higher for living within a service area where their utility chooses to burn a lot of coal, and that on top of the poor air quality that ratepayer is forced to breathe. So such a family is taxed heavily by the choices of their utility. Opting to install rooftop solar helps this situation a little, but it is hard to see fairness in this.
The basic problem with all this is that most families have very little choice about their electricity, even if you try to net the carbon tax back in other tax credits. The utilities actually have little incentive that to simply pass the tax to ratepayers. If the point really is to change utility behavior, then I think the utilities must be prevented from passing the tax cost to ratepayers. So if utility has profit capped at a 10% maximum return, the carbon tax should be applied after this profit is calculated. So the utility gets to earn 10% minus the carbon tax. In this situation a utility that high sourced coal might have a profit of say 2c/kWh but pay a carbon tax of 4c/kWh. After that tax, the utility would incur a loss. This would motivate very fast change in behavior! But if that utility were to pass the 4c/kWh tax to the ratepayer and still keep 2c/kWh in profit, then very little would change.�
1/1/2015
guest Interesting developments in Germany.
The top grid provider tried to divest from traditional production, and now the second largest is doing the same and buying into utility scale solar.
A regional grid operator also mentioned he feels the nation could get up to a whopping 70% solar/wind before storage would be needed. Sounds impossible to me, but he said it.�
1/1/2015
guest +6% at the open.�
1/1/2015
guest LOL�
1/1/2015
guest I am still alive. Yes, I needed a break and put myself in a timeout.
It's odd that I get called out when I am posting in an up trend, or in a down trend or not posting at all. That's only because I am the lone soul who is cautious/bearish here. Bulls on the other hand don�t get called out no matter when they post, what they post or what price targets they predict, no matter how wrong they turn out to be.
This shows the inherent bull bias in this forum and anyone with a negative view will be forced to wrestle with the crowds. That's tough to keep up and inherently drives the negative person more negative as they keep defending. This is very much the reason for staying out. I don't want to be more negative than warranted just because I got stuck in a negative emotion trying to defend my view. Ideally my view should be based on info than sentiment.
Having said that I accept that I failed miserably in seeing the trading range. Have all the laughs that anyone wants. That's cool by me. But also note that bullish predictions have been equally wrong with SCTY. Nobody ever foresaw a $25 print even in their worst case scenario predictions.�
1/1/2015
guest I believe I just called for the CEO to be removed, not sure how much more negative I could get!�
1/1/2015
guest The latest VSLR-SUNE-TERP deal provides an interesting opportunity to reassess SCTY's valuation.
A few things to note though
- VSLR reported RV is GRV
- VSLR reported RV is based on installs
- SCTY RV is based on bookings (there is quite a big gap between cumulative installs vs bookings)
- The debt dynamics are very different
If you can normalize all of it, you will find some interesting results. Worth trying it out.
(I will refrain from posting my math as I have no interest in getting attacked by folks here)
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Back off dude.
I am entitled to my opinions. Especially on subjective things like management credibility. You say what you want to say about them. No need to come after me.�
1/1/2015
guest A) I'm not "coming after you", I'm ignoring you for the most part until you PM me rambling nonsense.
B) You are free to question management credibility as I am free to question yours.�
1/1/2015
guest Keep it civil please, everyone.
Moderators are standing by....�
1/1/2015
guest Governor Ahhnold's written a great piece making the Republican/Common Sense argument for renewables.
�
1/1/2015
guest Reading an MIT article on the SCTY Gigafactory and it seems to be full of straight up lies. Am I nuts here?
Paying for Solar Power
Selected excerpts that smell like disinformation to me:
And it goes on from there. I mean these are just flat out lies, correct? Pretty embarrassing state of affairs when we see this drivel coming from one of our greatest engineering institutions.�
1/1/2015
guest You're right.We talked about this earlier in the thread, but the Koch bros have given over $100mln to MIT. MIT now partly hijacked because of it. As a result, MIT has strangely pushed a few anti solar "studies". They specifically aim at roof top solar m. As we known utiltiy solar is still only accessible to centralized utiltiies so they can control retail pricing. Roof top, not so much.It actually is a growing trend... High jacking trusted brands to propagate oil/gas/utiltiy agenda.�
1/1/2015
guest It amazes me that alumi from a place like MIT wouldt be losing their minds over this nonsense.�
1/1/2015
guest Holy smokes! https://en.wikipedia.org/wiki/David_H._Koch_Institute_for_Integrative_Cancer_Research
Those guys are everywhere!
�
1/1/2015
guest This about sums up the situation. :frown:
Scientists to Smithsonian: Cut ties with Koch brothers - The Washington Post
Sign the petition telling science museums to kick Koch off the board!�
1/1/2015
guest The solution for the Koch brothers and their ilk is to continue to drive deploy renewables and turn their billions into millions.
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I have not the energy to rebut so much poppycock.
Perhaps a quaint little film instead. The beautiful solution - YouTube�
1/1/2015
guest Yep, no fossil fuel waste costs for society...once again.
In Beijing, a Day Off School for Smog Is No Fun for Anyone
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1/1/2015
guest They consume half of the global production of coal. It's hard to imagine the foolishness of flooding the global market with Chinese solar panels, while their people choke on coal emissions.
I think this is one reason why Tesla should not manufacturer in China, not until they can power a fab with 100% renewables.�
1/1/2015
guest Hard to imagine indeed. It's sad to me that the conventional wisdom now is basically, we can do it, we just don't want to pay for it.
http://www.ft.com/intl/cms/s/0/d690ddea-9ec2-11e5-b45d-4812f209f861.html
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1/1/2015
guest Tesla Powerwall sales kick off in Australia as local installers named : Renew Economy
Some interesting details here on complete solar plus Powerwall systems being marketed in Australia.�
1/1/2015
guest Both TSLA and SCTY short interest seem to have shot up at the end of November. Could get interesting!
�
1/1/2015
guest Much Of The World Perplexed That Climate Debate Continues In U.S. : NPR
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1/1/2015
guest I'll see your fossil jobs and raise you renewable jobs.
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Open Utility: How a start-up plans to be the AirBnB for energy trading : Renew Economy
This is what I'm talking about. Add some batteries and rooftop solar and the utility is out of the generation business.�
1/1/2015
guest It's depressing how much this sounds like an article title from The Onion.�
1/1/2015
guest Congressional leaders expect funding deal to be unveiled Monday | TheHill
Looks like Monday we'll find out about the solar ITC extension. Wrap up vote on Wednesday.�
1/1/2015
guest The cynicism in me does not believe we have any chance of extension but that would be great�
1/1/2015
guest Thus solving my depression problem. ONCE AND FOR ALL!
:wink:�
1/1/2015
guest Homeowners can rent their roofs for solar energy
Interesting way for utilities to combat scty city. They pay you 3 cents per kWh your system makes�
1/1/2015
guest I am not a SCTY investor, but thought that this might be of interest here
Wall Street's getting crushed by a form of financial engineering you've probably never heard of - Business Insider
What is a yieldco? How's it killing Wall Street? - Business Insider�
1/1/2015
guest Tata Power Solar commissions worlds largest rooftop solar array : Renew Economy
Tata Power is going to put up the largest rooftop solar array ever, 12 MW.
I don't think the record will last long, however, Tesla's Gigafactory will have 5 time the roof space, optimized for solar. I think they may be able to put up more than 90 MW.�
1/1/2015
guest Hmm, why would I not trust my utility to do this?�
1/1/2015
guest Not only that, why would I take $.03 then turn around a pay $.10?�
1/1/2015
guest That's because they own the system. I have sort of the same deal with the utility but I own the system. I pay 12c for power and they pay me 15c for my solar power.�
1/1/2015
guest Solar Tax Credit Faces Cloudier Outlook - Barrons
The Republicans would certainly propose ending the solar ITC. The question is what are the Democrats proposing, and what will be in the final agreement.
Now would be a good time to email your congressman.
U.S. solar industry in urgent push to extend tax incentive - Yahoo Finance�
1/1/2015
guest Consider this organization promoting solar: Vote Solar | Bringing Solar to the Mainstream�
1/1/2015
guest Great link, Thanks.�
1/1/2015
guest How much of the current uptrend is based on ITC extension hope?
Just as price has been going up, the short interest has been going up equally fiercely. I have three different ways to track the 'current' data. The fight between bulls and bears has reached a fever pitch. I can't exaggerate it enough. Who will win is anybody's guess. I am still on the sidelines.�
1/1/2015
guest I think is priced as a toss up. I'm not sure what probably of favorable outcome market players may give it. But as a toss up, if their is a favorable extention, the price can move up, and if not, the price can move down. So naturally all sorts of investors may well sit on the sidelines, rather than placing a bet on which way congress will swing.
My view is that the stock is still quite undervalued. I think buyers can wait for Congress to do what Congress does and then pick up shares at a good price, whether the bump is positive or negative.�
1/1/2015
guest Hijacking of trusted brands is the new black... Kochs and APS are deeply into hijacking...
ASU Foundations $100,000 Gift is Completely Irregular
hijacking "sleeper" cell network...
Kochtopia: The GOP culture of corruption in Arizona | Blog for Arizona
its interesting when certain political candidates court the Kochs for their extensive "database." What they're really after is their clandestine operative network of front groups that can disguise attacks, promote propaganda/agenda as coming from falsely objective sources, as well as laundry bride money to elected operatives.
i feel we're living in an episode of some prime time domestic terrorism show...�
1/1/2015
guest Here's another example from Florida and the cell network in action there against rooftop solar today.
Floridians for Solar Choice organizers maintain theyre still going strong - Florida Politics
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Solarcity is really going to see some dramatic cost savings using copper instead of the industry standard silver in panel production.
cost of copper is 7 times cheaper the silver right now. 7 times cheaper... At a gigawatt level... Over 3.6mln panels... That's some incredible costs savings...
cant wait to hear the new cost guidance next week...�
1/1/2015
guest Brent down 5% settling well below $38!
Paris talks leaning toward a Saturday announcement of a fairly robust agreement.
SCTY up 2%. Short position on SCTY above 50%. We're going to make a ton of money in this stock.�
1/1/2015
guest It's a bonfire of fossils.
WTI crude is down 3% to $35.6/bbl and hearing oil is down 6%. Gas is hitting support just below $2/MMBTU, but with heating oil falling, gas should collapse too.
IEA sees no price recovery for oil in 2016. Demand for oil is expected to grow only 1.2 mb/d in 2016, down from 1.8 mb/d in 2015.
I'm looking forward to the day when oil consumption falls y/y. Adding 30 million plug-in vehicles in 2017 would alone knock out the 1.2 mb/d in incremental demand for oil. Fortunately, we don't have to wait until EVs can deliver that kind of death blow. Global solar is getting quite close. Consider that solar reaches about 233GW this year. Using fossil fuels in steam turbines, this increment is the equivalent of offsetting 1.65 mb/d in demand for all fossil fuels. No doubt some fraction of total demand destruction is specifically pulling demand from oil. Next, year solar will add about 30% more which is about 0.5 mb/d of incremental fossil demand destruction. Wind too can destroy about as much. While the current glut of fossils seems to be fossil supply driven, in not too many years the fossil glut will be demand driven and consumers increasing switch to renewables.�
1/1/2015
guest Nice little vid from Bill Nye where he talks about the transition that's being discussed in this thread:
Watch Bill Nye Lay Out His Wish List for Saving the Planet | Rolling Stone�
1/1/2015
guest $250mln Solarcity ABS issued today.
Kroll Bond Rating Agency Assigns Preliminary Ratings to SolarCity FTE Series 1, LLC, Series 2015-A | Business Wire
Including the $113mln from bonds, Solarcity is/has added about $360mln of capital within the last week...�
1/1/2015
guest I did not realize that they had $250M in MyPower loans. First MyPower ABS. Great to capitalize these loans.�
1/1/2015
guest Climate deal agreed. Next week should be interesting.�
1/1/2015
guest 
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1/1/2015
guest White House Praises 'Most Ambitious Climate Change Agreement In History'
President Obama to speak at 2:30�
1/1/2015
guest Washington, D.C. � Democratic Leader Nancy Pelosi released the following statement after delegates to the COP21 Paris Climate Summit announced a final agreement to limit carbon pollution and address the climate crisis: �The success of the Paris Climate Summit is truly a monumental moment in the history of the world. I congratulate President Obama for his indispensable leadership in getting this agreement. Secretary Kerry and our negotiators are to be commended for securing such a bold, global commitment to act on climate.
�With the Paris Agreement, the world has come together to affirm that clean energy is the future. As we move toward more ambitious action in the decades ahead, we must ensure that America is equipped to lead in the clean energy economy. We will continue to advance the landmark Clean Power Plan that reduces carbon pollution, lowers energy bills, and protects the air our children breathe.
�President Hollande is to be congratulated on this successful conference on this challenging issue under challenging circumstances.�
it it will be interesting to see how negotiations between Paul Ryan and Nancy Pelosi turn out. Solar ITC Extension?�
1/1/2015
guest Looks like ITC extension will happen.
Oil producers want the oil export ban lifted. Solar industry wants the ITC extended. Oil producers will pay off, I mean, lobby Republicans, while solar industry will pay off, I mean, lobby Democrats. Incumbent Republican and Democrats will get the money, I mean support, to get re-elected while the oil producers and the solar industry gets their pay days.
Everybody wins.�
1/1/2015
guest :biggrin:�
1/1/2015
guest If ITC extension comes through I will buy lumps of stock in a heartbeat. Even if I miss the initial spike I will buy. I think there will be a massive rally due to short squeeze. Even after that there will be quite a bit of growth.
On the other hand if it doesn't pass I will continue to stay on sidelines. I am not confident in any of the growth or margin projections. I actually doubt if the company can survive. Even if it does it will restart at a much lower base is my view.
So far the sources I trust have not been very positive on the likelihood of ITC extension. But I see some change in tone now. I'm closely watching. I will only jump in when there is confirmation that it is a done deal. Will not buy speculatively before hand.�
1/1/2015
guest According to this article, extending the ITC is well within Democrats grasp if they aren't too greedy.
Deal to end oil export ban in sight | TheHill�
1/1/2015
guest Wow, a 10 year renewable ITC extension would be a tremendous catalyst.�
1/1/2015
guest As I've posted before, current demand growth is weak while the scale of renewables is driving increasingly more demand destruction for oil. By 2020, solar alone will be knocking out more than 1.4 mb/d in demand per year. This all means that solar will soon elispse oil plunging it into perpetual decline.
For this reason, I am no concerned about ending the ban on oil exportation. It probably do little more than reduce the cost of transport of oil to market. The US will remain net importer of oil, while global demand and global prices fall. Exporting fossil fuels is a last ditch effort to catch a failing market.
The key thing we need to focus on in this country is installing renewables and putting and batteries EVs on the road. This is what will position oil for structural decline.�
1/1/2015
guest Oil at $35/$37, good lord. What immore concerned about is this huge push for opening up LNG exports. These people could frack us dry within 20 years if they're allowed to do as they please.
TSLA looks to open lower, as does SCTY. No reaction to Paris or potential ITC extension?�
1/1/2015
guest I'm not worried about LNG. Solar is killing demand for natural gas in Asian markets. Even at $2/MMBTU in the US it is unprofitable to liquifying and ship to Asia. LNG prices need to be about about $8/MMBTU for US producers to profit. But solar in Asia is far cheaper than $8/MMBTU for gas, specifically 9.4c/kWh just for fuel. Basically cheap solar everywhere makes LNG unprofitable to ship anywhere. It's only useful as an expensive backup fuel, and so its use will be minimized.�
1/1/2015
guest A Solar Boom is Taking Place in Corporate America - NASDAQ.com
Nice growth in corporate solar installations. SolarCity well positioned.�
1/1/2015
guest SCTY up a buck or so this morning. Nat gas at a$1.87!
On the topic of these corporate solar deals....
How well positioned is SCTY relative to other players in the market? Is there considerable value in SC's perceived greater likelihood to survive as an entity vs. someone like SUNE? I think that will mean everything to residential buyers, but is it as important to someone like Walmart or are they looking for lowest price?
Trying to gauge SCTY's advantage in this sector. Worried that if there's no major advantage, there will be nearly zero margin.�
1/1/2015
guest In California they capture a lot if margin due to zep mounting hardware and the fact that they are using in house employees to do the installs instead of subcontracting it out like all of the other national players do. There is also something similar to Fit payments in the California market that was said to put margins on par with residential installs
It's also my understanding that the panels out of buffalo really shine when mounted on a flat roof!�
1/1/2015
guest http://in.reuters.com/article/climatechange-summit-india-coal-idINKBN0TX15D20151214
�
1/1/2015
guest As solar continues it's (exponential) growth, I see the impetus being the reduction of utility demand charging. The combination of energy storage and solar generation managed by intelligent controllers/inverters will disrupt the utility industry. The growth curve for electric vehicles will lag behind utility disruption. Just my two cents.�
1/1/2015
guest SCTY now at pre-ER level. It is as though nothing happened at ER. It's amazing.
I suspect a lot of the upturn is due to ITC extension expectation.
I see that folks in Senate are negotiating a deal and might very well settle on something that will include solar ITC extension. But I hear that there is resistance to a deal in House by both parties (Dems don't want oil exports, Reps don't want tax credits to renewables).
Does anyone have specific insights into the House situation? IIRC much of Obama's period was spent in government in-action primarily due to House. Not sure what the environment there is now. Will they give into pressure by their senate counterparts?�
1/1/2015
guest If something does happen on the ITC extension it would be negotiations between those that want to lift the ban on oil exports and those that want to extend the ITC.�
1/1/2015
guest I've been pointing out comparisons to Obama shoving the Affordable Care Act through Congress. That only got passed by providing short term financial benefit to the insurance industry and leveraging that into Republican votes in Congress. In the same way that we gave those clowns millions of additional health insurance customers, I'd like to see us give up oil exports in negotiations for a clear 5+ year path to success for residential solar in the US.
Sell them the means of their own destruction.
A mere one year into the ACA Americans are slowly waking up to the fact that the health insurance industry is a complete waste of money and makes the system much worse. Once most everyone is covered and Medicare/Medicaid is fully expanded, the next step will be clear as day.
Frackers will make short term profits exporting, but any moderate(and more importantly stable) federal boost to US solar would accelerate us to "escape velocity".�
1/1/2015
guest Working through $40.00. Pretty sexy.�
1/1/2015
guest Deutsche Bank reiterates "buy" rating and ups target from $64 to $80.�
1/1/2015
guest Quite so.
Like Warhol's Portrait of Gretzky (NSFW).�
1/1/2015
guest Hopefully the analyst day tomorrow and tour of the 100MW line add fuel to the short fire currently brewing.�
1/1/2015
guest On ITC I think Sentate is in the bag. Obama is too. Just now read that House democrats are signing up to it. Only ones left are House republicans.
This really looks like it's a done deal.
Massive, massive short squeeze will ensue.
- - - Updated - - -
Short interest is so high that people are paying 60+% interest to short SCTY as per Interactive Brokers. Early last week it even reached 74.1%.
If ITC extension comes through, I can't imagine the scramble to close the positions.�
1/1/2015
guest SCTY buy at $30.05 looking better and better. Tentatively glad I doubled up on SUNE at $2.80 too. Go solar!�
1/1/2015
guest Geez wish I had bought something substantial under $30. Though I am still in the camp of not understanding these financials and basically only investing a small amount because it is solar and Elon is involved. May the X bring similar returns to TSLA next year.�
1/1/2015
guest Weren't you saying that management was misleading in the financials just a couple weeks ago?�
1/1/2015
guest They are. They will continue to do so.
With a very rich 30% ITC it doesn't matter. SCTY will be profitable even if you account everything properly.
Without ITC I am not sure the firm has a workable model if you look at the financials correctly. But with ITC, hell yeah, they have an absolutely workable model.�
1/1/2015
guest We should probably wait until ITC extension is signed and digested, but anyone care to venture a guess of when we crack $100?
I'm hoping we cross $100 on the way to $120 after 2Q16 earnings are announced in July or August of next year. Might be a better bet to say post-election.�
1/1/2015
guest Solarcity ABS oversubscribed again...
add:
$185m�
1/1/2015
guest Working as a Utility Solar Power Inspector, I was given financial data as well as technical data. Specifically, panel and inverter technical data as well as cost data. With commercial customers paying 30 to 40 percent of their bills for demand charging, SolarCity has a strong profit margin. Generating power and storing it to energy storage systems (batteries) will allow customers to manage their own energy requirements. Make no mistake, SolarCity is going to make a tremendous amount of money.�
1/1/2015
guest Up 11%... is it the DB upgrade?�
1/1/2015
guest Shhhh we're not there yet with ITC, don't spook it.�
1/1/2015
guest It's the ITC extension, has to be. Or maybe someone got a sneak peek at tomorrow's Investor Day announcements? I don't buy into the idea that SCTY(and therefore US solar in total) is ITC dependent, but in the short term it locks in a huge advantage for SCTY as they are a premium installer with higher install costs.
Solar is happening, there's nothing that can stop that now.
SolarCity's model is popular with normal consumers and should only get more profitable as costs are lowered drastically.
Add a free 30% check onto that and.....�
1/1/2015
guest Sure SCTY is up on anticipation of the ITC but if it doesn't go through we'll be back to mid 20's. If ITC happens I'd be simply rebalancing into TSLA, if it doesn't I'll be adding to SCTY at bargain prices, either way is good with me but I sure prefer the former�
1/1/2015
guest All ITC does is make liftoff easy. If they left it as is, SCTY would still be the leader and likely end up taking more share than if there's extension. Now the profits would be considerably less in the short term, but when you're talking about the single biggest source for new energy you might actually want to swap that short term boost for the advantage of being top dog in a brutal marketplace.
If you didn't care about the stock SCTY price, you'd actually prefer a more rapid ITC stepdown as it could kill off most everyone except local installers.�
1/1/2015
guest Looks like this was a misprint. DB lowered from $80 to $64, not the other way around.
Shouldn't take news from something called Dakota Financial News.�
1/1/2015
guest Well, as long as it grows like mushrooms ... :tongue: any manure is goo to go.
Alright, checking out now for tonight. Please tip the veal.�
1/1/2015
guest There's also the outcome where nobody makes any money, big or small. Ever wanted to own a gas station? I'll take ITC extension any day since the second scenario is IMHO a lot riskier.�
1/1/2015
guest Gas stations make no money because they're nothing more than a bucket for a commodity. SCTY sells a highly differentiated product.
Riskier in what way? For us as investors it might go either way, depending on when and how we want to make money.
What happens if they cancel the ITC tomorrow and pledge to never give another penny of subsidy to solar? Does Elon pack it in and give up on solar? Much more likely that the industry has a massive shakeout, there's huge short term pain for a year or two, and SCTY comes out the other end with more quality employees and much greater marketshare. Then they can start worrying about profit margin. As a guy sitting on tons of Jan 2017&18 calls I sure as hell hope that doesn't happen, but SCTY is really "better off" the tougher things get.
How much is each point of 2020 US marketshare worth? Probably a lot more than SCTY will make over the next two years. Solar hardware is cheap and demand will never disappear.�
1/1/2015
guest Got the word that Republicans in House are also inclined to do a deal. So all stars are aligned. ITC extension looks pretty solidly possible.�
1/1/2015
guest Yes I'm sitting on some of 17 and 18 options as well, so that probably colors my opinion. Agreed, SCTY is likely going to continue to excel in execution vs. peers, ITC extension or not. Given that this business is so sensitive to regulatory environment (local, national, international) I think it's a bit of a long shot to say that regulatory headwinds would be a good thing for SCTY or its investors, long or short term. Your thesis is it'll delay growth and possibly increase eventual market share. Even if that's true it'll have to go against opportunity cost for your capital, other regulatory environment changes that might or might not align with what SCTY is doing at the time (basically, luck), possibility of technology shakeups, etc.�
1/1/2015
guest Why would anyone listen to what you have to say?�
1/1/2015
guest I completely agree. I simply view solar power from the perspective of an electrician. I do no not possess any training nor experience in subtlies of bean counting. No one should ever consider my opinion regarding securities.�
1/1/2015
guest Is that 70 percent on a yearly basis?�
1/1/2015
guest Yes, yearly. Still it is exceptionally high. I saw similar rates for TSLA in early 2013.
For the record I bought SCTY with both fists today. Fingers crossed, ITC extension will pass in two days.�
1/1/2015
guest Interesting how three major events are all taking place in the next two days:
analyst day
itc extension
fed announcement
for those with options they're looking to cash in on, tomorrow would be a mighty nice day to have that happen.�
1/1/2015
guest Wouldn't you think Yellen's announcement is baked in?
Where are we at in the witching cycle?�
1/1/2015
guest It's the third Friday so a **** ton of puts expire.�
1/1/2015
guest I have zero stock market expertise, unless you count an uncanny knack for losing money. :wink:
I'm hoping you guys figure out if it's squeezing or how much more is coming this week. I would love to see a video tour of the 100MW line and also what these new HE panels look like too.
More Australian Tesla Powerwall re-sellers named, including CSR | One Step Off The Grid
�
1/1/2015
guest How could they raise rates now in the midst of an oil crash. Isn't low interest rates what you need for a massive oversupply problem? Oh wait...nevermind.�
1/1/2015
guest Mr. Benson, I hope you are able to regain your losses. Like you I had some severe losses on 5,500 shares (I think you had more), I did some averaging down by buying at $25 bringing my average down to $40. So, for the moment I am thankfully a little in the green! Whew, that was stressful waiting. Best of luck to you, I think you'll make gains and come out of this OK.�
1/1/2015
guest So last count of short interest was 32M shares or a whopping 64.45% of float. Any way to track short interest between the periodic updates?�
1/1/2015
guest Apparently tax text to come out today. We will soon see what the tax credits for Solar are and for how long. Voting in House mostly on Thursday. I think between both parties, there are more than enough votes in both House and Senate. Democrats have been playing hardball trying to get all all sorts of unrelated concessions (Eg: indexing of child tax credit, etc). Hope they maintain some level of focus and get this through.�
1/1/2015
guest Chinese Solar Makers Bid Wall Street Goodbye Amid Sliding ADRs - Bloomberg Business
�
1/1/2015
guest Thanks Gene, best of luck for you too. I have been doing the opposite of every wise investor, selling low and buying high. In any case, I don't regret my decisions. In my view, I did the right thing at each of the circumstances. I still believe barring an ITC SolarCity's future is very clouded. Fingers crossed, hope this ITC extension comes through. The discussion will change from survivability to 100% growth rates, 1million targets, 'reckless growth', gigafactories, to blind-faith-price-targets (when will we hit $400 again?). Exciting times.�
1/1/2015
guest
This was in the Politico morning energy blurb regarding ITC:
�
1/1/2015
guest Now that I am on the long side, I guess we are buddies again??
Yeah, the short interest as per NASDAQ is 32.1 Mil shares as of Nov 30. I see the float as 60.8Mil. So it's 52.83% of float.
There are a few different ways to see trends but nothing to give exact numbers.
The simplest way is to look at Interactive Brokers (IB) tool called Short Stock Availability tool. It gives you the current rebate rate (the interest charged for shorting) as well as a brief history. If the interest is going up, there is increased shorting activity. I see that the rate peaked out on Dec 7 at 74.1%. Currently it is at 61.6%. To give context, for example TSLA's current rebate rate is 0.89%. So the rate reach these ridiculous 50% plus, when shorts are expecting an imminent business failure and are desperate to cash it in. On the contrary if there is a material positive news it creates a massive stampede and a huge price spike.
If you have access to professional tools like Bloomberg terminal, you can see survey data like Markit. It's not perfect but gives you a sense of trends. They release data on a two day ago basis. Maybe there are other ways to see Markit data than through a Bloomberg terminal.
From what I understand the rebate rate published by IB is for new shorts. For existing shorts it's usually a much lower rate. There is a firm called S3, which releases their Blacklight information on a real time basis. This I believe is the aggregation of all short rebate rates (or atleast the ones they have access to). As per S3 BLACKLIGHT, the rate is going up even now, it didn't peak out yet.
All in all, there will be a *tremendous* amount of short covering if ITC comes through. I expect a massive spike in price.�
1/1/2015
guest http://www.shortanalytics.com/
Currently 33%�
1/1/2015
guest To me much of that appears to be outdated. Looks like Politico has connections only at the fringes. The discussions are moving very rapidly. House Democrats and subsequently Republicans already gave in. The Senators are crafting the deal and it's been pretty bi-partisan. Pretty sure White House is positive as well. We are well beyond the 50% probability of a pass now. At least that's my understanding of the situation.�
1/1/2015
guest The $400/share price target is out to 2025 and based on incentive compensation plans for the Rive brothers. Growing from $43 to $400 in 10 years is just a 25% annualized growth rate. The industry should continue to grow at 30% or more over this period. So I see little reason to dismiss the $400 long-term price target. The point of such a target is to keep the longterm opportunity in view and not lose patience or perspective with every short term cycle of market sentiment. The market has proven that sometimes it can't see even one quarter ahead. It's up to investors to keep the long view in sight.
All the best buying into this dip.
- - - Updated - - -
This is a really interesting article. There is a fundamental misattribution in the market of the price of oil to the value of solar producers. Oil will continue to lose value as solar supplants it. Oil still trades at a ridiculously high premium to other fuels. Even today oil is 3.5 times the price of natural gas on a per BTU basis.
But solar investors should not lose heart. In time the market will recognize that the oil and gas producers are unprofitable at these prices, while the solar industry is profitable. When that realization sinks in, solar and oil will decouple. In the meantime, it is good to acquire solar at depressed prices.�
1/1/2015
guest jhm, Appreciate your view as always.
The big fundamental difference between me and rest of the bulls here is that I see ITC as very material. Having it vs not having it is a day and night difference to me. For other bulls, I believe the view is that SolarCity will thrive anyway. I don't subscribe to that view. For me, the ITC is needed at least for another 5 years or so. Then maybe it doesn't matter. I don't think the PPA industry is ready for a non-ITC world in 2016/17 time frame. This downturn and the subsequent upturn was not merely sentiment driven in my view. It is very much a function of losing ITC and lack of preparedness for it, vs having it again. Market has been lot more rational than we generally give credit to. At least that's my take on it.�
1/1/2015
guest
update, and reason why the stock fell about 10% from today's highs.
15-Dec-2015 10:37 - US CONGRESS NEGOTIATORS HAVE NOT YET RESOLVED DEMOCRATS� DEMAND FOR 5-YEAR TAX CREDIT FOR SOLAR AND WIND POWER-SENIOR SENATE DEMOCRATIC AIDE
15-Dec-2015 10:38 - DEMOCRATS WANT TAX CREDIT TO TAKE EFFECT WITH START OF SOLAR AND WIND CONSTRUCTION PROJECTIONS INSTEAD OF COMPLETION -AIDE
15-Dec-2015 10:38 - SOLAR, WIND TAX CREDIT DEMANDS LINKED TO REPUBLICANS� DEMAND TO END U.S. OIL EXPORT BAN�
1/1/2015
guest OK, but that means both sides agree to a five-year extension but Democrats want it to take effect with start of construction? So if the Democrats cave we still get a five-year extension? In any event where do you get this ticker?
EDIT: TAN and SEDG are both up still, however, so I'm not sure it explains the SCTY drop.�
1/1/2015
guest Interesting. Came to know that House will release the final proposed text late in the evening. Apparently it becomes public info immediately and is posted to docs.house.gov
House vote is set for Thursday. Senate vote date not yet set, hopefully this week, if not, over the weekend.
I see lower risk from Senate than House. I think we will have pretty good clarity by tomorrow.�
1/1/2015
guest It's interesting that the panel manufacturers I follow - CSIQ, FSLR, SPWR, HQCL, JKS and JASO - all are maintaining their gains today that they've enjoyed since COP21, whereas SCTY, as you all know, has stumbled. I'm thinking that market players are hoping the worldwide situation to remain positive, regardless of what occurs in the US. That FSLR, which I believe has the greatest relative US exposure, is the weakest of that bunch lends some credence to the thought.�
1/1/2015
guest I don't see any way to avoid this squeeze if ITC is good to go in any form. There are way to many shares shortand any dip will be gobbled up by folks looking to bail while they still can.�
1/1/2015
guest Harry Reid putting pressure on Republicans with his negotiating stance.
Oil Export Plan Last Obstacle to U.S. Spending Bill, Reid Says - Bloomberg Politics
Separately, the deal apparently is to include:
5-year extension of solar ITC
5-year extension of the wind PTC
2-year extension of Land and Water Conservation Fund
Allows Obama administration to repurpose $3b in already appropriated funds to global climate fund
This looks like a sane list to me. Not sure what else Democrats are asking that is putting off the Republicans.
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Anyone know of companies positively exposed to Wind PTC?�
1/1/2015
guest Paul Ryan tells GOP: Budget deal a partial victory - POLITICO
�
1/1/2015
guest Benson, I appreciate your views as well. I totally get that your current investment is based on ITC. I also get that the market can take a very short term view for rational reasons. Time horizon is one of the key things that differentiate investors, and it is not inherently better to have a short term view or long term view. The market actually needs both. My bias of course is long-term, and I am 15 to 20 years from retirement. I do think that ITC washes out over a 10 to 15 year time horizon. Basically, with ITC SolarCity grows very fast for 5 years, but market saturation kicks in and growth past 2020 slows down. Conversely, with ITC stepdown, SolarCity grows more slowly for 3 to 5 years until it becomes solidly price competitive with utility power. That is, it needs to be priced about 20% below utility power to grow at a strong clip. Once this happen growth picks up and is strong for another 5 years or so. Either path, I think SolarCity gets to the same place by 2030 or sooner. Of course, the specific price path for the stock does depend substantially on ITC and myriad other issues.
Fingers crossed, ITC gets a solid extention, and we both see accelerated gains in the next few years.�
1/1/2015
guest I heard this rumor about this company that was going to sell stationary storage on massive scale...haven't heard much from them since. What was their name anyway...something Energy.
:wink:�
1/1/2015
guest What are the provisions, if any, for solar ITC and wind PTC to get credits for energy storage?�
1/1/2015
guest Analyst day running late? Just seeing a screen saying 'Solar City' and 'Delivering Better Energy' - anyone else?
edit: has begun.�
1/1/2015
guest Lyndon talking policy. Sounds very optimistic.�
1/1/2015
guest Yes, I also wonder if there is much potential for SolarCity to get in on firming up wind farms with batteries. It is also possible to intercrop wind and solar. I'd love to see wind and solar farms all firm up a little. Just adding an hour of storage allows those facilities to compete head to head with gas peakers and avoid need for curtailment. It would change the whole perception of wind and solar as unreliable, intermittent and in need of fossil backup. Firming up utility solar and wind, then, resolves many technical challenges to distributed solar. So if SolarCity pushes in this direction, it can mitigate some degree of policy risk to the residential business.
For an example, think about SolarCity operating a network of Powerpacks collocated with utility solar and wind farms. Within the same utility service area it also has alot of distributed solar systems at homes and businesses. In real time, it can monitor the net export of distributed systems and compensate for that by charging the Powerpack fleet. That is the net shocks for distributes assets can be precisely cancelled out by storage in wind and solar farms. The question then is what this grid smoothing service would be worth to the utility. Compensation from utility to SolarCity need not be strictly monetary; it could be leveraged for policy accommodation. For example, a utility trying to impose a special fee on ratepayers with solar could be persuaded to waive that fee for customers that participate in such a program. This would exploit SolarCity's scale to a nice advantage. SolarCity would have the scale to negotiate such concessions.�
1/1/2015
guest http://in.reuters.com/article/india-solar-softbank-group-idINKBN0TY22Y20151215
�
1/1/2015
guest Reading rumours on StockTwits of govt PPAs from CA and NV.�
1/1/2015
guest That is small, just 5MW.
- - - Updated - - -
CPUC ISSUES PROPOSED NET ENERGY METERING DECISION TO ENSURE CUSTOMERS CONTINUE TO BENEFIT FROM GOING SOLAR
SAN FRANCISCO, December 15, 2015 - The California Public Utilities Commission (CPUC) today helped ensure that Californians will continue to receive the benefits of using clean energy by proposing a successor program to the current Net Energy Metering (NEM) program. NEM allows a customer-generator, such as those who have installed solar photovoltaics (PV), to receive a financial credit for power generated by their on-site system and fed back to the utility.
The Proposed Decision issued today by CPUC Administrative Law Judge Anne E. Simon establishes a NEM successor program that would continue the existing NEM structure while making some adjustments to align the costs of NEM successor customers more closely with those of non-NEM customers.
In creating a successor program to the existing NEM program, the CPUC was directed by Assembly Bill 327 (Perea, 2013) to ensure that customers pay their appropriate share of costs while encouraging a sustainable customer-sited renewable distributed generation program. The Proposed Decision attempts to strike a balance between these requirements. These new costs for NEM successor customers include:
? One-time interconnection fee (likely to be approximately $75-$150). This fee, which represents the costs for a utility to review and ensure that a NEM system interconnects safely to the grid, has historically been borne by all utility customers, including non-NEM customers. The Proposed Decision finds that these interconnection costs can be paid by NEM successor customers themselves without jeopardizing the economics of the NEM installation.
? Non-bypassable charges that all utility customers pay. Non-bypassable
charges are used to fund low income and efficiency programs. They are the equivalent of approximately 2-3 cents per kilowatt-hour of energy consumed. Historically, NEM customers have only paid for non-bypassable charges if over the course of a year they consumed more electricity from the grid than their installation produced. The Proposed Decision finds that NEM successor customers should pay for non-bypassable charges on all energy they consume from the grid, regardless of the amount of energy they have exported to the grid.
In order to maximize the value of time-of-use rates in improving customer responsiveness to grid impacts, the Proposed Decision requires NEM successor customers to utilize time-of-use rates. Customers who sign up in 2018 or later must utilize time-of-use rates as soon as they sign up, while customers who sign up before 2018 must utilize time-of-use rates beginning when all residential customers go on default time-of-use rates in 2019.
The Proposed Decision establishes a framework to develop two new programs to drive adoption of renewable distributed generation among residential customers in disadvantaged communities. One program would provide financial incentives for multi-family buildings to install solar PV, and the second would allow residential customers in disadvantaged communities, regardless of whether they own or rent, to participate in NEM even if they aren�t able to install a renewable energy system on their premises.
The successor NEM program would take effect for new NEM customers after the utilities� existing NEM program participation caps are met, or July 1, 2017, whichever occurs first.
The Proposed Decision is scheduled for the CPUC�s January 28, 2016, Voting Meeting.
The Proposed Decision is available at: California Public Utilities Commission.
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I consider this to be very positive news. That's not much penalty at all.�
1/1/2015
guest Wow. New 2017 cost target of 2.25/watt all in cost. (Old target was 2.50/watt)
2.00/watt by 2019.
aggressive expansion on utiltiy solar + storage
aggressive expansion of aggregation of distributed solar+storage
add:
They are going to show the analysts the factory as well as a model home with aggregation capabilities.
We might see some positive reviews come out today and tomorrow after all is said and done today. A few minds will be blown by all the potential value-add coming out of Solarcity in the future.�
1/1/2015
guest Excellent cost targets. Do these include all customer acquisition costs?�
1/1/2015
guest Thanks for the update. This all looks quite workable. TOU by 2018 is actually helpful for stimulating battery sales. By 2018 hopefully the Gigafactory will be pumping these babies out at lower cost. A little bit of rate variation through the day will make them more attractive. It's also good from an environmental point of view. We want stored solar energy to help drive down the use of gas peakers.�
1/1/2015
guest Yes. Also, this is at 10% ITC step down, with no ITC extension.
also, to note their hardware costs are at 1.00/watt and will hit .80c/watt in about a year. This gives perspective compared to all the supposed cheaper smaller installers.�
1/1/2015
guest On another point, I was quite surprised that ITC at 10% or 30% level only made a $0.55/W difference in retained value. I'll have to spend a little time looking at the details to see how this works. At first glance, it looks promising, along with pushing the cost down to $2.25/W.
I definitely like the emphasis on being the low cost leader. That's cost, not price. I'm sure detractors will intentionally mix this up. Being the low cost leader, who does not have to be the low price leader, is very good for investors.�
1/1/2015
guest Great news. Any specifics around reducing sales costs? In my mind there's no shortage of demand nationwide at these cost levels, I'd just like to hear SCTY state a plan. If $2/W is the goal, then today's sales model must already have a phase put plan. Nice to hear!
I could see SCTY doing a LOT of straight installs if they can charge $2.50/W for the Buffalo panels with decent monitoring capabilities. I reeeally hope the market wakes up to this before my 2017 options expire.�
1/1/2015
guest You know, looking at the operational excellence peice, I was struck with how applicable this is to lots of in home construction services. Like, how about they redesign my kitchen, get it done right, quick, cheap and hassle-free? I think there really is a place for national home installation service companies.�
1/1/2015
guest
Yes. They are going to drop legacy high cost sales channels, which will drop costs by .20c to around .40c.
Now, interestingly, this is an average. They showed a cost breakdown where a large chunk of sales costs for what I assume is residential sales where sales costs are half of the .64c it was at q3 conference call time. They really demonstrated they can pin point the areas of high costs and drill down on it. They also said they are now positioned to throttle head count in those high cost areas. Specifically noting they will cut ties with some expensive lead generators. I can't remember the name of it, but I think they are referring to the deal the have with industrial & commercial utility partner from 2013 deal.�
1/1/2015
guest As I always complain, all of their costs and cash flows are: aggregated project level cash flows. They are NOT all-inclusive enterprise costs over the installs.
In any case, directionally, lower costs is a good thing. So that is some good news to cheer for.
The other big positive from today's show is that they are talking about RV in installed terms, backing away from bookings. That is a positive move. Using bookings is atrociously deceptive. The gap between cumulative bookings vs installs is more than 40% !! This is while they are saying they can go from booking to install in a matter of days. So all of that gap is BS. They are all dummy bookings. Again, I commend them for trying to come out clean.
- - - Updated - - -
For those who care
The cumulative total of installs is: 1.7 GW
From Q3 Shareholder letter. The very first line from the top.
The cumulative total of bookings is: 2.5 GW
From the Q3 slidedeck, page 7. Divide GRV of 4,373 with $1.78/W figure from bottom
So RV is exaggerated by 47%
If you only use installs, and of Q3 NRV is $22/share (instead of the $33 they mentioned).
So don't be surprised in the Q4 report if you see a dramatic drop in RV/Share as they adjust the methodology.�
1/1/2015
guest California retains full retail rate. No demand charges.�
1/1/2015
guest SolarCity response:
"We support the PUC's proposed decision to continue the state's successful net metering policy. This is consistent with California and Governor Brown's leadership on clean energy and recognizes the important role of rooftop solar in accelerating our transition to a clean energy economy and providing customer choice.
The proposal to require new solar customers be on time-of-use rates is concerning. As we saw in 2007 when time of use rates were briefly mandated for solar customers, they don't work for everyone who wants to go solar, and would reduce the motivation for installing solar. While these rates can send helpful signals about when to use electricity, we urge the PUC to closely examine the impacts of mandating time-of-use rates."�
1/1/2015
guest Yes, I posted the full text up-thread.
Here is a reaction from SolarCity:
SolarCity Statement on California Public Utilities Commission Proposed Decision on Solar... -- SAN MATEO, Calif., Dec. 15, 2015 /PRNewswire/ --
I am not too concerned about Time of Use charges. They are way down the line and can work well if policy is structured correctly.�
1/1/2015
guest Interesting - can anyone tell me why solar customers wouldn't want to have time-of-use rates?�
1/1/2015
guest If you live some hot and you work at home and want to run air conditioning during the day, in which case TOU can be very expensive�
1/1/2015
guest ITC decision comes out NLT 7PM pacific, 10PM eastern.
(Paul Ryan said he got the oil ban lifted, which means we got the solar itc)
tomorrow is going to be a wild ride...�
1/1/2015
guest NLT?�
1/1/2015
guest "No later than" maybe?�
1/1/2015
guest Thanks, that's very exciting. Any specific source you guys are watching for updates?�
1/1/2015
guest You are saying this comes out tonight, Tuesday, or is it tomorrow you are speaking of?�
1/1/2015
guest I think the concern is that with high solar penetration in the grid peak demand and high rates may occur in the evening while daylight hours have a low rates. In this situation someone with solar may fed in power when rates are low and then draw grid power when rates are high. Batteries and to a more limited extent west facing panels would mitigate this.
But in many places there is not so much solar that this is a problem. If the peak hours are in the afternoon when A/C usage is highest, then solar nicely complements the situation. Solar helps you avoid peak rates.
I recently read an article on this in Australia where there is substantial solar penetration. The network found that rooftop solar did shift the peak for grid power. The peak was a few hours later than several years ago, but it was also a much lower peak. So while solar did not eliminate a peak, it did make it smallar and more manageble. The peak did still occur before sunset. So more west facing panels would in fact push out and reduce the peak further.
The problem for utilities is not really that there is a time of peak demand. Rather it is the missed revenue opportunity of reduced peaks that are messing up the utility business model. So I am happy for utilities to offer TOU pricing because it just gives solar owners more opportunity to make a bigger impact. If you have a nice west facing roof, you may someday benefit from this kind of pricing, and so will environment.
Found it.
How rooftop solar is causing big falls in peak demand : Renew Economy�
1/1/2015
guest When is the vote?�
1/1/2015
guest Slide 54.....fascinating. MW Installed by Sales Channel.
This is the stuff that really hurts my brain. I understand that SCTY is out there on the front lines as pioneers in a fresh industry, but some of these sales costs are painful. Glad to see them indicate a move away from the customers wildly expensive to acquire. What we want are online word-of-mouth sales with a cost of maybe $.20/W at most. Hell, Germany has nearly zero customer acquisition costs, no reason we can't too. TONS of fat to be easily trimmed from an average acquisition cost of $.64
Put that cash right in the investor's pockets. Tanks!
Loving all the news coming out and kudos to Lyndon for killing it today. Clear aggressive realistic guidance and a focus on cost cutting.
ITC gets the nod from the House before Friday and the shorts will get destroyed.�
1/1/2015
guest Let them eat coal: Coal lobby not taking Paris deal very well : Renew Economy
Indeed.
While some are simply in denial, others jump right into guvment conspiracy theory... Government Influence Over Asset Prices Growing | OilPrice.com�
1/1/2015
guest Man this wait is killing me. Looks like a deal between leaders is reached (finally!). Oil exports getting a nod. Still not very clear what solar is getting. Wind PTC for (at least) 2 years is certainly in the bag. Can't wait for the full text.�
1/1/2015
guest Kevin Brady is briefing members on the tax extenders right now.
vote might be thurs
add:
spending deal has been reached...
add2:
hearing 5 year ITC extension...�
1/1/2015
guest Yes deal is certainly reached. I'm still looking for 5 year ITC confirmation.�
1/1/2015
guest DONE
Lawmakers have agreed to lift the four-decade-old ban on crude oil exports as part of a spending and tax package announced by congressional leadership on Tuesday night, according to a GOP lawmaker.
In exchange, Republicans agreed to extend a series of expired or expiring renewable energy tax breaks. Both the wind Production Tax Credit and the solar Investment Tax Credit won five-year extensions in the tax package unveiled on Tuesday, the GOP lawmaker said.
�
1/1/2015
guest AWESOME!!!!
Tomorrow it's gonna be fireworks!!!
- - - Updated - - -
Now I can breathe easy. Sweet dreams people!!
Appreciate all the good work here. Thanks to everyone!�
1/1/2015
guest 5 years at full 30%.
solarcity back up to 80%+ growth again.
big time guidance to come.
upgrades galore.
they are the best positioned to take advantage of this extension. Immediate impact on capital influx.�
1/1/2015
guest Extended as in at 30% or with the 5% stepdowns proposed? I guess I'll just wait til morning and watch the chaos on a good night's sleep. Still wish I'd had the cash to dump in at $26, but what you gonna do. Those $1 2017 calls @ $60 & $70 are looking like gold Jerry!
Speaking of call options.....2018's were wildly expensive today and folks were still buying a bit. What's the rationale there? Why pay $7 for $70 calls when you can just buy shares for $40?�
1/1/2015
guest I read step downs each year. Can't copy paste. Will wait for official text for confirmation.�
1/1/2015
guest I'm fine with that, it's actually better really. 4Q urgency to get installs online before year end is what drove Germany installs through the roof. (Add)2GW in December of 2011 alone!�
1/1/2015
guest Looks like 5 year phase out expiring in 2022. Commence construction also included, so projects started in ITC year will get tax credit even if completed years later.
Add:
Text of the deal is in the omnibus bill, not the tax extenders bill... Omnibus text not out yet... Expected omnibus bill to be posted by 11pm tonight pacific time.
add2:
according to the omnibus: 30%(2017-2019) 26%(2020) 22%(2021)
wow. Short squeeze. Bye bye chanos and gordon johnson!�
1/1/2015
guest Mine is the sunlight,
Mine is the morning,
Born of the one light
Eden saw play.
CAT STEVENS - - YouTube�
1/1/2015
guest Did anyone else's option order go through yesterday?
The spread on some of the calls is just silly, but I was able to snatch up some $50 Jan16 calls at a reasonobale premium
At least there's some OpenInt on some of these nice round number strikes.�
1/1/2015
guest I have a boatload of April 40 calls for sale. Not sure whether to cash out today ahead of the FED announcement, or wait for the vote.�
1/1/2015
guest Grab your coat and get your hat
Leave your worry on the doorstep
Just direct your feet
To the sunny side of the street
Can't you hear a pitter pat
And that happy tune is your step
Life can be so sweet
On the sunny side of the street�
1/1/2015
guest Its gonna be a bonfire of shorts. Fed is the last thing I would worry about.�
1/1/2015
guest If anything, a Fed announcement of limited additional moves in 2016 might cause a rush back to stocks and a tougher environment for shorts to cover.
This is gonna be delicious.�
1/1/2015
guest 
�
1/1/2015
guest Details on the ITC extension:
2016 - 2019: 30%
2020: 26%
2021: 22%
2022 onwards: 10%�
1/1/2015
guest I bought some additional stock early morning around 7AM hehehe�
1/1/2015
guest 50 here we come�
1/1/2015
guest Opens pretty much at $50. Lololololol
Edit: The best part of all this is the rational stock valuation for the last 3-6 months was really about $60-80. The shorts held it down with disinformation and now there's room to run.�
1/1/2015
guest It's a gusher!�
1/1/2015
guest Here is something to chew on
TSLA Short Interest
3/15/2013 - 32.3 Mln shares - stock price $35.29
5/31/2013 - 18.6 Mln shares - stock price $97.76
SCTY Short Interest
11/30/2015 - 32.1 Mln shares - stock price $28.76
1/15/2016 - ?? ??
I hope I am not too crazy expecting a $90+ print in early Jan�
1/1/2015
guest Looks like SCTY up a bit today�
1/1/2015
guest Personally I am not going to sell a single share until I see Short Interest drop below 19 Mln shares.
Don't miss out on the rally people. Hold long and strong!!�
1/1/2015
guest Funny, I thought this company was fundamentally flawed and management was incompetent and deceitful a few days ago....�
1/1/2015
guest A moment of silence for Chanos' portfolio....
Nah, j/k. Burn, Chanos!�
1/1/2015
guest It's the ITC. It's always the ITC...
"Don't blame it on the sunshine, don't blame it on the moonlight, blame it on the ITC"
�
1/1/2015
guest Any predictions for a high today?�
1/1/2015
guest I'll definitely smoke a nice Cohiba tonight after having closed out my Jan16 calls for a 350% profit. Or did you mean some other kind of high?�
1/1/2015
guest I answered that just a few days ago.
- - - Updated - - -
Just yesterday I posted this while holding 1000s of shares
I am not interested in cheerleading and echo-chambers. I like to say things as I see them.
Given a very rich ITC none of these issues matter. The economics work great. Give 30% guaranteed return on capital to *any* business, it will grow like a weed. SolarCity being a Solar company is on the right side of the history.
Nevertheless, I am NOT backing out from the claim that management has been deceptive.�
1/1/2015
guest woohooo! This is what I like to see.�
1/1/2015
guest This is insane, I did not expect it to be extended for that long, and a whole 4 more years with 30%. I do not think that is necessary even though I do welcome it as I too am invested in solars (albeit not SCTY). I think the US solar market will be bigger than China in a few years. I guess the understimation of the LCOE reduction curve in solar did end up doing us some good after all.�
1/1/2015
guest I hope someone had some ENPH. It's up 85% as of this moment. 25% for SCTY is worth a big party though.
�
1/1/2015
guest 25% gap up today, wth?�
1/1/2015
guest Let's all show Benson some respect. He was smart to know when to jump back in and stress testing SolarCity's finacials is an unglamorous, but quite worthwhile task. He is an independent investor who does his own homework, and that is exactly what this market needs. Cheers.�
1/1/2015
guest I smell a short squeeze.�
1/1/2015
guest Yeah but the YTD of ENPH is anything but beautiful:
�
1/1/2015
guest +1.�
1/1/2015
guest Agreed - cheers!�
1/1/2015
guest
Yes.�
1/1/2015
guest I've been watching ENPH almost as long as TSLA and SCTY. It's not been a happy stock this year. Good to see some bounce back. I have a friend invested in the company.�
1/1/2015
guest What a Happy Holiday .... SCTY up 26% TSLA up 3% in one day! HO HO HO Thank you shorts for such a thoughtless gift :scared:�
1/1/2015
guest Dangit, why didn't someone personally call me yesterday to tell me to buy calls? It's like I have to pay attention and do research!�
1/1/2015
guest Indeed, SolarEdge has been taking market share from Enphase. SEDG has the technological lead, while ENPH has scale and incumbency. In a rising demand scenario, scale has a big advantage. So it is right for ENPH to jump up like this. SEDG, too, is up 16%.
FTR, I'm invested in SEDG, but not ENPH.�
1/1/2015
guest +1 also
Although his gloominess was starting to affect me recently, and I was having a bit of a crisis of faith. I was thinking about cashing out and buying a used Leaf instead of holding out for my Model 3. I feel a lot better today. Still I feel a need to be cautious since I cannot refute anything he says. I just got approved for options trading so I might dip my toe in with a protective put around earnings.�
1/1/2015
guest Irrational negativity is just as detrimental to forming a clear value picture as irrational exuberance. I'm glad everyone is making money here, but buying high and selling low based on emotion should not be encouraged.�
1/1/2015
guest I wish I bought at open...nice little squeeze. At least I have exposure through my now-ancient CSIQ and JASO holdings that has appreciated nicely this morning.
What a wild day.�
1/1/2015
guest In all fairness I believe SBenson sold based on negativity stemming not from "emotion" but rather from his analysis of the financials. And the fact that he was not counting on such a generous extension of the tax credit.
We shouldn't turn a blind eye to the things he's been pointing to: changes in accounting and moving away from the Retained Value metric to the new concepts for reasons that are a bit unclear.�
1/1/2015
guest JASO briefly exceed the $9.69 buy-out offer price, reaching a high of $9.75! I took the opportunity to cash out of my stock, but it'll be interesting to see what happens to the offer now.�
1/1/2015
guest I certainly agree that free analytics are always welcome. Especially(as Elon would say) pessimistic anlaytics from a party interested in the success of the object organization. However, the rapid swing to highly irrational simply isn't helpful. When we start talking about fair market cap being based on current conservative retained value of a market leader growing at 89% annnually, I have a tough time seeing that as helpful to creating a clear picture of value.
I'll now shut my mouth so as not to put a damper on the Chanos roast!�
1/1/2015
guest Thank You James!!
We spent a lot of time together over last few months both in this thread and in private chats. You know exactly where I am coming from. Appreciate all the support all the while.
And thanks to everyone for voting this up.�
1/1/2015
guest BTW, I am seeing no joy among oil investors today. They are finally getting a lift of a 40 year old ban on oil export, and yet the market says "meh" to oil E&P. XOP is flat, and TAN is up 7.3%. I think the market knows who got the better deal last night.
Moreover, I am hopeful that the market may continue to decouple solar and oil. No doubt solar shorts thought that low oil prices were bad solar, but they will pay dearly for that mistake. Natural gas has fallen to $1.81/MMBTU from about $2.08 a week ago. Solar will continue to squeeze natural gas, and gas will continue to squeeze oil. There is no joy in Mudville tonight.�
1/1/2015
guest On a separate topic, in anticipation of Wind PTC extension, for lack of knowing anything better, I bought NextEra (NEE) about two weeks ago. It is sort of a blue chip type stock but still has a small bump up today. Anyone know anything about NEE? I am debating how long I want to hold this for.�
1/1/2015
guest To clarify my protective puts at earnings statement, if SB is right and retained earnings get revised down, that would obviously be very bad in the short term. My simplistic assessment of the stock value is based entirely on that plus growth rate. I'm not saying it will happen, but it could. I haven't had a chance to view the investor presentation yet (can't stream at work, was busy last night, kicking myself) so not sure what their current guidance is. But like he himself is saying, at this point it almost doesn't matter.�
1/1/2015
guest SBenson, NextEra is essentially Florida's utility, looking to buy Hawai's utility and then also a very large nationwide generator of wind and to a lesser extent solar. They are one of the largest renewable generators in the nation. Also, they operate ~5 nuclear plants.�
1/1/2015
guest weekly call Options from yesterday:
�
1/1/2015
guest Apologies for asking this for the 20th time, but how do we track short interest day to day? We know it hit 32M a while back and there's an update coming at Christmas, but what's the best way to see how much short interest might be cleared off? Just guess based on a percentage of total daily volume?
Speaking of volume.....9.3M thus far today!�
1/1/2015
guest Trying to gauge how much fuel is left in this rocket. At present we have 7mil shares traded, while short interest has risen from the last time the stock was at 50 by about the same amount. My intuition tells me that this suggests the panic covering has mostly been done, and we wont see a continuation of this vertical lift-off. Is there any sense in that?
I suppose many of the shares traded this morning may have been new longs entering on the ITC news, so perhaps there are still quite a few underwater shorts out there that have held on, so there may be a little more fuel left, but I think the next big move will be when there is a catalyst (probably a few analyst notes, which I expect to be very positive) or a catalytic move by some larger shorts.�
1/1/2015
guest Thanks. In terms of price action I think it generally tracks the broad market indexes. I am thinking of selling out between 105 to 110. To be honest I expected a bigger reaction in the stock based on wind PTC. Although, I should say, I didn't dig into the financials. So I don't know exactly how much of a benefit PTC will accrue.
- - - Updated - - -
Ironically, the most sophisticated wall street analysts from premier banks like JP Morgan and Deutsche Bank do exactly that!
The business is fundamentally the same however they report their numbers. But if they were to adjust RV to installs (rather than bookings), people who don't know better will go through a sticker shock.
This is not investment advice, but personally I will lighten up my position a bit before ER (will not completely sell out though). I hope the shorts get enough squeezed by then.
- - - Updated - - -
As per IB, there are no shares available to short and the current rebate rate is 66.4%.
Short covering barely began.
From this morning in case you missed:
Use your own judgement though. I have been wrong in predicting price action enough number of times.�
1/1/2015
guest Well, volume just hit 10 mil for today. I'm guessing maybe 25% of short interest could have covered so far? I'm purely guessing.�
1/1/2015
guest Think of where we are and what each type of investor might be looking to do.
Are longs going to sell any time soon? Unlikely. Most longs got in at $35-$55 and see the upside as being far past $50. So they're not selling. How much new long volume could be expected today considering recent news? Double normal? Triple? Far more? They're going to be almost all of the action today.
Shorts are screwed and not going to unscrewed themselves any time soon so long as they have a glimmer of possibility that there's another dip to be had. That being said, I really don't have much clue what I'm talking about. Just my personal assumptions based on what happened to TSLA.
My guess is we see a series of short-squeeze-based run ups over the next little while, then an earnings/guidance catalyst will be required to make the real jump into the stratosphere on a mega-short-squeeze. There's going to be a tug-of-war between the perception of a "failed unprofitable model" and a "hyper growth money printing machine" over the next year. The numbers will tell the story and the real liftoff will happen from there.�
1/1/2015
guest If directed at me I don't think pointing out a 180 degree change from uber bear to long is disrespectful in the least.�
1/1/2015
guest Everyone needs to step back and think about this for a second....
solarcity will have 3 more years of ITC at 30%. Then 2 more years of 26% and 22%. Expect a massive guidance change as soon as the bill becomes law. Solarcity will easily bump guidance to 1.5-1.6gws for 2016. They now might also give a 2018 guidance outlook now as well. There is clear visibility now so expect them to share that with investors. Banks are salivating for big time tax equity, so expect big abs offerings for a very long time to come. Can't emphasize the positive chain reaction this is going to have on many aspects... Especially going into powerwall and power pack integration ramp...
the short squeeze hasn't even started yet. Wait till we see 30mln shares traded every day this week and next, then talk about the squeeze slowing down.�
1/1/2015
guest To me it's not about respect/disrespect, it's about missing the point he was trying to make. If the conditions on the ground change (which they did with the ITC decision), shouldn't the conclusion change? As an investor, I am more interested in why someone reaches a certain conclusion rather than the conclusion itself.
What matters is consistency in reasoning. His reasoning didn't change; the premises did, however, triggering a strategy change which he announced on the record. Sticking to previous assessments when faced with changing data is not a virtue. Adjusting to a new reality is.�
1/1/2015
guest The big lesson from the post-3Q Earnings tank has been the insight into how the market will perceive results and guidance from SCTY. I believe it was SBenson who hit his sweet spot in investment logic when he mentioned most folks were being irrationally exuberant the day prior to 3Q Earnings. That turned out to be right on the money. Chart readers and algorithms took the news as mediocre and short pressure tanked the stock even though the news on install cost lowering and post-ITC guidance really should have been positives.
Where does that take us from here? Is that inverse logic still the best method of trading this stock? Should we be looking for slight negatives on the next couple earnings days, or has this lesson been learned by all parties involved and integrated into algorithms and charts? I have to think that the barrage of wildly positive new guidance will destroy any chance of downswing due to "chart people" over-reacting. There's just too many good angles, and as you mention they all reinforce and feed back on each other.
SCTY can now safely paint an accurate picture of what 2017/18 will look like and when people compare those figures to current market cap...........bickering over retained value interpretations will be inconsequential. Can't wait to get this thing voted on and signed.�
1/1/2015
guest Lets be real, the only reason scty was down was because of ITC expiration, California net metering decision, and chanos short. The fundamentals are extremely strong, not even close to what some have stated here in the past. That is not even a debate.
The debate was on policy problems. Those policy problems are now dissolving as an accelerated pace. It's quite astonishing actually. We might really get to a renewable grid much faster then even the most optimistic projections now.
Utiltiy rates are rising in all Solarcity markets, yet Solarcity is continuing to reduce its retail rates at the same time. Now with ITC fully extended for 5 years, that will only accelerate with scale.�
1/1/2015
guest I'm debating doing same and buying SCTY/SPWR/SEDG with proceeds, but that's quite a run-up today.�
1/1/2015
guest Well if this is only the beginning of the squeeze, will we hit $60 by the end of the week?�
1/1/2015
guest I agree that most short covering hasn't happened, but I think that this chunk of shorts (that shorted below 50, based on thinking the company was unviable, rather than the stock overvalued) mostly has. I'm almost positive another big chunk will cover soon, but that it will take another catalyst to kick off the next leg of the squeeze,by causing panic among the next chunk of shorts - the ones that shorted between 50 and 60 which looks like a chunk about the same size as appears to have covered today.�
1/1/2015
guest In the past two months, SCTY went down ~50% from beginning of October to mid-November, then went up ~60% from mid-November to mid-December and ~25% just today alone. What a wild ride it's been. When it was $25 not too long ago, I really wanted to buy more but didn't have spare funds available since I was all-in for SCTY at $50 (lesson learned to always have spare funds ready to buy).�
1/1/2015
guest Watching the $70 call options for Jan 2017 crawl down to $1 a few weeks back with no cash to invest was unbearable. Ah well, it's only money.�
1/1/2015
guest Especially watch what happens at 11AM pacific time today....
also, be on the look out for the Solarcity abs PR to be released soon. Maybe after bell today or tomorrow.�
1/1/2015
guest It was not directed at any one person. Many of us, myself included, have given Benson a hard time since turning bearish. So I just wanted to give some credit to what he has contributed.�
1/1/2015
guest I guess maybe end the week @$60 was a lowball estimate? Any guesses? :biggrin:�
1/1/2015
guest $55.20 And the shorts aren't nearly out yet. Delicious.
- - - Updated - - -
I just want to see $120 by this time next year.
- - - Updated - - -
Total volume as of now is 14.2M, can I assume only maybe 20% of that is shorts covering? Or is it much higher?�
1/1/2015
guest Hope everyone is enjoying the ride.
Per IB the rebate rate is still at 61.98% and still no shares available to short.
So I repeat the short covering barely began.
- - - Updated - - -
A quick note on Fed.
SolarCity is not exposed much to the short term rates. It is much more exposed to the long term rates as it leverages much of the cash flows. Today's Fed announcement, after the initial noise, didn't move the 10-year treasury bond much at all. Meaning FOMC decision and it's forward looking guidance have no material impact to SolarCity's business. Btw, even the short term rates are expected to move up very slowly. The next move is apparently priced for June.�
1/1/2015
guest If any of you were around when tesla went through the squeeze, scty is shaping up in similar fashion.
itc extension is the biggest catalyst in the past decade for the entire industry, Solarcity is positioned to benefit the most.�
1/1/2015
guest I was not. I guess we know all the shares Elon just bought probably won't be for sale too right? I have no idea what to expect here.�
1/1/2015
guest I think there were definitely elements of a short squeeze in play today. Volume was 4 times the average! Now, I could be wrong, but I think there are a lot of small traders (and even some big ones) who had their eyes off the ball today, with shopping and vacations and stuff. Also the margin calls will go out tonight; some shorts might get very unwelcome emails overnight. So, personally, I think there is more run-up for SCTY tomorrow (and hopefully TSLA too, although not as pronounced). Anyway, a very happy day for me!
Of course the other possibility is a reaction against the move(s). I'm happy to just watch it play out, since I was very long on both stocks.�
1/1/2015
guest Thanks for all the useful intel here folks. It would be difficult for me to just keep buying if not for all the insight I gained here. Back in the green again in my variety of SCTY holdings, not spectacularly so but pretty satisfying.
Interesting side note, ENOC is actually down today a bit. It has me puzzled a bit. Is that because demand response isn't going to have as much opportunity for arbitrage given increased renewables supply? But they are also supposedly working on integrating batteries into their algos so they should do at least Ok long term (if they do Ok at all).�
1/1/2015
guest Ya think?
Up 34% in one day, I don't think those short (or long for that matter) wouldn't notice, unless it's a very insignificant position. Also there are likely quite a few investors who "go long and forget" (never look at the ticker). The number of shorts doing that can be counted on one hand.
That said if you did go short above today's closing price you'd still be "in the green" and psychologically it would be common to want to "wait for the correction" and then close your short, or double down. If your short is in the red and you didn't cover earlier today, in the $45-$50 range then cognitive dissonance may be setting in: "this thing is obviously overbought", "I'll wait it out" etc.
These shorts will get their margin calls and will need to face reality eventually, thus powering a squeeze to new all time highs.
Once there new longs will come in. These will be investors who "discover" or rediscover SCTY once the market puts value on the stock again, some due to technicals but most due to fundamentals (basically correctly interpreting the enormous value in the generous ITC extension, and the fundamental shift in policy we're starting to witness unfolding. More or less these are the people late in the distribution when it comes to how early you were able to catch on to the fact that fossil fuels are doomed and solar is the future. To people on this forum this idea seems so obvious and has been well founded for years, maybe even decades, but we have to internalize the reality that there is still a large chunk of investors to whom this is a novel and intriguing notion. Go figure.)�
1/1/2015
guest still very red overall on my SCTY but today helped lol, I need 2 more days like today to hit the green I think�
1/1/2015
guest Nice to see the big move today on top of the past few weeks. I first bought at $77 and kept buying all the way down to $28. Nice to be well into the green.�
1/1/2015
guest Cheers dandurston. I can boast to a slightly worst initial buy at $80 and down from there. It has been a similarly wild ride to green indeed. :tongue:�
1/1/2015
guest Super. Welcome to the forum.
I always feel better buying on the way down as opposed to the way up.�
1/1/2015
guest I've learned I prefer buying options when the stock is flat or going up, buying on the way down (from 70) can be painful�
1/1/2015
guest Options only magnify my stupidity on the way down...but today they made me look like a genius that I can promise I am not.�
1/1/2015
guest With Tesla, there was a sort of rolling short squeeze. One round of shorts would make a little money, get greed, then get burned. Just as that round of shorts would take their losses and close their position, another round of shorts would initiate at a higher price. Then the cycle would repeat. So the total number of shares short didn't need to change all that much.
So I wonder if that will happen for SolarCity. There very well could have been a lot of covering going on today. But there are probably a bunch of shorts thinking SolarCity really ought to go below $40 again so they pile on in the $50s.
So shorts will play whatever games they want. I'm not counting on a squeeze. What I try to stay focused on is what the company is doing and where sentiment is headed. And I am currently optimistic about both.�
1/1/2015
guest The other thing to consider is the additional news that will come out over the next week to 10 days. SCTY was very clear in their analyst day presentation that all estimates going forward were based on sun setting of the ITC. Once the ITC extension is signed into law (Friday or Monday) they will have another news cycle with fairly dramatic upward revisions. SCTY also emphasized that they were giving analysts the spreadsheets with the 6% DCF calculations (and the 10% ITC presumably) so they could do their calculations themselves. That will include analysts upward revisions of estimates, (already at $57+ Before the generous ITC extension).
There is also the potential for Tariff relief on the horizon - total speculation, but with Trina setting aside $45 million for settlement of the Solyndra case, things may be falling into place for some relief, which would help SCTY on a cost standpoint, as with higher production goals, they won't be able to in source all their panels in the near future.
Fun times ahead.�
1/1/2015
guest From reading around this afternoon/evening it seems like the short sentiment is as strong as ever. These guys will deny reality right up to $70/share, be forced to cover, then zoom! Just like TSLA.
It's amazing to me that people went through the TSLA squeeze and are now doing the EXACT SAME THING with ALL THE SAME PLAYERS on BOTH SIDES! An astonishing less in human nature.�
1/1/2015
guest exactly.
The chain reaction of positive news hasn't even started yet.
Investment Tax Credit Extension Would Increase US Solar Installations 54% Through 2020 | Greentech Media
54% increase install base expected due to the passage of the ITC extension. And this is said to be conservative....
shorts are stubborn they will re enter for a while here so expect tranches of short squeezes like today for a while moving forward. Again, we really haven't even warmed up yet...
added bonus:
retroactive to 2015, Solarcity can depreciate 50% of new installed assets thru 2018... 40% in 2019...
Tax Credits Teed Up for Extension | Chadbourne & Parke LLP
added bonus2:
New tax credit helps fuel Solar City recovery
Senator Schumer had a little talk with Solarcity....Solarcity will be doing some new guidance releases soon after the signing of the bill into law.
Be prepared.�
1/1/2015
guest Next we need everyone getting behind Carbon Fee and Dividend.
Carbon Fee and Dividend - Citizens Climate Lobby
[video]http://bit.ly/GreatHayhoeCCLvid[/video]�
1/1/2015
guest Thinking about possible short term developments here. Say one has a very large short position. A reasonable thing to do would be to wait for the initial wave that the news generated to die down and then try to manipulate the stock and exit. There's a chance some of those large positions are also constrained by having to show profit by year end. So they won't act before the extension is signed into law, but they won't wait very long after with their hit pieces. The wild card is if/when SCTY will issue revised guidance. Any ideas on the latter? Does this make any sense?�
1/1/2015
guest Good Morning Everyone
Latest update, per IB, there are no shares available to short. Moreover the rebate rate went UP to 66%
Also checked S3 Blacklight data, the rebate rate went UP.
Tomorrow will get to see MarkIt data for yesterday (two days old always). Will let you know.
All indications so far say that short covering barely began. Or maybe new shorts are replacing the old shorts.�
1/1/2015
guest One little detail.
I wonder if this could go into effect for installations begun in 2015. It's very nice to get some of those credits a year earlier. It helps with cashflow.
The is possibly most relevant to large installations. Stats on large installations have always seen completions peak on Q4 as installers push to get tax credits under the wire. But under this new rule. The push will simply be to start a project by year end. So completions should be more evenly spread out through the year. This probably would save on labor costs, as workers get consistent hours throughout the year.
- - - Updated - - -
Benson, thanks for the update.
It looks like we've got them right where we want them. The price lift has come from buyers, and it is very costly for shorts to apply selling pressure. They have been running out of rope with which to hang themselves.
So buyers can take this opportunity to accumulate before shorts exit en masse. Shorts are paying dearly not to push the price up, but they are running out of firepower.�
1/1/2015
guest Solarcity was up to 64 in pre-market. Fat-finger order?�
1/1/2015
guest Looking set to open around $57 as of now, but then again yesterday was much more pronounced when the Bell rang.�
1/1/2015
guest I don't know the exact mechanics of it. Whether they get to retroactively take credit in 2015 or if it will be in 2016 but based on 2015 credit rate. It may not be very material except for some very detailed tax management.
However, I read something even more positive a while back. Can't locate it now. Apparently project commencement can be interpreted all the way back to beginning of making of the panels. What does that even mean? Does digging up earth to find raw materials count as beginning? Does installing equipment in a factory count? In any case, these analysts were predicting that the interpretation can be applied in such a way that the ITC can be taken further out for a few extra years. So if all this is correct, the ITC doesn't go down to 10% in 2022. It happens in 2024/5. And the step downs to 26% and 22% are further out than published too.
Moreover who is to say ITC won't be extended or increased (from 26, 22 level) again.
Climate change is a market failure. The heavy government hand wants to give us boat loads of money. It pays to be on the right side of the history.
- - - Updated - - -
I get the feeling that much of the market didn't quite get to see the detail of this tax credit extension. I didn't see details spelled out in any news articles. As all the detail gets out I have a feeling that the stock continues to run up. We are way ahead of the curve here. or so it seems.�
1/1/2015
guest I may have missed something but we seem to always be looking at residential solar market. A friend of mine who has been in sales with SolarCity for several years was telling me that they are going after small business and medium business installs soon. I assume the ITC is only for residential? Am I correct? This guy has been saying all along that getting hardware costs down is paramount. Too me that is saying that SCTY is wanting to drive these costs low enough so that businesses can get a good return even if they do not receive ITC. And of course, battery storage for a business would help a lot. My father has a small business, about 20 employees, with a machine shop. Their electric bill is in the thousands!�
1/1/2015
guest Just over a year ago, we tried to get Solar City to bid on a flat 8000sqft roof in the desert in El Centro, CA. They weren't interested. Now they're getting interested and this opportunity at least has passed.�
1/1/2015
guest I believe the tax credit is fine for business installs. The best part about commercial installs is that a much larger chunk of total production can be used right on site. Retail operations can use it for AC at peak and your father can run his machinery during the daylight working hours.�
1/1/2015
guest Would you have been able to receive ITC or is it residential only?�
1/1/2015
guest ITC is most definitely both residential and commercial.�
1/1/2015
guest Looks like this is great news for Mr. Musk, especially due to recent developments (Paris talks, congress vote). The stock is up and analysts are increasingly bullish https://www.tipranks.com/stocks/scty�
1/1/2015
guest I was looking to buy two days ago but had to free up some funds... looks like I missed the initial bump. Anyways... still on board as of yesterday.
Looks like it's tracking oil prices today. It would be nice if they could be decoupled.�
1/1/2015
guest For the last 4 months I've been telling people that "anything below 50" was a steal. Kind of tough when people buy at $40 on your recommendation and the stock drops to $29 the next week! I still thought $50 is outrageously under value even with the ITC stepping down to 10% and now that it's extended I'm not even sure I have a fair value in mind. Gonna have to wait for new guidance in late Jan or early Feb to set a new realistic target.
If this week's press coverage, continued short interest and human nature are any indication, you still bought way ahead of the curve yesterday. The wider public still doesn't "get it", but they will when new guidance arrives.�
1/1/2015
guest IRS will have to issue specific rules about what constitutes commencement.
Another little detail is that the 10% ITC after 2021 is for commercial and third-party owned residential. Residents that buy their own system will get nothing. Thus, big installers offering leases and PPAs have and advantage over mom & pop local installers. This seems terribly unfair, and for that reason may triggers some sort of new extension deal in 2021. I guess we'll get to debate this endlessly in about 5 years, but it seems to me that the political seeds for a second extension have already been planted. Ain't politics fun?�
1/1/2015
guest I asked someone who is an expert in this type off stuff and got a prompt response. Lets just say the person writes intelligence reports. So I trust the source.
Apparently SolarCity lumps a bunch of residential projects together and claims credit under Commercial category. So they can lump a bunch of projects over a few different years and claim under "commence construction". So a few extra years is in the bag. A regular homeowner and mom/pop stores can't leverage this way. This is massive.
- - - Updated - - -
That actually translates to a few extra years on full 30% credit. As each leg is extended out by a few years.�
1/1/2015
guest All the [small] advantages in this legislation will go toward helping utilities maintain an advantage. As such, you can expect SCTY to have a huge advantage over regular installers because they're much more like a utility. Mom and pop don't have a lobbying arm.�
1/1/2015
guest That makes sense. In fact, I wonder if small solar gardens will become a new corporation, collaborative effort in finance form.
So my reading for the day. Broader market is down, SCTY is up about tree-fitty and volume is just creeping to 6m shares. Shorts cannot be happy waiting this out and not getting any help on a down day, might start looking to bail in big numbers tomorrow?�
1/1/2015
guest This is no small advantage by any means. 30% ITC for a few extra years, from a few years out, on a net basis translates to "multiple billions" of dollars of windfall to SCTY. Just do some back of envelope math, you will see. This hidden windfall is not known or well understood by the market place. At least I didn't see anyone explicitly talking about it.
For someone reading new, this hidden windfall is in addition to the published new ITC timeline. This is based on language change in the law from 'placed in service' language to 'begin construction' language.�
1/1/2015
guest Hey guys, I don't post too much but wanted to thank TTM, SBenson, JHM and others for providing some good conversation/updates in this topic. I'd been thinking about starting a position in Solar City for a long time, but don't follow it the way I do TSLA and some of my other investments. When the price went down into the 20s recently I came close but decided I'd rather give up some upside in exchange for waiting for more on ITC. I started a position (common shares only) today, thanks in part to some of the updates in this topic. Here's hoping I didn't miss too much of the ride back up.�
1/1/2015
guest Glad to have you on the long side, been trying to convince a couple of friends it is not to late.�
1/1/2015
guest Some options comments for today(understanding I know nothing of options):
The most options sold seem to be $60 calls that expire tomorrow. Why would you do that?
Jan 2017 $70's are going for $7.81 and $80's at $5! Very satisfying feeling. If I have a bunch of these I just sit tight and wait for at least $100, right?
Jan 2018 $90's are a whopping $6.85. Yikes!�
1/1/2015
guest Sitting on some of those I got for $2.15�
1/1/2015
guest That's what I figured. Need to do some more options strategy reading now that things are getting serious.�
1/1/2015
guest Adding to the ITC language change topic.
SolarCity effectively has full 30% ITC until beginning of 2024.
I will let you guys look up the Bill and figure it out
Shhh, but don't tell anyone�
1/1/2015
guest Am I correct that now with the ITC package fully exposed, the next single biggest factor affecting SCTY is the simple market dynamics of the short squeeze? New guidance with ITC will be the next catalyst which will come from analysts over the next days to week or two? Is this an elementary, yet still proper way to think about what is happening to the stock?�
1/1/2015
guest Short Situation Update: ZERO shares available for me to borrow at ETrade or OptionsHouse. Updates from users of other brokers very much appreciated!
My feeling is that the extreme short situation will continue to dominate the price action for some time. Even if other catalysts appear I don't believe it will be so straightforward to differentiate the impact. Aside from new guidance and analyst upgrades, which you mention, I feel we may get an extra bump once the spending bill is actually signed into law (which I believe should happen tomorrow or Monday?)
In other news: Jim Chanos will be appearing on CNBC after the closing bell today. Should be very interesting to hear what he has to say and how nervous he seems now that this position (and his TSLA short) are turning against him in a big way. If he gives any indication that he is considering covering his short (or that he already has, to any extent) I would expect extreme panic covering right away.�
1/1/2015
guest The shorts have no firepower. So the best they can do is go on TV and lie. FUD is all they got.�
1/1/2015
guest Chanos is gonna be brilliant today, I'm sure he's in the dressing room as we speak rehearsing his convoluted nonsense. Will tip my glass to him at happy hour!�
1/1/2015
guest Short covering seems to have started. Per IB the rebate rate dropped to 41.52%. But there are no shares to short.
I am not sure if the rate means anything. It's like saying saying price of a banana is $1 but there are no bananas to be sold. I guess it simply means if bananas were available or become available any minute now, they will be sold for $1.
For context, rebate rate on TSLA currently is 0.94% and rebate rate of our nemesis CLR is 0.38%. Both of these names have high short interests around 28% of float. So in general any rebate rate over mere 2% is excessive shorting.
I wouldn't consider short covering to be done until the rebate rate atleast falls under 10%. So we will see how long this will take (and how much higher the stock price will get).�
1/1/2015
guest Do you not think Chanos has also changed his position, now that the facts have changed? I'm not sure but the US market for solar is no longer sub-primed. :wink:�
1/1/2015
guest I do not often get the chance to post (mid-day especially). It has been a great two days. Unfortunately I bought lots of my options at extraordinary prices..and even with the last week, am down 30-40 per cent on some. But on the other hand some that I had written off, have life.
More importantly than the $$$, is that this was the right thing to do. The world needs change, and funding clean energy is a necessity, not an option.
I really appreciate all the opinions and information in this thread, both long and short side. I am not nearly as knowledgeable as those who post here, but whatever knowledge I have with respect to solarcity comes a large part from this thread. So thanks everyone.
I have essentially no funds left to deploy as bought some more shares yesterday, and a few call options today with summertime expiry.�
1/1/2015
guest Chanos coming on after the commercial break. CNBC�
1/1/2015
guest Amazing to me, SolarCity up 6%, after going up 34% yesterday and on a day when the market is down 1.5% and oil has fallen another 2%, $34.8/bbl. Also the solar industry as a whole is down almost 1%. So something special is going on with SolarCity.�
1/1/2015
guest Chanos has no clue. Solarcity sells retail electricity. Not whole sale electricity. Nat gas can go to zero. So can utility solar. Both can go to zero and still utiltiy retail rates will be higher then distributed rooftop solar. No matter how you cut it, centralized monolpoly utiltiy business model is flawed going forward. Solarcity will be cheaper then the cost of transmission, so there is no debate whether roof top is better or not. Or, if rooftop can compete will falling panel prices. Yes. A resounding yes, it will utterly dismantle the utiltiy as we know it.
Secondly, every solar install will come with energy storage coming very soon now the ITC will be extended 5 years at actually much better terms then the past 9 years under ITC. As such all retail rates will be determined by the aggregation rate Solarcity gets for being the aggregator of the network of solar+storage. In addition, local microgrid markets for peer to peer buying and selling will be also established of which the center piece is Solarcity software. I don't know if many of you caught it, but Peter rive said emphatically he's been developing the software for 10 years now that will become the standard operating software. This is like Google. This is like Apple iOS. This is like Microsoft Windows. This like blu Ray over win DVD. Massive massive implications to becoming the standard for the Internet of energy, the NYSE of retail energy.
dont forget m, both the rive brothers founded a company that created software that controlled computers REMOTELY before starting Solarcity. You see the connection here?
Chanos has no clue what so ever and will really remember the slaughter his position will receive. I love it.�
1/1/2015
guest Chanos doesn't care to have a clue, he's in the business of picking at perceived weakness and making money. Kind of a boring interview, I had hoped he's be a little more aggressive. Apparently his thesis is that any solar entity with an outside sale force is bad. That's it?
As for utility solar.....all anyone has to do is look at the value of utility companies in Germany to see what will become of ours. Even utility scale solar isn't saving them. Micro-grid solar farms will be widespread, but that's privately owned.
The biggest piece of value that SCTY is bringing in is the ability to build relationships with all these somewhat early adopters so they can sell them the next big thing. Once everything moves toward decentralizing, SCTY will be the IBM or Microsoft as mentioned above.�
1/1/2015
guest FWIW, there seems to be an awful lot of noise going on in the congress in approving the bill(s). Not because of Solar specifically anyway. We all blissfully ignored all of it and are riding on the hope that the deal is a done deal. Maybe some shorts are still betting on the deal to fall apart.
In any case, the latest is that, overall the situation seems to be under control (despite considerable bickering on both sides of the aisle). If it gets signed into law, as planned, we might see another leg up as shorts give up their last ditch hope.�
1/1/2015
guest I wish Chanos would just double down on his short on a day like today, and announce it publically. Pretty please, with sugar on top, double down the short.�
1/1/2015
guest
The people voting care more about going home for holiday than any misguided principles.
Done deal IMO.�
1/1/2015
guest
Chanos central thesis --his primary reason for shorting-- is he sees utility retail rates going lower then Solarcity 20 year contract holder rates and thus causing people to default on their payments. This is why he calls Solarcity subprime. It absolutely matters that he doesn't have a clue about the fact utility retail rates will by definition never undercut rooftop solar going forward because of technology innovations and rooftop retail rates becoming less then transmission costs. He says he sees a long term flaw in rooftop, but yet the fundamental long term flaw is in the centralized utiltiy model that is at issue here. His short is completely built upon a faulty premise. I imagine he will hold on as hard as he can, but he will fail.
Scty will ill not do what he wants, it's significantly under valued right now.
Lets wait and see what happens after the ink dries on the omnibus bill. Remember, president Obama has already said he approves, now it just has to get to his desk for signing. That is the moment of real truth for the big short positions out there.�
1/1/2015
guest Would any of you guys be able to point a new SCTY investor to a few links/data points/blog posts that you'd consider to be the most beneficial in order to best understand the important pieces of the SolarCity story going forward. For example, over the last few years when I've talked with people about Tesla and can tell they are sincerely interested I always point them first to the Master Plan blog post from 2006. Fastest way to cut through the noise about Teslas being toys for rich people, etc. Also, Tesla Energy so they understand the story isn't just cars. The Gigafactory, Autopilot, etc...
Now that I have a position I want to do a deeper dive in case I'd want to add to (or lessen) my position as the story plays out or changes. For example, I did not know anything about Rive working on standard operating software as mentioned by Foghat above. These are the things I'm trying to get a grasp of that might not be obvious. Of course I plan to do my own research, but I'd be appreciative if anybody could point my in the right direction since like everyone, the time I can dedicate to research and listening to previous conference calls is limited. Thanks.�
1/1/2015
guest You've seen the analyst day presentation right? Events & Presentations - SolarCity look for 2015 Analyst Day�
1/1/2015
guest Why anyone would ever think this is beyond me, it is a physical impossibility as energy becomes more decentralized. Again, Germany. As soon as they hit 5% solar(total supply), the entire profit margin of almost every legacy electricity producer was completely erased. If solar is taking up 30-50% of the demand at peak and all your profits were made at peak.......
Chanos wants me to believe rates will be lower when I can easily just look across the pond as the top three utilities are all begging the government to allow them to run the grid and divest entirely from production. One argument has a couple shorts advocating for it and the other has already happened.....in reality....in the 4th largest economy in the world.�
1/1/2015
guest Thanks, dakh. Had that marked for reading but haven't gone through it yet...Does anyone think there are plans (possibility) to merge/acquire TSLA & SCTY at any point or will they most likely just work with one another?�
1/1/2015
guest Watch the presentation, it's a bit long but I think it is still a time efficient way to get an intro into what these guys are all about. I for one didn't realize just how intensely they're focused on creating the best solar installation machine out there. They can well be a Tesla of solar installers already - at least a few years ahead of anyone else in organizational and technical efficiency.�
1/1/2015
guest Hey, Chanos, here's a list of 29 companies you may want to short. All the best, James
These 29 Oil Companies Could See Their Credit Ratings Cut | OilPrice.com�
1/1/2015
guest As of 2pm pacific, looks like the White House has helped whip up the necessary democrat support for the vote tomorrow.�
1/1/2015
guest I read somewhere in vague terms that House will vote today and Senate tomorrow. Is that accurate?�
1/1/2015
guest House passed the tax extender bill today.
House set to vote on omnibus bill tomorrow morning.
Omnibus and tax extender sent to senate as one bill after.
Senate votes on combined bill.
Combined bill signed by the President.�
1/1/2015
guest Got some specifics. House vote planned for tomorrow at 9:15am followed by Senate at 10am.
Here's to another leg up tomorrow!�
1/1/2015
guest Thanks for updates. Keeping fingers and toes crossed!�
1/1/2015
guest The chairperson of the Arizona PUC resigned today. Solarcity wins another one. This is a big December indeed.�
1/1/2015
guest Maybe those 140 strike 2017 calls won't be worthless for too much longer!�
1/1/2015
guest Hell yes! The Rebellion is winning.�
1/1/2015
guest This omnibus package is remarkably smooth sailing...considering politics. It seems like both sides feel they got the best deal they could and tomorrow is set to be quietly efficient. I was skeptical following COP21 but this does appear to be the market forces following the policy objectives. Best of luck tomorrow. :smile:
NV Energy's proposal stifles competition in rooftop solar | Las Vegas Review-Journal
Lyndon:
�
1/1/2015
guest I don't see how that is a good thing. From reading the news it seems like she was the most pro-solar person on the PUC.�
1/1/2015
guest As per MarkIt data on Wednesday when we had the big 34% bump, Short Interest fell by a mere 0.1 Mil shares. Compare that will 32.1 Mil shares that were short in the market as of Nov 30. So effectively short covering did not happen at all on that day.
So the 34% bump entirely happened due to long investors jumping back into the stock and creating buying pressure. Effectively they are all people like me. This provides validation to what I have been saying all along - without ITC the firm was at the brink of an existential crisis, with ITC it�s a robust business model that will grow like a wildfire. People jumped back in with both feet once they saw a deal was made and it was officially in text. I just got lucky that, together with you, we discovered the odds of a deal were quite very high early on. We were indeed ahead of the curve, however small that lead may be.
Now we have 8 years more of unabated full 30% ITC for SolarCity. By the end of it, scale of the firm will be so ginormous that not having an ITC won�t ever matter. But I actually think ITC will be extended yet again or even made permanent. At this point I believe any price of less than $100 for SCTY is just an unfair price (More on this later).
Coming to present:
As per IB, there are a few shares to short. But the rebate rate spiked back up to 63%. As I see, in early hours folks are selling short what ever they could borrow, to create an illusion that Chanos interview from last night has credibility (I will post my updated views on Chanos in a bit).
Also S3 Backlight data says that rebate rate went further UP.
All in all, short covering barely started. As you see last night Chanos actually said he wants to short more if only he could find more shares to borrow.
The entire uptrend has been due to long buying on increased ITC optimism.�
1/1/2015
guest FWIW, I still see some noise in Congress in passing the omnibus bill. Fingers crossed hope it comes through fine.�
1/1/2015
guest It passed. On to the senate.�
1/1/2015
guest Watched House vote online video feed. The bill is passed indeed.
Senate - Harry Reid talking... SFW�
1/1/2015
guest Excellent!�
1/1/2015
guest House easily approves $1.1T funding bill, 316-113
Quiet morning and almost no volume. Calm before the storm?�
1/1/2015
guest Passes senate. President to sign.�
1/1/2015
guest ROCK ON!!�
1/1/2015
guest Hah, I misread your post. On to the senate...my mind read as it had passed the senate already. Doh!�
1/1/2015
guest And the game is won. Delightful.�
1/1/2015
guest Senate has enough votes already to pass the bill. Vote is continuing.
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Passed senate
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Obama to hold a press conference at 1:50pm.
I assume it is to talk about the bill(s).�
1/1/2015
guest Has anyone heard anything about this? Not sure about the source...makes sense there will be big Government contracts however.
SolarCity wins solar sourcing contract for GSA, DOE, EPA and Forest Service | EP News Wire
From a couple days ago...
Federal Government Awards Multi-agency Solar Power Purchase Agreement in CA NV
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1/1/2015
guest All solars up except SCTY. Must be Chanos effect.
SolarCity should strike while the iron is hot. Release revised guidance please.�
1/1/2015
guest Still under 3M in volume today.
When guidance is revised in a few weeks/months, we'll see the full on squeeze. Just hoping there's no dip to allow the shorts a moderate exit.�
1/1/2015
guest It was just the opposite yesterday, SCTY up, TAN down. I think prices may simply need to consolidate for a little while before moving up again. So I could see SCTY consolidating around $55 before climbing above $60.
Maybe the actual signing of the bill will give us a little boost. It's either priced in, or shorts are hold our hope for some legislative hiccup.
I'd be happy for SolarCity to wait until after Christmas to give us a strategy update. I think it could have more impact after the holidays. Perhaps an announcement for the date of a strategy update would be nice just to tide us over.
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No sooner than I post this, the market jumps up to confound me.�
1/1/2015
guest Works for me! :biggrin:�
1/1/2015
guest I'd like to see a bit of a pause before revised guidance. Lets settle in at this new level, get the numbers right and then kick off the real squeeze at the 4Q earnings announcement in Feb.�
1/1/2015
guest We gapped up yesterday. So touching down to $53 could simply be filling the gap. If that's all it was, we could now be clear for take off.�
1/1/2015
guest If we could settle at $55-60 for a month or two and bring volatility down that might lower long call option prices and let some other folks get on board.�
1/1/2015
guest My impression is this is a pressure cooker for the shorts, and they are running out of days to cover. If you add the certainty of this agreement, once signed to the mix of bad news...I can't imagine how they don't panic. Having been on the other end of a fantastically tragic trade it's probably quite numbing to the stomach regions. As for the valuation, it seems they have the head start and are clearly the best positioned to take advantage of this new race to the end of fossil fuels dominance. I hope I'm right.
Everyone seems to compare it to the Tesla squeeze. Is it still shaping up that way and merely beginning a chug upward to relieve the pressure that is already built in to the record short levels?�
1/1/2015
guest Had not seen any of this, thank you. 5 MW is pretty substantial. Love to see scty Wining this bid�
1/1/2015
guest If there are in fact still 32M shares short, then the laws of physics indicate a TSLA-style squeeze. Unless Chanos is right. LOL�
1/1/2015
guest Well, I don't have access or much expertise in these matters of shorts. Something weird is going on when SCTY has more than double the daily volume of TSLA...and more average volume as well. Heh.�
1/1/2015
guest Mid day update, per IB, the short rebate rate is at 61.96%. They are basically as crowded as ever. My expectation was ITC will scare them. But that didn't happen at all. So we need something more to put a light up the butts.
�
1/1/2015
guest The longer this pressure is allowed to build, the better.�
1/1/2015
guest 30% ITC applies to solar+storage systems.
50% depreciation up front.
welcome to the new age...�
1/1/2015
guest This is infinitely more generous than what I would have guessed as best case scenario 2 months ago.
30% lasts so long that it's gonna almost have more impact on battery roll-out than solar. Crazy.
I'll be talking something like battery/solar/bloom box micro grid within 20 years.�
1/1/2015
guest Agreed. I can't imagine how shocked the shorts are our government agreed on anything...let alone this package. I have this going for the excited buzz in the background.
Obama holds year-end press conference - POLITICO�
1/1/2015
guest After the action we have had the past week I think today is spectacularly bullish.
I know. Kool Aid Drinker. But it was the Kool Aid that allowed to buy all those 2018 calls in the 30s, and dare I say now, 40s. 20s just did not work out for some reason. Though I did get some stock there.
I drink my Kool Aid sugar free.
If there are really so many shorts left, I just do not see were they believe their exit point is. This ITC is not going to go away anytime soon. Peak oil usage on the other hand....�
1/1/2015
guest
This is not counting state battery incentives like what California and New York are offering. 30% for Solar+storage system as a single unit, then add local storage incentives on top of that.
This is solarcity's world now. We just live in it.�
1/1/2015
guest No respect for Tesla Energy. No respect I tell ya. :wink:�
1/1/2015
guest I know. They only will be sold out for in perpetuity with 15% margins...�
1/1/2015
guest This is HUGE.
So the price of Tesla batteries dropped by 30% literally overnight!!
Does this apply to PowerPacks? Remember that project in Hawaii where SolarCity is doing utility-scale-solar+battery as one project and selling the power at some crazy 16cents or something?
How about PowerPacks on a standalone basis, say to support non-renewables, instead of speaker plants?�
1/1/2015
guest This specific situationis being sorted out by the IRS right now... But for rooftop, it applies to a solar+storage system as one unit.�
1/1/2015
guest I've got my shares and that's all well and good, but if the wider population can figure out the value of all this prior to Jan 2017 my SCTY calls would greatly appreciate it!�
1/1/2015
guest Can you please explain very briefly what you mean by 50% depreciation up front?�
1/1/2015
guest So I guess this is what they are waiting for to do a self-supply solution in HI. Well, this and Tesla to produce some batteries...�
1/1/2015
guest Is Obama going to sign the bill on camera or is that a different ceremony?
Coming up on 6m volume and finally climbed green too. :biggrin:�
1/1/2015
guest Stability would surprise me. I'm expecting a fierce battle between longs and shorts.�
1/1/2015
guest Placed my call order for Jan2017�
1/1/2015
guest Solar Tax Credit to Spur $40 Billion in U.S. Investment by 2020 - Bloomberg Business
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1/1/2015
guest More info on Storage implications...
http://www2.deloitte.com/content/dam/Deloitte/us/Documents/Tax/us-tax-wnt-irs-and-treasury-release-notice-on-new-energy-credits-regulations.pdf
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Tax Credits Teed Up for Extension | Chadbourne & Parke LLP
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1/1/2015
guest Oil at $34.61/$36.67 and investors fleeing stocks like crazy seemingly moving away from all risk today and SCTY is......neutral/up.�
1/1/2015
guest Sunrun hitting 52 week highs today as well.�
1/1/2015
guest http://www.nrel.gov/docs/fy16osti/65061.pdf
NREL just published benefits of storage to meeting California targets...
solarcity once again, right at the center here... The hits just keep on coming... When it rains it pours
add:
all, any analyst reports out there this week on Solarcity will change, don't take them as what they project post renewed ITC today.
Solarcity will come out with new guidance first. Then the analyst reports will follow. Storage is a significant piece of that guidance going forward. It is the piece no one, not one single analyst has modeled for yet. In addition, there are so many new value adds from this ITC renewal package that it will take an entire overhaul of the financial projections.
Everything has changed, so be aware we haven't even started to see a squeeze yet. It is coming though.�
1/1/2015
guest Do you think other names are as well positioned as SCTY to benefit from this new world order of solar? I have some SEDG and CSIQ as well.�
1/1/2015
guest Heck yes. Anyone with ability to scale up within any area of the entire supply chain will kill it. I'm hesitant on any Chinese panel manufacturers(until they can mass produce high efficiency panels), but I do like SEDG. I also am interested in gallium nitride (the new silicon) as well as digital currency. High speed satellite internet. Tesla of course. I like developing markets for solar abroad as well.�
1/1/2015
guest Awesome. Thanks for sharing the California publication, and for analysis.�
1/1/2015
guest The new world order may benefit many but we all learnt over time that the best value capture is in residential solar, as it gets free T&D, especially SCTY given it's size and vertical integration.
On top of that, if you are looking to play the short squeeze dynamic, there is absolutely nothing better positioned than SCTY. The rebate rates to short any other names is not even 5% let alone a whopping 60% plus for SCTY. It is *very* overcrowded in there, desperately looking to get out. Their hope is to get out on a spike down but they might very well be forced to get out on an another spike up.�
1/1/2015
guest So I see the previous ITC was a bit limited for batteries because they were labeled as "dual-use" if they were still grid-connected. Is this still the case? As in, other than extension itself and a change in being able to claim it by project start, are there any changes that will increase the credit for a typical solar+battery grid-connected system? I'm having a dog of a time finding out the relevant details.�
1/1/2015
guest I was just thinking this is probably best spread as a two fold play. TSLA and SCTY are the blue chip new world order companies if you will...forward looking bastards. But there is a solar industry spread which just got shot full of FDA approved steroids...absolutely. At the same time...there is a dying rocket of opportunity in fossil fuels ahead of us. Sure...it's gonna pop up like some tech bubble stock because they also got their stimulus that makes their business model work, which obviously will not. So in the debate can we add some rocket debris futures as offsets or...who you would most like to Shkreli in a month or two with securities fraud...wink wink. :wink: :wink:�
1/1/2015
guest This post reads like a foreign language to me. I must be dumb but I honestly have no idea what you're trying to say.�
1/1/2015
guest Too much partying on a Friday night?�
1/1/2015
guest Me or doggusfluffy?
�
1/1/2015
guest I'm not sure either is the thing. They were discussing various solar companies as investments. I was trying to think about who in the fossil fuel sector would benefit in the short term, but then fail in the longer term as the business model ultimately fails. I'm not sure if it would be stranded pipelines with no gas, refineries or wells with no demand, or maybe something else entirely that I'm not thinking of. At any rate, I would like to find something to short or bet against eventually as an offset to bullish positions in renewables. It might not even be profitable as it seems to my memory these businesses usually declare bankruptcy anyway.
I was only barely partying, chainsawing and hockey with beers and tacos...but mostly writing in a style to amuse myself although I didn't realize it was that confusing. :biggrin:�
1/1/2015
guest Well around February of this year, the Put Income fund (maybe Put "Income" fund is more accurate) I have money in thought selling puts in Chesapeake Energy Corporation would be a safe bet. A small position quickly became much larger as it was rolled forward again and again as they waited for CHK to get back to $20. I'd say it still has plenty of room to fall from its current $4, but since they finally exited the position a few weeks ago it will probably dead cat bounce to $30 soon.
Fortunately I'm very long TSLA and SCTY so I can look at it and laugh...�
1/1/2015
guest Update from Interactive Brokers on short-interest situation.
Posting TSLA and CLR for reference. They too have high Short Interest % of float.
The comparison drives home the point that Short Interest in SCTY is atrociously high.
�
1/1/2015
guest Does anyone recall what the rebate rate was on TSLA back before the 2013 short squeeze?�
1/1/2015
guest It reached 70's. So did SCTY last week.�
1/1/2015
guest 
I seem to be getting a lot of pops from Exxon all of the sudden. HHHHMMMMMM
I'm not a conspiracy-theorist, but I do mistrust the media.�
1/1/2015
guest I remember this thread well, good times: Cost to Borrow Tesla Shares for Shorting Hits 85%�
1/1/2015
guest Alea iacta est.
With interest that high it's hard to understand how someone would find that it's worth it to hold a short position with a long view (as in you believe SCTY will be down to say $20 in 2018). It will be ridiculously expensive to hold such a position for 1-2 years. In other words most short positions must in addition to being short (bearish) also be with a short time horizon (as in "the house of cards that is SCTY will fall in the first half of 2016 or thereabouts").
Remarkable and however I try to find counter arguments to why a further substantial increase in SCTY share price now is inevitable I can't come up with any. This insane short interest combined with the fact that it's more or less impossible to see why SCTY would fail now makes for a perfect storm.�
1/1/2015
guest This is an even easier call than TSLA, no? Tesla had barely delivered 10k cars by the time the squeeze went down, SCTY is the #1 installer in the biggest growth industry there is and now they have more than just Musk backstopping as they build out. Zoom zoom�
1/1/2015
guest Reflecting back on the analyst day, I just wanted to note a few interesting points:
solarcity stated they will continue lease manufacturing capability in the future. This means they will strike up another incentive deal with New York for the 5 GW factory. That means very little capital investment for 5X more capacity. I'm going to be on the lookout for such a deal to come down the pike. Also, Elon mentioned co locating tesla energy storage, so might have other incentives attached as result as well.
solarcity also noted they are installing 3 megawatts a day. That's huge. It also illustrates roof top is surpassing utiltiy level in new capacity growth. It is now much quicker to get the same amount of capacity from roof top then from utiltiy level which only increases the value of Solarcity aggregation services that much more.
Lastly, Peter rive said powerwall is now $4k with solar install. Last I remember, it was $5k as of May. This is already a $1k reduction in price and they just started instslls in October.
update:
forgot one point... Peter rive also stated they have aggregated roof top/distributed solar on an undisclosed island location for over a year now and is working very well. That over a year of "beta testing" the Solarcity OS software in real life conditions. This bodes well for marketing the microgrid product as well as aggregation of DG on the utiltiy grid. I just watched an interview from a year ago with Peter rive where he stated emphatically storage will come with each solar install as default in five years UNSUBSIDIZED(no ITC) so 2019. However, now the ITC is extended until the end of 2021, I imagine that default coupling of solar and storage will be accelerated. Pure speculation, but I imagine we could start seeing this happening in 2017...�
1/1/2015
guest Does their installation of battery storage (when part of a solar install) currently allow a 30% ITC or is that applicable only after the ITC language was modified in the recently passed spending bill?�
1/1/2015
guest Yes. Current irs says "storage device" applies with solar together for ITC.
However, there is a request for further clarification in the language, to explicitly state battery storage as opposed to just storage device.
add:
Based on cost reduction projections, I feel Solarcity will treat energy storage like they do an inverter. They will model for replacement every 10 years(tesla warranty in 10 years). 10 years from now, powerwalls will be significantly cheaper then today and thus replacements very cheap at that time to replace what was there before. Again, I see this as another point for Solarcity to up sell the latest and greatest and extend the customer relationship and revenue stream.
with the 30% tax credit extended, 2017 could be a very monumental year for Solarcity making energy storage a default product with solar system across most of its biggest markets.�
1/1/2015
guest This is why I keep saying the argument over PPA contract renewal value is silly, in 10 years SCTY will be reaching out to their entire customer base with enhanced offerings and new contract offers. No one will get to the end of their 20 years without upgrading in some way if they sign today. Picture that advantage for a moment.
Forefront of PPA and overall residential solar installs with a captive and satisfied customer base representing maybe 40-50% of non-purchase high-end residential solar customers in the entire country. You could not write a better gameplan for developing a market base to sell micro-grids and all kinds of distributed or semi-distributed solar/storage products.
Even if I want a different type of battery made by god knows who I'll still be ringing up SCTY to do the design, installation and apparently work off their software which leans toward some kind of maintenance contract at the very least.
Every 5-7 years we can call these guys to upgrade our systems at minimal(if any) net cost and turn the screws a bit more on the fossil fuel interests.�
1/1/2015
guest I am unfamiliar with the solar industry, but due to recent developments looking to possibly make an investment in SCTY in the future. I just have one question regarding a point Chanos made.(Perhaps this has already been answered in this thread somewhere)
As solar technology improves and costs further come down, what is stopping someone who is currently on a 20 year lease to stop his lease payments and buy an updated more efficient panel from someone else and save more?
I guess this is the crux of Chano's argument, so if he wrong about this then there is no merit to his position.
Again, this might be a stupid question, and I'm sure the answer is simple. Is it simply that people won't be willing to ruin their credit scores for such modest savings?�
1/1/2015
guest If you were an SCTY customer and efficiency went up, what would you do and why?�
1/1/2015
guest If Chanos is being honest, even he is having to pay a significant premium to short Solar City. I'll take his position a little seriously, if he has the guts to reveal how large his short position is. The action on Friday was very interesting. There are a lot of reasons Solar City could quadruple in a very short period of time, if the market begins to price in 2018 and beyond. the current price is barely pricing in through the end of 2017.
If we get rid of all the noise, and look back to early 2015, you'll remember that many analysts were beginning to eye $150-$200 as a possible 12 month target if the market prices in where Solar City will be in 2018, if Solar City can meet its guidance.
The only reason Solar City reduced its guidance was due to uncertainty about the ITC.�
1/1/2015
guest So let's say I pay $200 to my utility today and by using scty I cut my bill to $160 a month. In 7 years panels cost come down to $3000 from $15000. So you either pay $160 a month for another 13 years, a total of $24960, or I can default on the lease and pay $3000 to buy my own panels.
The numbers are hypothetical but the scenario is what Chanos is talking about. Can you explain the error to his logic?�
1/1/2015
guest I am familiar with the analysts that cover TSLA, who are the "Usual Suspects", I mean the stock analysts that cover SCTY?�
1/1/2015
guest This has been a concern for me, but then you take a big hit to your credit rating and may find yourself in legal difficulties if Solar City pursue you for damages. Of more serious concern is the option to buy the system at fair market value every 5 years on the anniversary date - that value will be very low by 15 years, if not 10 years, so it may make sense for people to buy it, thereby depriving Solar City of greater expected revenue over the remainder of the contract.�
1/1/2015
guest First, you default, your credit's gone. You've been saving money for seven years and now you're willing destroy your credit to pay $3000 cash for a new system(since you can't get a loan anymore)?If you can name one person that would do that, then I'll reconsider my sanity.
second, your utiltiy retail cost/kWh is going to go up, but your solar rate stays approximately the same. You end up saving more during those 7 years.
Third, net metering retail rate is locked in and you're grandfathered, even if they lower that net metering rate. You put a new system on, you lose the grandfathering.
fourth, Solarcity is has the lowest all in cost/watt of all leading competitors. What happens if they continue to be the lowest cost company out there? Do you think they might be the one to offer $3000 systems in seven years.
lastly, what if Solarcity offers you low cost energy storage to add onto your Solarcity system at any point? And those services provided by the solar+storage system lower your costs even further?
Actually there are a litany of issues with the situation you bring up that it would be highly improbable any Solarcity customers would default. Right now, Solarcity has a 99.5% on time payment rate from all its customers since 2006. Nearly a decade of almost all payments received. Over that time panels cost went from approximately $3.80/watt to approximately .70c/watt. Not one mention of a Solarcity customer defaulting because of it.
Chanos is going to lose a lot of money.�
1/1/2015
guest Does Chanos call out this scenario specifically or equivalent? Is this online somewhere? I missed the CNBC interview when it was live...but just watched it here: http://www.cnbc.com/2015/12/17/jim-chanos-here-are-my-energy-shorts.html
And he mentions that Solar City is just doing it wrong (retail model as he sees SCTY only making 7% rate of return), but is very bullish on solar in general, however doesn't go into detail into how he would do it.
Interesting quote is that he is also bearish/short on all major leveraged (all) oil companies and that he'd, if he were OPEC "pump as much as possible now while it's (oil) worth something"
Maybe it is in the full interview which is behind a pay wall: http://www.cnbc.com/2015/12/17/pro-uncut-the-full-interview-with-jim-chanos.html�
1/1/2015
guest Another thing missing here is that panels are already very low in cost. Some of the soft cost will surely come down but the cost of labor will almost certainly rise. Even in the above scenario you have a customer who chose the 0 down lease instead of the "better" buy option. Then 7 years down the road they are looking to spend 2 years worth of electricity cost all at once. This might happen in small numbers I dont think even with prices falling as quick as you outlined many people will choose to spend that much cash all at once. Much like renting a cable modem for 5+ years (like the vast majority of customers do) It is just easier for them to keep paying their bill (that is lower than their friend without solar pays).
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From memory he more alluded to it then spelled it out. The interview I saw was from the first round he did when he first announced his short and it was something like "with the price of panels falling so fast in a few years nobody will want these panels on their roof and they will all default"
Its also worth mentioning that in some markets like California the net metering rules have already changed some and the older installations are already grandfathered in. As solar penetrations become higher this will happen in multiple markets and the older grandfathered systems will help offset the cost difference somewhat.�
1/1/2015
guest If Chanos believes this scenario, he is shorting the wrong company. He should be shorting the utilities instead.
$160/month implies a solar system with 10 kW or more, which would cost $30k to $40k today, not $15k. If you can install 10 kW of solar for just $3000 in 7 years, just $0.30/W, then the utilities are absolutely obliterated. Meanwhile companies like SolarCity are doing the obliterating.
This kind of argument is like Tesla shorts claiming that the cost of batteries will fall so fast that it makes Tesla obsolete. Well under that scenario traditional automakers are actually at much greater risk than Tesla. Battery advancements will put traditional ICE makers out of business long before it would put Tesla out of business. Moreover, Tesla is much more likely to be leading the technology or at least keeping pace with it.
The best way to mitigate the risk of technological obsolescence is to be the technology lead. That's what both Tesla and SolarCity do. Chanos should go short something else.�
1/1/2015
guest I found this fascinating. Currently trending to the top of reddit:
99% of Costa Rica's electricity came from renewable energy in 2015 - Solar Crunch�
1/1/2015
guest I just going to throw it out there and start speculating on the new guidance:
Raise 2016 guidance to 1.6GW and indicate multi year guidance to come at the q4 conference call.
At the q4 conf call give 2017 guidance of 2.5GW and 2018 guidance of 4GW
Also, they will indicate they will expand on the riverbend factory to 5GW and seek to be at full production by 2019.�
1/1/2015
guest I would love this but I think your dreaming. Not on your 2016 guidance or Riverbend but I don't think they will touch 2017 guidance until late 2016�
1/1/2015
guest I know. It's bold, but they did give 2018 1 million customer goal and 2015 guidance in 2013. I think with the clarity on the ITC through 2022 now , they can do some deep projections to get investors thinking long term numbers.
it possible they might do a proclamation like storage with every solar system by 2020 or something similar.
Now is the time to give investors something long term to chew on. Investors will rush in if they can be given clarity Solarcity has a mid to long term pay off in sight.�
1/1/2015
guest Does anyone really believe that Chanos shorted SCTY because of what he believed was going to happen 7 years from now? He entered this position because ITC was winding down and he smelled blood in the water. Came out with a media blitz (which is total BS. This system is so rigged...) and a bunch of FUD buzzing about subprime lending so he could party like it was 2008. His plan was not to hold a short for 7 years. It was to hold a short for 7 months as SCTY crashed and burned like SUNE.
The regulatory landscape blew up in his face. I guarantee he did not anticipate ITC extension on any level, certainly not what was passed in the end. All he's got is to keep repeating the same FUD except now it has no traction. In the meantime, SCTY looks poised to continue exploding with a huge short overhang. He is a shrewd guy, but he is going to regret this move. It is hard to see how he can be in the money 2 years from now unless the entire stock market collapses.
You know, I have shorted plenty of stocks in my time, but no one ever came asking for interest due on the borrowed shares. Do the brokers take it out of your cash position when you are not looking?�
1/1/2015
guest The choice is 1. continue to pay $160/month for 13 years = $24960 2. $3000 cash for panels, lets say another $1000 for batteries, an all in system that takes you off the grid for the next 20 years = $4000
So, $24960 over 13 years, or $4000 cash that lasts 20 years.
Again, these numbers are hypothetical and extreme to test Chano's argument. I don't know enough about the solar industry to know what are plausible future costs, I just know costs are coming down. If the answer is simply costs cannot further come down by that much, then case closed. I'm here to ask since you guys know more.
Yes, in the hypothetical scenario the buyer wouldn't be going back to the utility, but to another solar manufacturer.
Yes, I am assuming SCTY will continue to be the lowest cost company, which means new customers will continue to choose SCTY. However, that does not affect the customers already on lease for 20 years at more costly rates than significantly cheaper future rates. Even if SCTY is the cheapest in the future, other manufacturers in 7 years, 10 years will still be significantly cheaper than what SCTY is offering today. And by then, a customer today will still have 10+ years on his lease.
Offering storage will continue to reduce costs. But will this and other reduction be able to keep pace with how fast the panel costs themselves are falling? For instance cell phones were $10k when they were first introduced in the 80s, that is $30k in today's dollars. Today you can buy a flip phone similarly capable for $35. Again, I am not familiar with the solar industry, is a similar cost curve not possible?
This is a good point. I am not familiar enough with SCTY, they were able to offer below utility monthly rates 10 years ago at $3.8/watt panel costs? How much was the total cost to install a 10kw system 10 years ago? Today?�
1/1/2015
guest well said. He saw an opportunity. It then blew up in his face. Same with gordon johnson from axiom.
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its best to read this entire thread. There is a lot of debate on all your questions raised. I think you will find satisfying answers to help you make a decision on solarcity's future.
as far as your cell phone argument, Solarcity is not selling systems. It doesn't matter if the cell phone new, it matters it the minutes are cheap. In this case Solarcity is all about selling clean cheap smart electricity. Consumers don't really care about solar they care about lowering their electric bill, their operational cost of the home. That's the product here. Cheap electricity.
i think with storage, they entire system becomes upgradable over time to increase value of the system in many different ways from efficiency to linking with other home devices to again cheaper end retail costs. Also, storage will enable an energy market to develop where you can sell electricity to the grid when they need it as well as buy and sell to other home in the neighborhood. I can on and on about the many things that will come of this. Most of it has been discussed in the thread. Give it a crack. You won't be disappointed.�
1/1/2015
guest That is fine but it doesn't help me because I am not looking to short the utilities or SCTY. I am looking to buy SCTY, but would like to clear things up before doing so. Saying utilities would be worse off doesn't help SCTY.
As far as TSLA, I am much more aware of their business model and am an investor. Their lease is 63 months as opposed to 20 years. While battery costs are certainly coming down, at 8% a year it is not fast enough to be worth it for someone to default on their lease payment to buy another EV.
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Yes, Chanos short position is done, I agree. The carry costs are far too high for him to hold even if everything he says come true eventually. However, for a long, his points still need to be addressed since my time horizon is much longer compared to him.�
1/1/2015
guest the fundamental question is would you default on your contract, ruin your credit and have to pay cash for any major item after(i.e. A new tesla or a house, boat, etc...)?�
1/1/2015
guest Will do. I'll say this, his points regarding TSLA are very weak, so I am betting what he says about SCTY is probably misguided as well, but if am to buy the stock I just need to figure out exactly how they are misguided. He may simply be better off trying to uncover fraud like he did with Enron rather than trying to figuring out high tech growth companies like TSLA, SCTY, AMZN etc that he simply does not understand.�
1/1/2015
guest There is a much much bigger picture he doesn't understand at all Solarcity and tesla. Many many synergistic elements that add value for many years to come(add Spacex in there as well). Got to look at that big picture first before you try and play ball in Elon and family's world. Chanos is old school, this is new school. He's out of his element. He's looking at only the tip of the ice berg but fails to see the massive future just underneath the surface about to inevitably pop up.
it will be all painfully clear to him soon enough.
add:
As it has been pointed out, Chanos' short was an opportunity play... It had nothing to do with the long term fundamentals of Solarcity business. He was clearly betting against the ITC being extended as well as California net metering degradation and other net metering cases. So far, none have played out in his favor. And like I said before, with storage net metering won't be a factor either... So his only hope was the ITC not being decided this early. Now it's set through 2021... Have to remember he started his short s couple months ago... All of this policy change happened literally in one week, last week... So this is quite a shock to everyone... Let's give everyone a chance to digest and then watch all the guidances come out, then the upgrades and price targets raised. I'm sure we will see $100 PTs from a few of the "usual suspects" in he next few weeks. Even higher if longer term guidance is given (I'm speculating multi year guidance during q4 conf call in early February).�
1/1/2015
guest Solar panel evolution will happen in Buffalo - Business - The Buffalo News
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1/1/2015
guest For me, owning tsla first because I respect Elon and his "dreams / goals" I purchased scty at $18, sold at $80 to buy more tsla, had Solar City install a PPA solar system on my home and just transfered 10k from my 401k to my IRA to buy more scty at$50. It may be "foolish" to some to put my future retirement funds "all in" on blind trust of one individual or company. I have my reasons that are too much to post, but let's just say that to me if you like the man and the mission, long term investment will pay off in spades. There are always going to be people trying to manipulate the opinions of the individual investor. For me, faith in the man / mission along with due diligence put me where my investments are today. I am not a Teslanaire yet but closing in fast.�
1/1/2015
guest Something to think about. SCTY is developing a mean lean solar installing machine. What they install 3 years from now will be a few times more than what they install now. Same goes for 5 years from now. So even if some early installs start defaulting at a higher rate, that would still be a drop in the ocean when that actually starts happening. When I buy the stock I think about paying for what they're ver well prepared to accomplish much more than what they've done so far. That part is just a proof of concept and proof of ability to execute.�
1/1/2015
guest As mentioned above, these numbers aren't realistic, that's the nature of the chanos argument. Cherry pick numbers from different scenarios, slap the numbers together and call it a case study.
If you're paying $200 per month today, you need 10kW of panels at a minimum to net out. That cost $30,000 today and about $12-16k at the dead lowest point we can hope to hit in 10-15 years. You also need to maintain them, and figure out the tax credit, and figure out who's an honest installer, and worry about the roof leaking, and handle any hardware breakdowns, and worry about if the installer/manufacturer will even be in business to honor the warranty if there's a problem in 2026, and think bout how to upgrade in 5 years as batteries come out.
Would most consumers want to do all that? SCTY takes care of all that for you, charges less then you pay today and locks the rate in to hedge against inevitable increases in grid rates.
I would say that at a minimum, 60-80% of households bringing in more than $150k a year would go with something like the SCTY model. It's such a small premium relative to the value and peace of mind received.�
1/1/2015
guest Thanks for the post. I think there are many investors that feel exactly the same way.
We'll probably see a lot more of those years old arguments pop up now that a massive catalyst has materialized almost unexpectedly.
the funny thing is they come and go, but we are always still here in the end.�
1/1/2015
guest I am saying that this form of argument is invalid. It's just BS from someone who is simply trying to confuse investors.
If you want to figure out if SolarCity is a good long-term invest, I would recommend that you begin with the Analyst Day presentation deck. Get a good sense of how management frames its business model on strategy.
Take time to digest that before worrying about whatever nonsense shorts may be dishing out. They don't believe 90% of the crap they say. So it's not really worth analyzing.�
1/1/2015
guest 10MWhs of distributed Powerpacks now online in Southern California. 10MWh of firm demand response. Aggregation now in action.
"They�re going to use this whole fleet of batteries as a virtual power plant,� Bluth said.
Tesla battery system fires up in Irvine Co. office tower - The Orange County Register�
1/1/2015
guest oh no!�
1/1/2015
guest It looks like these power packs are 1500kwh so for every 150 solar installs done is like having one power pack installed. Once scty stays deploying these in markets with every solar install it will create very large virtual power plants at a rapid pace�
1/1/2015
guest
They average about 440 instslls per day, so if they included storage they could literally install the same 10MWhs every week...
add:
for perspective, that's 520MWhs/year at today's install pace of solar energy that can be shifted to peak hours on the grid. That's just at today's pace, imagine at continued 40%-80% annual compounding... That's now gigawatt hours of flexible solar(and already distributed!)for peak demand in about 2 years time...
You ou think its time for PUCs to rethink capital investments in nat gas peaker plants??�
1/1/2015
guest Thinking about this, cell phone business in US is pretty good analogy to PPA. You get long term lease on your device that is rolled in with the service contract. The way they manage defectors is by having tight control over phones -- if it's under defaulted contract the phone is unusable, and there are strong laws in place to make this fairly bullet proof. Same thing can easily be done with solar installations.�
1/1/2015
guest I believe the reporter got her units mixed up.
It's likely 10 MWh's of storage, with a peak effect of 1500 kW. It says that's 16 PowerPacks so it would suggest each pack stores 625 kWh at can deliver a peak output of 94kW. That's assuming they're all serially connected.
This does not rhyme with what we heard after the reveal where allegedly a PowerPack had 100kWh storage. But they could likely custom build these to different specs. Ir the article could be wrong, perhaps so far 16 PowerPacks have been installed but eventually there will be 100 of them (for 10 MWh)?�
1/1/2015
guest I suspect that eventually there will by 1 to 2 hours of storage per unit of solar. It will be interesting to see just how this will be deployed.
SolarCity looks to be pairing Powerpacks with utility scale solar. I suspect this may be the cheapest deployment. Consider that utility scale PV solar is now at a cost of $1.25 to $1.50 per W. Such includes the grid interconnection, wiring, and inverters. All this can also be leveraged for storage. So the incremental cost of storage is about $250/kWh for a Powerpack plus about $100/kWh for installation. So about $350/kWh before ITC, or $250/kWh after ITC. (Yes, I'm ignoring other government handouts.) So pairing 1 hour of storage with large scale PV is about $0.25/W.
So I thoroughly expect to see utility installation with 1 hour of storage approaching the cost of $1.50/W. This is only slightly more than solar only, but it goes along way to firming up solar. Such a facility would be able to compete with peaking power plants and participate in whatever peak hours there may be while avoiding feeding too much power into an oversupplied market. I really think this is the lowest cost way to add peaking power to the grid. It is so cheap that it well could price existing peaking capacity out of the market. This is where it important to understand how the full cost of solar is approaching the fuel cost of natural gas. As the marginal cost of gas generation slips above the full cost of solar, it kills the utilization of gas plant, and these plants fail to make back their capex. Utilities will try to avoid this. But as dispatchable solar gets so cheap, they will not be able to avoid this market displacement of existing capacity.
So the Analyst Day presentation included an image of adding storage to ground mounted solar. I believe they intend to push into this market.�
1/1/2015
guest
Solarcity is in every market now, utiltiy thru residential and everything in between. However, distributed solar+storage is the real prize here. It will beat utility level on retail pricing in the mid to long run going forward. Utiltiy level is the short term. Dealing with grid services is really the true strategy out of all of this. Utilities will ultimately procure a vast majority if not all of infrastructure-as-service in scaling levels, and accelerating at that, over the next fews year and in perpetuity at that...
utiltiy scale solar and all other fossil fuel plants will cost more as well as take much longer to build out over the next few years/decades. They will be the minority investment soon. The "alternative" procurement.
most people forget, it's the RETAIL price of electricity that matters most, not the whole sale. What is the delivered energy cost to consumers.�
1/1/2015
guest One thing people aren't talking about is the effect of the 30% ITC extension on solarcity's lobbying efforts. Instead of spending money on the federal level representatives, they can now use most of those resources on state/local lobbying efforts which is where the real changes need to occur for long term stability. This is big in that way.�
1/1/2015
guest You know I'm not a big fan of utility solar. Certainly I want SolarCity to stay focused where the margins are biggest, which for now is residential.
That said, there are interesting opportunity with utilities that could be quite compelling. Consider the Kaua'i dispatchable solar facility. This will have over 3 hours of storage per unit of solar, 52 MWh to 17 MW solar. While this is a good deal in its own right, I do think there is an additional advantage for SolarCity. Specifically, by operating a solar peak power plant, SolarCity should be able to argue that the island grid can handle even greater penetration of rooftop solar. So if they can open up this market for more rooftop, this gives them a critical opportunity with residents. So there is a policy gain here.
Consider now operation in another service area for a utility that cries out to it PUC that they cannot handle a high penetration of rooftop solar. So the utility engages in regulatory obstruction. SolarCity may counter by building out a solar peaking facility that is capable of countering any intermittency that SolarCity rooftop customers may dish out. This would immediately undermine the utility's contention and shift the terms of negotiation. The question should be how much battery capacity does SolarCity need to offer to backup rooftop solar. Once this is nailed down, SolarCity can install it both behind the meter and in solar peaking facilities.
Furthermore if this does not satisfy the utility, SolarCity has the opportunity to be an independent power provider with it solar peaking facility and compete head to head with utility owned peaking facilities. Note that the economics are potentially so good, that it can reduce utility own assets to stranded assets. SolarCity can do economic damage to a utility that is unwilling to negotiate in good faith. So the utility will simply have to stop making a baseless argument about peak capacity required to accomodate additional rooftop solar, or SolarCity could create a glut of peak capacity and force recognition.
So I'd be surprised if SolarCity needs to force the issue, but in any case dispatchable solar is a huge bargaining chip for SolarCity. Additionally, SolarCity can offer to place Powerpacks within a substation to stabilize the substation service area. This too can be used to negotiate for favorable rooftop solar policies.
With all these plays, the ability to aggregate all SolarCity assets for good of the utility make the negotiating leverage even stronger. The virtual link of all solar and storage under SolarCity's control is very powerful.�
1/1/2015
guest JHM I am just an interested long time lurker. We all tend to look at the world thru our own environment. For me that is TVA which has proposed severe constraints on solar for next year. And they are not subject to any regulatory oversight. As a result I have felt that we in the Southeast are in a time warp. However I just returned from a cruise where we visited Grand Turk and found that they rely on desalinization and that diesel generated electricity is the sole generation source. By the way I saw a sign that diesel was $6 a gallon. In addition I was told that electricity in St Thomas is $.49 pr kWh. It appears to me that there is a huge profitability opportunity for solar/storage in these and other similar situations around the world that mirror the disruptive force of cell vs land lines in developing countries�
1/1/2015
guest IEA coal outlook blithely ignores the big picture : Renew Economy
This is the kind of blindness we can expect from all the fossil industries for quite a while.
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Yes, there are huge opportunities for islands. I don't know anything about the situation in St Thomas, but if they are not already deploying, I suppose there are vested interests holding it back.
What's the residential rate that TVA offers?�
1/1/2015
guest The rates in St Thomas/St John/USVI have hovered around $.49-.56 and would be moving much higher if not for tanking oil. They get all their juice from burning diesel at a big refinery I think in St Croix, which is now either closed or is closing shortly. So they're probably just importing diesel. The good thing is these islands are already interconnected, so the infrastructure for balancing across a bunch of islands seems to already be in place.
Imagine the savings if someone walked in there with a massive solar/storage plan. Taken as a whole these are not just a string of tiny islands, there's a ton of demand there. Square villas with perfectly slanted roofs all with one side perfectly oriented south. Would be nice to see the USVI government take the lead and get a plan in place, they already have a pretty huge array along the entrance to the St Thomas airport.
I'll be in St John in about three weeks and will drunkenly spout random potential plans to gauge the reaction of villa owners. Will report back.
Edit(several corrections): St Thomas/STJ has a 200MW operation now fired by propane. St Croix is a separate 122MW grid facility. Options to link both to Puerto Rico have been explored.
St Thomas opened a 5MW utility solar array this summer providing 5% of peak.�
1/1/2015
guest Saw on IB feed that Morgan Stanley upped it's price target to $104 (from $86) this morning.
If anyone has access to the report, could you please share the highlights?�
1/1/2015
guest SBenson, are there shares available to short on IB?�
1/1/2015
guest Yes, they are. But the rebate rate went further up a bit. It is now at 64.81%. This is higher than on Dec 15, before the big spike, when it was 64.01%. In other words, shorting increased after the big move up.
Other data, MarkIt and S3 Blacklight also indicate that shorting increased since before the big spike.
Shorts are relentless for some reason. Are they in like, who blinks first contest or something? They really ought to wake up.�
1/1/2015
guest Is this the makings of TSLA part 2? It has basically the same setup, doesn't it? I would think all SCTY would need to do in the coming quarter report is to show profitability and cash flow positive, and we are off to who knows where. Or am I being way optimistic?�
1/1/2015
guest I never seem to find analyst reports. I find plenty of click-bait "news" sources which reference the MS upgrade to $104...but never the actual report.�
1/1/2015
guest They are usually distributed to their clients (who do business with them). But the reports leak out a lot and reach a lot of hands. I heard that this is tightened up quite a bit lately though.�
1/1/2015
guest I believe it was also Morgan Stanley that first gave TSLA a huge upgrade just before their squeeze. $104 is still under value, but there is no new guidance yet so you have to remain conservative.
Speaking of cash flow positive.....we know that was the year-end 2016 goal for SCTY in a post-ITC setup. What does the horizon look like now? With install costs down to $1.92, they just need to lower their acquisition costs to be CFP, right? I assume since the ITC was to continue through 2016 regardless, there is no change in the timeline?�
1/1/2015
guest Comparing to TSLA short squeeze, as tempting as it maybe, we should also appreciate the differences in circumstances.
1) When TSLA squeeze began, the price already shot out of the historical price range. In case of SCTY the price is well withing historical prices. So some shorts are in red, but some shorts are still in green. We need pretty much all shorts to be in red and that too by a sizeable amount to trigger a scramble to cover.
I was hoping that increased guidance, analysts reports will do it. But today's MS price target increase has no impact at all. That's a bit of a downer.
2) It's nearly impossible to trigger a positive EPS in case of SCTY. They occasionally post it due to random movements in the 'noncontrollable interests' line item in Statement of Operations. But that positive EPS is meaningless and the stock reaction has been muted in the past.
I am somewhat resetting my expectations of a squeeze now. Maybe it will be a slow gradual squeeze as more and more long buying happens over time.�
1/1/2015
guest Natural gas is up almost 9% today, to $1.923/MMBTU. I see this a good for solar. TAN is up 2.6%.�
1/1/2015
guest So Sunrun is up 7% today while SolarCity is flat. Any theories?�
1/1/2015
guest Agree with this, as I stated a few pages back. Too many shorts still green. Still think SCTY will rise to, and well above, ATH medium-term, but not that it will happen in one almighty squeeze.
Also strong shorts that are still green will be using up their remaining ammo to create dips and exit possibilities, resulting in a protracted battle. I can still only see one logical outcome in the long run.�
1/1/2015
guest Just now came to know that 14 out of 18 analysts already updated their price targets since Dec 16th. So Morgan Stanley's update today roughly marks the completion of the updates owing to ITC.
Now I guess only thing left is guidance update. I wonder if it will come out before ER. They need to think through the strategy now (if they haven't already). At a minimum they need to get together with the Board for signoff. So I am guessing early to mid Jan if at all. But then it's very close to ER anyway. Why bother? Why not simply talk about it in ER in late Jan.�
1/1/2015
guest Be patient. There has only been one upgrade since ITC passed, and I feel he was premature.
Solarcity (and all the rest of solar) will give revised guidance first.
once guidance is out, new analyst ratings will come out... Even Morgan Stanley's today.
again, revised guidance will dictate everything that follows.�
1/1/2015
guest It does seem weird to have a lull like this. Holidays and less trading days perhaps too? Also, it still seems like the Tesla Energy has become the opposite of Tesla killer articles which use Tesla as the preeminent EV. The press constantly references energy storage products as the benchmark, but the market isn't taking Tesla Energy into account either it seems. I still view SolarCity as having a global opportunity here...well beyond the US markets if they chose to expand panel manufacturing and Zep hardware sales and installations.
Germany's Sonnen takes on Tesla Powerwall in the U.S. | Utility Dive
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1/1/2015
guest People are still uncertain and that's fine. An ITC change shouldn't change our estimation as investors of how much the wider public "gets it". That will come with earnings and guidance soon enough. If the world doesn't wake up after guidance is revised, they almost certainly will after 3Q16. Either way, I'm good
To me, this is the ideal situation. $100 is at this point a near certainty, but we will still have these little dips until guidance is revised in late Jan or early Feb. We now have a month to look for buying opportunities. Keeping my fingers crossed that we can cross $140 by Thanksgiving.�
1/1/2015
guest It's strange how Sonnen thinks they can talk up a battery that is many times more expensive than a Powerwall. I really don't see how they can go to market with these prices. It's like some new panel maker talking up how they're going to enter the solar market with a 200W panel priced at $2.50/W. Why would you want to spend $9900 on a 4 kWh battery? Bizarre.�
1/1/2015
guest Renewable energy and more pointedly solar power will become a political football over the next eleven months. Look for Elon and Lyndon to take this opportunity to do all they can to advocate and advance clean energy. Elon is a master of free media coverage. Just sayin.�
1/1/2015
guest Massive cup and handle. Nothing else needs to be said. Consolidating at prior resistance. Technically a bit overbought, but short interest is far too high, and fundamentals more than justify the rally. I think the term is overbought buried? Not to mention it was extremely oversold. The rally is more of a reversal of the huge drop that was entirely due to fear that the ITC wouldn't be extended. Pause before next leg up. If it breaks $60 on volume will retest 52 week high.
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Sonnen's business model might not be legal in the USA. Even if it is, the technology hasn't been proven to work and to be safe. It also hasn't been shown how their technology is more cost effective. Also, there is no way Sonnen has enough capital or batteries to be a threat to Tesla.�
1/1/2015
guest Nevada PUC came out with new Net Metering rules. Looks pretty negative to rooftop solar.
http://pucweb1.state.nv.us/PDF/AXImages/PRESS_RELEASES/300.pdf�
1/1/2015
guest Surprisingly volume is under the new higher average 4.25m...and TSLA is 1.67m. Such a quiet day considering all the excitement lately. Best of luck to SpaceX tonight too.
Haven't seen this posted yet:
Elon Musk talks Carbon tax, Mars Energy at AGU (12.15.15) - YouTube�
1/1/2015
guest The short rebate rate came down a bit in the afternoon to 58.4% (from 64.81 in the morning).
I guess our friends over in shortville like to buy in dips
I guess if nothing all these shorts provide a stronger base price for us.�
1/1/2015
guest $.09 per kWh residential with no peak load pricing, continued courtship of energy hog industries. Perhaps the use of hydro for peaking justifies the lack of pricing incentives like TOU.�
1/1/2015
guest
That is my concern -- that the current price is to some extent supported by ongoing short covering.�
1/1/2015
guest SolarCity Statement on Nevada Public Utilities Commission Proposed Decision -- SAN MATEO, Calif., Dec. 21, 2015 /PRNewswire/ --
Tomorrow should prove interesting.
SolarCity CEO Lyndon Rive released the following statement today regarding the Nevada Public Utilities Commission's proposed decision on rooftop solar:
"If the Nevada Public Utilities Commission's proposed decision is accepted tomorrow it will destroy the rooftop solar industry in one of the states with the most sunshine. There is so much wrong with the decision, the only option for the PUC is to reject it. The one beneficiary of this decision would be NV Energy, whose monopoly will have been protected. The people will have lost choice, jobs, and faith in their government.
"The decision would retroactively sabotage the investments Nevadans have already made in solar, even though they were encouraged by their government to make those investments.
"If the PUC approves this proposal, it will force SolarCity to cease sales and installation operations in Nevada. And if SolarCity, which has the lowest cost structure in the industry, is forced to shut down operations, you could estimate that more than 5,000 solar jobs across the industry will be lost as a result of this decision.
"Today's proposed decision is reckless, and I encourage the PUC to reject it tomorrow. Nevada will otherwise become the first state out of 44 with net metering to take a step backward, not forward."�
1/1/2015
guest You're fortunate. That's a really low rate. Hopefully, there's not a whole lot of coal in the mix.
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Wow, you can really hear the lament in Lyndon's voice.�
1/1/2015
guest The perfect deal: Jigar Shah on the recent extension of the U.S. Investment Tax Credi
PV Magazine Mobil: The perfect deal: Jigar Shah on the recent extension of the U.S. Investment Tax Credit
Jigar Shah: The scale of what happened in Paris, and what happened in DC this week, with respect to the ITC extension, is truly massive. I think that people have a hard time grappling with it.
This one policy, combined with China and India's efforts, etc., will make solar and wind the dominant electricity technology that will be deployed over the next 10 years - at a trillion dollar scale.
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1/1/2015
guest Shah says that pensions are on the sideline because they are not taxed and so do not need tax credits. I don't quite get his concern. An ABS seems to be a fine vehicle for pensions.�
1/1/2015
guest He mentioned how cheap money is on the sidelines. It seems to be similar to what was talked about up thread. How the Tax Equity Investors take a pretty large piece of the pie. At some point it will make sense before the tax credit winds down you would hope.
I really hope we get a good result out of Nevada Tomorrow.�
1/1/2015
guest That -retroactive sabotage- bit is scary. I wonder who will end up holding the bag in that case. Homeowners or asset backed investors or shareholders? I hope there are not too many installs in Nevada.�
1/1/2015
guest Buffetts utility set to win if Nevada solar subsidy scrapped - Chicago Tribune
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1/1/2015
guest Didn't I read somewhere that the vote was like at 930 am?�
1/1/2015
guest Thinking about selling my shares and buying more options. 2017's are coming down nicely and should be even cheaper the week after Christmas if there's no spike. Feb16's would be a play on revised guidance, almost can't miss there right?�
1/1/2015
guest
Im amazed people invest one minute and sell the next. I recommend having patience. The Nevada situation will run its course.
remember, there has never ever been a case where grandfathering been taken away. Never. Ever. This decision would be completely unprecedented and taken to court. It would be immediately over turned.
Ive followed this entire situation and it is purely political and not objective. The state congressional leaders do not like Solarcity. The puc does not like Solarcity. Both are strongly pro NV Energy. I've never seen anything like it, how publicly bias they are as well. You all can see it for yourself on the congressional video recordings on their website.
However, in a court of law, it will be seen.
Fortunately, Solarcity and others are gaining significant power, they will not take this lying down. They are going to fight and win in he end.
so either be invested and have patience, or just sit on the sidelines. It's actually much better for your health this way too.
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I think 2016 guidance is set. My estimation is that we'll get 2017 and maybe 2018 install guidance at q4 conference call. I wouldn't rule out a major proclamation like another million customer goal or storage with every solar install goal.
overall, my feeling is well have to wait till q4 conference call for the new guidance reveals.
Lyndon is talking with senator Schumer in New York today, so we might get a riverbend update soon. Possible expansion of riverbend factory at some point in the relative near future.�
1/1/2015
guest SunEdison is imploding again, down down 25% today on a documentation request from David Tepper. This seems to be dragging down the entire solar sector and could continue to do so for quite a while.�
1/1/2015
guest Be aware of short covering stories put in the media. This would be the time to do it. That spike run up was not healthy for them.�
1/1/2015
guest I'm not sure what provision a PPA may have for the situation where the feed in tariff is below the PPA rate. Regardless, it is important that SolarCity deals fairly with the customer on this.
Really this situation should not be a surprise. It's happened all over Australia. We simply take the game to the next stage. SolarCity will need to work with customers to optimize utilization of solar power and add batteries. Smart thermostats, smart hot water, heaters, etc. can minimize the amount of solar power exported to the utility, even without a battery. Even if, a utility can get away with setting their own feed in tariff, they run the risk of incurring too much cost and lost revenue by setting the rate too low. They also alienate their customers.
I view this post-NEM world as inevitable. SolarCity must simply adapt and take competition to the next level.�
1/1/2015
guest Of all the states to have this battle...Nevada? I'm glad the casino's are lining up with SolarCity but it's best to have these commissions exposed publicly for the shills they are. It's also nice to see Buffet's name attached to the utility in question...I think anyway.
Elon Musk vs Warren Buffet in solar title bout - POLITICO�
1/1/2015
guest The number of total horseshit "news articles" that have popped up in the last week is hilarious. Google really needs to come up with some kind of minimum standard for things that get filtered into the "News" section.
Fortunately for me, this is now just a buying opportunity in an environment with infinitely more future revenue/sales certainty. Hoping shares rebound today or tomorrow so I can offload my shares to buy more options. Is that insane given that I'm working a within a maxed-out zero sum gameplan? This is money I have in an IRA and every dime I've allocated is in SCTY in one form or another at the moment.
I wanted to have 40-50% of my original chunk of cash in shares and the rest in 2017/18 options so that if for some reason the options expire worthless, I'd still eventually turn a total profit on the shares alone. Now that we have so much more certainty I'm inclined to treat my 2017's @$70 and 2018's @$90 as cash in the bank. I'm all about leverage here, so sell the shares later this week and buy some Feb16's to take advantage of the revised longterm guidance on the 4Q earnings announcement plus a bunch more 2017 $70's perhaps?
That's not complete lunacy, right?�
1/1/2015
guest SolarCity CEO in Buffalo to hail solar panel tax break extension - Business - The Buffalo News
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1/1/2015
guest This is important. Rive wants to grow as fast as cash flow will allow. So the 1.25GW for 2016 is still on.�
1/1/2015
guest The nevada thing passed.�
1/1/2015
guest Nevada rooftop solar suspended (for now). PUC voted 3-0 for taking grandfathering away from already solar customers as well as only giving whole sale credit for energy put on the grid.
The one thing we have to keep in perspective is Nevada has only 395MWs of rooftop solar installed in the entire state. Solarcity installed that number over the past 2 quarters, so Nevada is a very small market.
But let the chips fall and let's see what happens in the legal area now.�
1/1/2015
guest I read sunrun is suing.�
1/1/2015
guest How much would it cost Elon Musk to personally gift a PowerWall to every residential solar customer of SolarCity in Nevada? Couldn't be that much and it would be hilarious.
These kinds of decisions don't both me for three reasons. One, it's temporary. The voting populace of Nevada won't take this kind of nonsense. Two, it'll get overturned in the courts. Three, it affects the solar industry nearly uniformly. Who cares is demand backs up in Nevada even for an entire year or more? The future is coming, it's inevitable.�
1/1/2015
guest Agreed. Double irony if the offer was to pick up your Powerwall at the Gigafactory in person. The more publicity this gets the better informed the voters will become.
Dire warnings issued for rooftop-solar industry after new rates OK'd | Las Vegas Review-Journal
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1/1/2015
guest the funny thing is well probably see the growth that will happen in Hawaii well exceed (2x-3x) any delay in Nevada installs. Matter of fact growth has been flat for years in Hawaii, now the growth is anticipated to be exponential with solar+powerwall installs.
its just the crazy way state by state centralized monopoly utility structure pans out. You think it is extremely odd that nevada's own 2014 independently commission net metering report concluded net metering is a benefit to all rate payers at retail rates. But yet its commission ignored it and reduced to whole sale rates. Something really stinks in Denmark here...�
1/1/2015
guest
In other words, Sandoval declined to intervene at this stage. This doesn't mean he won't provide his thoughts should any party he agrees with call for judicial review.
As he points out, ANY PARTY not satisfied with the decision or that feels the decision does not ""provide for energy rate stability and balance the interests of ratepayers with business interests" is able to call for for judicial review. Every person in Nevada with Solar Panels, along with every business involved in installing solar panels will call for judicial review. The new rule clearly doesn't balance the public interests with private interests. Also, how is it legal for them to introduce a retroactive monthly fee for everyone who has solar panels?
Dire warnings issued for rooftop-solar industry after new rates OK'd | Las Vegas Review-Journal
In my opinion, this law will be overturned after the lawsuits start flooding in. Numerous states, such as California have already determined that such fees are not legal.
New California Law Cuts Solar-Permitting Red Tape | Greentech Media
Here is what the utilities in California said. Ultimately the utilities lost the fight. States are incentivizing people to use solar because it's in the publics interest that more people use solar. Therefore, it should be irrelevant if those who don't use solar have to pay a bit more than those who have solar panels (even if there is any truth to the claim that an increase in solar forces utilities to charge customers who don't have solar panels more).
In key solar decision, California rejects utility plans
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1/1/2015
guest So it's looking like we'll hit 6m over 5m avg. today. Any ideas if the shorts are unloading or loading up even harder? Tesla is flat volumes again.�
1/1/2015
guest rooftop solar already sued Wisconsin under similar circumstances in Nevada and won. Solarcity and others are much more experienced in this type of lawsuit. Again, don't under estimate the legal power of Solarcity and others.
The bottom line is Buffet just wants to slow down the growth of rooftop. I don't think the really think this new rate will stand in court, but it's still in court. The buffet goal is to draw out the process, contract the industry momentum. He knows that the Nevada PUC(buffet proxy) can't be held liable for any damages, so if he can make this get pushed to the courts, then so be it. It's a win.
secondly, governor Sandoval is in bed with nv energy. His staff is populated with nv energy employees. Let's not fool ourselves to think he's not looking out for them. A spades a spade. The governor appoints the commission. He can absolutely intervene on any and all decisions. He also can literally put anyone pro nv energy on the commission. This has to be tried by an outside independent entity and most likely that's state/federal court.�
1/1/2015
guest Hoping for an overreaction induced drop tomorrow so I can load up on calls. This inverse volatility is a good things for options, but I wouldn't be surprised if Chanos chimes in with FUD tonight or tomorrow. The noise from today is causing the market to completely overlook the price target upgrades from the past few days. Cup and Handle alert for both Tesla and SolarCity.�
1/1/2015
guest "As big as this one is, my guess is it won�t even supply half of our needs� by 2018, he said.
well, this looks like to be a statement Solarcity will guide for over 2GWs in 2018.
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1/1/2015
guest Foreword: Keeping the conversation on the subject as opposed to each other�s positions and motivations will be much more productive. No need for provocative statements each time someone posts a cautionary note. That only shows weakness in one's comprehension of the situation. Try to keep emotions in check please, we are here to find information from each other.
Moving on to the real subject...
The biggest problem with the Nevada deal is with NOT-grandfathering existing solar customers. So what now?
Sure we can talk about lawsuits and all that. One simple thing people miss, courts exist to enforce law. Not to decide what is fair. Fairness is supposed to be decided by the law itself which lawmakers make (congressmen and executive department: Mayor/Governor/President etc.) If you are hoping that courts will rule in favor of SolarCity, it needs to be based on some information on existing laws. Just because something is perceived unfair by a set of people, it doesn't automatically become 'illegal'. Also note that we are talking about state laws here. So what is applicable in CA is not directly applicable in NV.
I myself don't know if laws are in place to call PUC's decision illegal. My suspicion is no such laws exist. If so, PUC wouldn't have taken such a bold step. This is purely my speculation. Again, please come in with proper info if you want to say otherwise or just say that you too are speculating like me and give some reasoning as to why you are speculating that way.
IF this PUC order stays, then what?
(Before someone jumps all over this, notice the big, bold IF? We are just doing scenario analysis here. Not trying to say that that is the only possible outcome)
My best guess is - homeowners are on hook to pay SolarCity anyway. In case of leases the argument is straightforward. In case of PPAs, I believe the charge is based on what the system produces. It is not dependent on how much is consumed on the spot and how much is shipped to grid and what the grid is giving back as credit. So primarily this is a direct hit for homeowners... Keep note, even if the homeowners bought a system outright through local installers, whether they take up some sort of financing or not, the homeowners will be in the same predicament anyway. So SolarCity asking for continued full payment as agreed upon earlier is not unfair. At least in my view.
Now many homeowners may choose to default on the contract, because for many it may be worth defaulting than paying 2X the electricity bill for next 20 years. Then the pain spreads upwards to asset-backed investors and shareholders. If the numbers look very bad, this may leave a bad taste in the asset backed investors mouths. So either asset-back financing becomes expensive (rates go up) or simply unfeasible. More importantly this sets precedence. That is the bigger issue here than just the mere loss ensured in NV alone. This issue will certainly put asset backed investors on guard. This morning Raymond James released a note saying as much.
So here we go again, doubting the very foundation of this business model. If anything management wants to do more asset based financing. Not less. In the Analyst Day event they said they are exploring ways to finance away *all* of the 20-year contracted cashflows. So this NV issue strikes right in the heart.
Maybe this explains why shorts are relentless. I wonder how they know all this beforehand? Spending as much time as I do on SCTY, I had no clue that not grandfathering existing homes is ever a possibility. Maybe my perspective was shaded because that's what Lyndon Rive said multiple times in the past (again a dose of deception here, look up Q1 2015 CC transcript for example). But couple of times random guys popped up in this thread and said exactly this (and we promptly ssshhed them away; we really ought to learn to pay attention to the cautionary comments here in this thread).
Although this whole thing sounds alarming, on the flip side there is near infinite money in the global financial system (I work in the outer rim of the industry and I get to see some inner-workings sometimes). And with Paris there seems to be particular interest in financing green investments. So I believe/hope that ABS financing rates may go up but won't cease entirely.
If SolarCity comes out with an ABS pricing announcement that will certainly do some good to restore confidence. That MyPower deal being underwritten by Credit Suisse is not priced yet. It is well rated by S&P and Kroll agencies. So I hope that comes out soon.
Overall I am still optimistic that this too shall pass. Fingers crossed.
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FWIW, per IB, the rebate rate went down both yesterday and today. Also shares available for shorting increased quite a bit.
It certainly looks like short covering is happening in dips.�
1/1/2015
guest Grandfathering has never been denied in the history of of US utilities and was confirmed oddly enough in Arizona PUC proceeding earlier this year.
It is legally unprecedented. furthermore, Nevada state law prohibits PUC decisions from upending the rooftop solar industry in the state, which clearly this decision has done. there are a plethora of legally questionable things from this decision it's hard to enumerate them.
There is no question, this is a legal mess for the PUC, but again, that's part of the buffet strategy. They won't pay damages, so why not push this into the courts, slow rooftop momentum right at the same time they Nevada is set to bid and install buffet natural gas generators? Rather coincidentally, buffet is also looking at Arizona for his nat gas products as well...�
1/1/2015
guest Ad Hominem Alert
To all:
First and most important. I do not have a dog in this fight; I write this as a heads-up based on my own experience, background and knowledge. Nor am I singling anyone out as being defamatory; the finger-pointing I am going to do is dispassionate; absolutely disinterested.
I have noticed a common attack in a good number of these posts as well as some that deal with, e.g., the US railroad industry. That is to say, as shown in the immediate prior postI know personally this is not and never has been the case at all. My father knew Warren Buffet when Buffet was a fairly young man and a newcomer in the investment world; he saw him as having the potential to become the best of the new crop of investment professionals and made sure I studied him carefully and learned from his methods.
Unfortunately for me, I once tripped up and ended with egg all over my face, as follows. I was at a dinner at the home of the head of ABC shortly after the time that Berkshire Hathaway established a controlling interest in the parent company. As someone who had grown up with an intense aversion to television, it always had been awkward being with this family (the daughter was my first elementary school crush, and we remained extremely close for many decades after)...I must have had too much wine that particular evening, because I opened up. I said words to the effect of how pleased I was that Buffet had made this investment...."And why is that?"...."Because this will give him the opportunity to effect real change and turn television into the medium of learning and blah blah blah," I responded, digging myself an Omaha-sized hole as I ridiculously placed my own vision in Buffet's shoes. Mr. _X_ looked at me in a "Have I possibly known you for the past twenty-five years, and have you learned nothing from your father?" look and replied "Warren Buffet does NOT act that way. He NEVER gets involved in his investments".
Well, it's a fine thing I'd dug that hole because I desperately needed to jump into it, fast.
So go ahead and criticize NVE, Union Pacific and others as much as you wish and welcome to it. But I offer up my mistake to you all that you not repeat it.�
1/1/2015
guest And such is the nature of the human investor I guess. We just secured ITC extension beyond our wildest dreams and folks are concerned about a backwoods chunk of desert that isn't even really a state. That demand will be there, it'll just sit until state politics catch up.
These things will happen monthly for the next 3-10 years, can we maintain a bit of perspective?�
1/1/2015
guest Benson, I rather expect that equity investors, both common and tax partners would have to absorb any customer default losses before passing that on to ABS investors. The assets that back the ABS are both the intended source of cashflow and collateral should SolarCity default. I find it highly unlikely that the NV situation could lead SolarCity to default on their ABS obligations. For one, only a fraction of the initial term cashflow is monetized by the ABS. And for another, defaulting would forfeit any value in the book of renewal terms.
So I am not worried for the sake of ABS investors. Furthermore, the cost of remedying the decline in export revenue is limited to the cost of installing Powerwalls. For example, the change is expected to push over $600 per year of costs back onto solar owners. That may seem like quite alot of incremental cost over several decades, but the total cost is really capped at the cost of storage over those years, maybe around $3000 per household. So the question becomes, who pays for storage? I suspect that SolarCity will work out some reasonable way to split the cost with customers, perhaps installing at cost. Regardless what they bring forward, the total cost of the policy shift is limited and can be mitigated. If SolarCity handles this well, it could actually work to SolarCity�s advantage in bringing reassurance to prospective customers. That is, solar owners who bought their systems from small installers may have been left to fend for themselves in this situation, while SolarCity customers had the benefit of an installer and finance on their side. Think of the way that Tesla works with customers when things don't go well. Musk has a strong business ethic of putting the customer first. I expect no less from SolarCity. Putting the customer first in a situation like this will also protect the ABS investor. In the longrun, this will work out best for the shareholder too.
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Hey, Nevada is a proud state. But, yeah, this is all par for the course. As SolarCity gains market share, utilities everywhere will seek to obstruct in anyway they can. Sadly, about all they can do is play policy games and seek protection from real competition from politicians. That's all they got. It will be a really long time before we see real competition on the basis of lowering prices or improving service.
So let's all enjoy the ride. In the meantime, I'd love to see SolarCity to use Nevada and Hawaii as test beds. They need to figure out the smartest ways to deliver power management technologies including batteries to help customers get the most out of their solar systems. They need to be the very best at defeating demand charges, minimizing solar exports, optimizing time of day pricing. This is the second stage booster for solar to borrow a SpaceX analogy. So I want to see SolarCity bring new competive capabilities to the market.�
1/1/2015
guest That would be pretty foolish. Remember not to get too caught up in a bullish mind set guys, there are no guarantees and certainly not SCTY. With the ITC extension I too am bullish on SCTY at this price level but there is no doubt that the risk is real. Only skimmed the thread but apparently Nevada is now retroactively establishing a fee for residential solar customers, I don't know if SCTY can just hike the prices for these customers or who will end up paying, but the legislative risk is real nonetheless. Residential solar has a legislative tailwind like I have argued before in this thread and if this were to change their whole business model could quickly turn sour so be careful out there. I hope you don't have 100% of your money in SCTY with 40-50% of them in OOM options, if so I at least hope you are young.�
1/1/2015
guest On behalf of myself, thank you for your anecdote. If only this was abc maybe things would be different. However, this is electricity, a much different ball of wax. every action Buffet's taken in nevada has been anti-roof top solar, and blatantly so. If there is one thing that is absolutely true is warren buffet doesn't like to lose money. Roof top eats into revenues. he's heavily invested in centralized utility. He has zero investment in roof top solar.
In Nevada, you can't disconnect from the grid in you have solar + storage. If you decide to leave the grid, you have to pay an exit fee. If you refuse to pay the exit fee you will be sued.
secondly, the very Nevada PUC conducted an independent study on net metering in 2014 that concluded net metering benefited all rate payers at retail rates. Today's decision completely ignored its own study. If you can't see the foul play just from that fact, then I guess nothing will. There are many many different facts and examples that demonstrate protectionism of a monopoly position in the face of emerging competition. Remember, net metering was found to benefit ALL rate payers, meaning the grid serves the ratepayer better(and cheaper) then without. This exactly what the commission was designed to ensure would happen in the face of a legal monoplistic utility that would maximize rates despite consumer impact.
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solarcity expects to grow rapidly in Hawaii in 2016. Lyndon rives stated at the analyst brief growth has flatlined in Hawaii over the past few years, but not in 2016.�
1/1/2015
guest Financial Woes Scorch SunEdison - WSJ
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1/1/2015
guest Elon Musk vs Warren Buffet
I have invested in Tesla Motors and SolarCity because I believe in the corporate mission. I am convinced a solar electric economy is our best solution to the challenge of climate change. Pointedly, so do the employees, management and chief executives of these companies.If you are a value investor, invest with Warren. I happen to believe in what these guys are doing. Should I lose everything, I will have done so doing the right thing.�
1/1/2015
guest It sounds like you didn't actually understand Audie's comment. I was thinking of posting something similar, but didn't have any personal experiences to hang it on, just some research and being an investor in B-H. So let me say it again:
Berkshire Hathaway invests in solid balance sheets and well-run companies, and then doesn't micro-manage them. In fact it pretty much doesn't do any management, micro or otherwise. Berkshire Hathaway isn't only Warren Buffet, Charles Munger also directs investments. Berkshire Hathaway employs only about 30 people (maybe less, I can't remember), so they don't even have staff who meddle in investments. Nevada Energy is a subsidiary of a larger energy company. Warren Buffet is not even on the Board of Nevada Energy.
So, malign NVEnergy all you want (I agree!), but leave Warren Buffet's name out of it.�
1/1/2015
guest I'm curious, does anyone know how much that exit fee in Nevada is?�
1/1/2015
guest It's curious, on a day when solar (TAN) is down over 4.3%, and SUNE is down 23% in particular, that coal (KOL) and Oil & Gas E&P (XOP) would both be up nearly 2%. Are these related? Could it be that post-COP21 investors are starting to see renewables at odds with fossils? Is there any chance that fossil investor take heart in the prospect that a company like SunEdison might become financially weakened? It must be too early to know these things. As a statistical, I know there is not yet enough data to conclude that renewables and fossils are negatively correlated. But it is an intriguing thought, is it not?
Even so, fossils are in disarray. Coal is so cheap that coal companies are going under. Natural gas is so cheap that gas producers are going under. And oil is so cheap that oil producers are going under. What fleeting schadenfreude there must be to see SunEdison routed by the market. That must feel a whole lot better than the reality on the ground for fossils.
No one wants to admit it, but renewables are winning.�
1/1/2015
guest Lately, I've been spending a lot of time reading articles over at oilprice.com. I guess I'm interested in how fossil investors are framing the energy investment world. Indeed, it is hard to find a fossil-centric article that is taking a serious look at renewables. But here's one article that seems to grasp the problem at hand for utilities. It's a sober view that recognizes the folly of attempting to grow the rate base.
Dear Electric Company CEO: Merry Xmas and Cut the Dividend? | OilPrice.com
If this article is any indication, utility investors may be getting to walk away. If the utilities do not divest generation assets, as I have argued, shareholders will divest these companies. There is a massive, global asset bubble just waiting to pop.�
1/1/2015
guest The Alliance For Solar Choice Statement On Reversal Of Wisconsin Solar Taxes -- MADISON, Wis., Oct. 30, 2015 /PRNewswire-USNewswire/ --�
1/1/2015
guest The top three utilities in Germany are down 70% in value in just the last 3 years and begging the government to allow them to divest from nearly all forms of production. How people don't discuss this as part of every single renewables conversation is beyond me. The Germans do everything logically and for the most part with the average consumer in mind rather than corporate interests.
German solar reading should be step one for any investor looking to educate themselves on what the US might look like over the next few years.�
1/1/2015
guest I'm on the invention side of things, so no worked out numbers and accounting on this, but from my perspective, turning the grid into an asset and profit center rather than a liability and cost center is where it's (supposed to be) at with these legacy electric utilities. For instance, sell "electricity transport services" enumerated for the real cost of transmission, and hook it up to attractive places, like distributed sinks (batteries, home generation (solar), buyers (users who want the juice), battery farms, and the whole range of other generation (including solar, wind, geothermal, nuclear, gas, etc.)). This is a great business to be in if you're the right person (i.e., corporation who knows what they have and what they don't). It's a dream come true: a new way of generating, saving and using electricity, but you already have most of the most expensive stuff done already. Now, all you have to do is introduce fair attractive all-entity trading platforms at all (micro and macro) levels (i.e., home trading of one's own generation, storage, use), make sure the competition interacts compatibly with it (don't play Not Invented Here games and don't be jealous -- make everything work right, including equipment vendors, installers), get the regulators to do their job right (sign off on this new stuff without jury-rigging it), and make a profit off of transport. The grid is the utility. (Remember "the network is the computer"? It was half right, and right enough to make sense here: it was the new thing that was underconsidered.)
All that generation gunk? Do the accounting right. Slow down the pollution. Realize its true life and cost. Don't go hog wild. Just like the article above said (the Merry Xmas one). But like that article said, it's not the bread and butter any more.
The grid is supposed to be a shining emblem of the company. They should treat it like a product on a shelf to sell to potential customers. Instead I see places like PG&E treat it like a dirty cost that has to be made more "stable" by killing numerous century old trees that take a century to replace on all of the prettiest roads in the area rather than just putting a little insulation around the wires. PG&E ought to be making us LIKE their grids so we WANT to buy product from them, rather than HATE PG&E and want to do everything in our power to stop using them and their dirty actions. Throwing a few wires underground is only a cost in a structure where the grid is a cost; otherwise, it's a new product to sell. Of course, that means a total redesign of the product base: you have to get the regulators to understand you want to charge for transmission according to transmission cost (no welfare for the "underserved" -- they can get solar anyway, so the grid is more of a feature than a human right), instead of treating yourself like a father figure who brings home the bacon every night from that dirty generation job every day --- that's no longer how it works. We don't recycle our energy from dirty garbage (dinosaurs and coal) any more -- we get it direct from the source (sun rays).�
1/1/2015
guest Dieselgate, BEV incentives and market penetration.�
1/1/2015
guest http://www.bloomberg.com/gadfly/articles/2015-12-23/nevada-net-metering-ruling-a-reality-check-for-solar
�
1/1/2015
guest James, My understanding of ABS is that they are pass through securities. So if a portion of homeowners default an appropriate portion of cashflows to ABS investors will be chopped. That will lower the yield they will get and can potentially take it to 0 or even negative depending on what % of the pool has defaulted.
For a hypothetical example, there is a pool of 100 instals.
Years 1 to 5 cashflows are earmarked for Tax-Equity folks
Years 5 to 15 for ABS
Years 15 to 20 left for the firm (shareholders)
If all 100 homeowners default in year-2, tax-equity folks lose a potion of their investment but ABS and shareholders lose all of their investment in this pool.
There is no mechanism for tax-equity folks to carry a greater burden for the sake of ABS investors.
In theory, yes, shareholders can take up greater losses. For example if SolarCity pretends that no defaults happened and it pays back full cashflows to tax-equity and ABS investors.
The way you are saying seems to suggest that SolarCity is on the hook to pay the ABS investors wether homeowners pay their bills or not. In fact I believe there are provisions like that for tax-equity guys but not for ABS. I remember the ratings note done by S&P. Their rating was very much based on wether homeowners will continue to pay or not. It certainly isn�t based on SolarCity�s ability to pay back.
Here is a quote from Bloomberg Gadfly column from here: http://www.bloomberg.com/gadfly/columnists/ASe2HvynvWg/liam-denning/articles/2015-12-23/nevada-net-metering-ruling-a-reality-check-for-solar
I agree with the solution bit. SolarCity should immediately explore the possibility of adding batteries. I believe the cost can be easily passed through to the homeowners by increasing about 2cents/kWH for each powerwall. That will be far more economical for the consumer than paying 2X the bills (or default and ruin their credit).
But the issue is, the PUC pretty much said this to NV Energy - here are all the ways you can screw residential solar. Figure out how much you want to screw in each step for yourself.
I am not kidding. The fixed rates and TOU rates will be determined by NV Energy that PUC will approve. So NV Energy can play with these fees in such a way that it becomes nearly impossible to overcome the burden even with batteries. For example what if fixed costs are $50/month? So we need to wait and see how this plays out. I believe we will know within a week.�
1/1/2015
guest Interesting microgrid news.
Microgrid System Laboratory Partners To Include NREL, DOE, Clean Coalition, Duke Energy and others
This stuff should have been going on at a large scale 6 or 7 years ago, perhaps the military was and we just don't know about it.�
1/1/2015
guest Has anyone considered the effect that all this warm weather is going to have on Q4 results? There will be next to no detriment to crews working through the winter, who are often held back by snow on roofs, etc.
Could be a fabulous boost to the installs count.�
1/1/2015
guest Does anyone know a good site that keeps all of the analyst upgrades and downgrades for SolarCity in one spot. Like a free much less powerful Bloomberg terminal.�
1/1/2015
guest We need to look at the prospectuses for these ABS offerings. I have not been able to find them, just the ones for Solar bonds. If you can find one, let me know.
But looking at the solar bond prospectuses, I note that SolarCity does characterize these as "asset-back" which they are in the sense of cashflow originating from solar assets. But they are "senior unsecured corporate bonds." So there is no collateral, but it is senior to other debt and obligations. Finally,
"SolarCity will be responsible for making all interest and principalpayments on Solar Bonds. We intend to fund interest payments on Solar Bonds with cash payments we receive based on longterm energy contracts for thousands of installed and operating solar energy systems. However, payments on Solar Bonds may be made as necessary from any corporate funds available to SolarCity."
So in the case of Solar Bonds, SolarCity would be in default if they failed to make timely interest and principle payments, regardless of how the solar assets are performing. So the only scenario where the Solar Bondholders is at risk is where SolarCity is defaulting on all junior debt and still cannot make payment. Recent developments Nevada look like a pretty remote trigger for general insolvency.
An ABS is structured difderently. There can be numerous safeguards like traunching and over capitalization to mitigate various risks to investors.There are likely provisions for dealing with nonperforming assets. We need to get our hands on a prospectus to clarify how it is structured.�
1/1/2015
guest Yes, lunacy. This sort of options play is closer to gambling than investing. None of that is cash in the bank - the wheel is spinning and anything can happen. Your value can go to $0. I've made money with options, and I've lost it all with options. Be careful, go easy.�
1/1/2015
guest Someone once posted a better one than this...but I think this is up to date at least.
SolarCity Corp Analyst Ratings, Earnings, Dividends Insider Trades (NASDAQ:SCTY)
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1/1/2015
guest Following Anti-Solar Decision by Governor Sandoval's PUC, SolarCity to Cease Nevada Sales and Installations, Fight to Protect Customers and Employees (NASDAQ:SCTY)�
1/1/2015
guest Gov Brian Sandoval is a climate change denier.
Brian Sandavol is a climate change denier.�
1/1/2015
guest I can't even read this as it will probably make me too upset and it's Christmas time, so I'll save it for after the holidays.�
1/1/2015
guest How can Nevada legally impose these fees on people who already have Solar?
Lyndon's statement sounds like this should be an easy lawsuit to win. Could every person in Nevada with Solar Panels group together and form a class action lawsuit against the state?
Following Anti-Solar Decision by Governor Sandoval's PUC, SolarCity to Cease Nevada Sales... -- LAS VEGAS, Dec. 23, 2015 /PRNewswire/ --
I'll post this blog here to remind everyone why Solar City invested in Nevada. This should be an easy lawsuit for SolarCity to win. The same lawsuit has occurred in a few states, and the utilities lost in each case. If the new fees are forcing SolarCity to leave, every other Solar Panel company is likely to follow.
Would every employee who is fired due to this decision have grounds to sue Nevada after this decision is overturned?
SolarCity to Expand to Nevada | SolarCity�
1/1/2015
guest This is an interesting angle. I think it's more ideological that preserving the utility model is more important than the Solar itself...which is of course good for the monopoly.
Koch brothers defeat Reid on solar power - POLITICO
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1/1/2015
guest i think the actual lesson suggested by AudubonB was know what you're talking about before you say something. Clearly, your thoughts of warren buffet are not the same as mine. The truth from following the situation since buffet bought nv energy in 2013 is absolutely anti competitive with roof top solar from the start. I advise you to look into it if you are going to defend warren buffet, because your statement might come off as ignorant and uninformed by fact. One mans ad hominem is another mans straw man, etc... Pick your fallacy...
warren buffet knows exactly what is going on with nv energy(among the other utiltiies he owns across the west).
I'm not going to go into it again, but please read this thread in its entirety to understand the extent of Nv energy's nefarious actions that are clearly approved by the biggest owner warren buffet, just as Elon knows intimately what happens with Solarcity. Elon trusts completely Solarcity management, however, he is very much apart of all significant strategy decisions just a warren buffet is aware of the wildly significant decisions nv energy makes to restrict competition to its utiltiy revenue stream. This is not isolated to just nv energy, but all warren buffets utiltiies... Clear pattern of behavior of all his utilities.
Please refrain from suggested censoriship of others informed options on subject matter and individuals actions directly related to Solarcity as an investment.
thank you�
1/1/2015
guest Looking at the legal merits of doing retroactive rate changes, it clearly is unprecedented and highly likely to be overturned in a court of law.
my feeling is they(nv energy) doesnt expect it to hold up.
The key effect, the desired outcome by all of this is to slow down momentum of roof top solar competition in Nevada. Period. Delaying is the objective here. That is the strategy. They did it with the net metering cap. They did it during the intern net metering period, and they are doing it now with this most recent decision. Delay delay delay.�
1/1/2015
guest Latin America Moving Quickly On Renewable Energy | OilPrice.com
Tip of the hat to these Latin American countries that are making the transition to renewable energy look easy. They are saving money doing it. I would expect countries that move ahead like that to grow their economies at a faster rate. Low energy costs are key to enhancing productivity which is what really drives an economy forward.
Note that in the recent auction in Chile solar came in at $65/MWh while coal was at $85/MWh. And this does not even consider the health and medical costs of coal. If I remember this correctly some of the solar included storage.�
1/1/2015
guest Brian Sandavol was legal council for the Utility Shareholders of Nevada. His top advisors are NV Energy lobbyists.
Each of the PUCN commissioners were appointed, and then re-appointed to their posts by none other then one Brian Sandavol. Not elected, but hand picked and appointed. You know what that means? Brian Sandavol gave them their jobs, he hired them.
These same three individuals made the ruling on roof top solar yesterday.
And some out there want to think this was an impartial decision by an "independent body"?
lets get real here...
remember, they love electric cars because that adds new revenue stream to nv energy. They love utiltiy solar because they acquire cheaper whole sale(because of 30% ITC) while maintaining "renewable standards" goals; however they do not reduce retail rates to rate payers... Only roof top does that...
update:
maybe Brian Sandavol is affraid something will be found on a text message or two with his contacts at NV energy... It's funny, the same text message situation is happening in Arizona with a PUC commissioner there. Funny both individuals say roof top solar are "bullying" them. Let's see how this shakes out...
Sandoval's text messages to NV Energy should be made public, experts say - Thursday, Dec. 10, 2015 | 2 a.m. - Las Vegas Sun Mobile
update2:
NPR interview with Lyndon rive on Nevada PUC decision and Brian Sandavol's unprecedented pre PUC decision press release as well as text messages to nv energy over net metering decision.
Nevada Public Radio�
1/1/2015
guest revisted conversation on nv energy/buffet
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more revisited conversation on nv energy/buffet actions
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More
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More
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More�
1/1/2015
guest More
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more�
1/1/2015
guest Originally Posted by Foghat
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....
Foghat,
i like who grins when he fights. It is time for two things, to start grinning, and start fighting.�
1/1/2015
guest 
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That makes sense James... I have never seen any prospectus for the ABS. Given that they are all private placements, I assume the prospectus is private as well. I clearly remember S&P note while rating one of the issues. They only talked about the homeowners ability/willingness to pay and regulatory environment was very much listed as one of the risks. I will dig around maybe I can find that.
In any case, even if it wasn�t done in the previous deals, it�s always possible to structure the next round of deals in such a way there are adequate protections for the investors and that should put a lid on the rates. I am all for the firm/shareholders taking the brunt of defaults than tax-equity partners or asset-backed financiers. External financing is the life blood of this company. So long as the system of financing is not ruptured, we can endure any losses and move on. As other have pointed out, Nevada in itself is not a huge market (like CA) that we need to worry about in itself. The issue was repercussions to other things as NV sets precedence. As discussed, I am convinced now management will be able to find ways to contain the damage.
I think the next big potential trigger for a massive squeeze is an ABS pricing/placement announcement. I actually hope two deals happen back to back. One for MyPower and another for the usual lease/PPAs. If these deals come out at 4 to 4.5% coupons. Man, I can only imagine the frantic short covering, as that puts a massive hole in short thesis (that financing costs are higher than ROIs).
Here�s to a massive short squeeze shortly!!�
1/1/2015
guest Germany probably is one of the markets with the most incentives for alternative energy (aside from BEVs, and subsidies for BEVs are still being discussed). There's a reason why German's Sonnenbatterie (now branded Sonnen) was a pioneer in this sector. Sonnen is expanding into the U.S. and other markets...
Germanys Top Residential Battery Company Ramps Up Its US Strategy to Rival Tesla | Greentech Media
Coming back to SCTY, these business models are more of consumer finance operation with a solar installation/service arm attached imho. Just another recent example on the low barriers to entry...
Sungevity Raises Giant $600M Fund From Apollo to Finance Residential Solar | Greentech Media
This looks all about who is able to raise the most money at low rates to somehow finance operations / installations and then hope for a decent payback/ROI within 10-20 years.
I don't see SCTY and rivals like RUN, VSLR or Sungevity primarily as solar companies, but rather sector-specific consumer banks / leasing operations - and therein lies a lot of risk for investors (lots of complex, long-term models and assumptions).
Like traditional consumer banking/lending, the sector has tight regulation attached which can greatly impact these long-term model (the discussed Nevada decision is just the latest example, more to follow...).�
1/1/2015
guest I hope people appreciate the detail in the picture I posted just above.
The rebate rate to short SCTY reached 90%�
1/1/2015
guest Isn't trading from now until year end typically low volume? If so, I think that will also hurt shorts as it will be very painful if they try to cover with low volume.�
1/1/2015
guest That is amazing, I love hearing Lyndon speak I got goosebumps hearing his emotion about fighting Nevada's terrible decision here with everything they have. And I'm glad a separate solar company is pushing to get the text messages released between Sandoval and NV Energy this whole thing smells dirty and SolarCity will come out clean as a whistle�
1/1/2015
guest I've been trying to figure out exactly this means but I can't wrap my head around the significance. Can you explain to me simply what this means? Is it equivalent to a 90% dividend on an annualized basis the lender of the shares earns?
Thanks in advance.�
1/1/2015
guest It is the fee short sellers must pay to hold shares of solar city short. It varies with the amount of shares available to short but if it stays at this rate(which it won't) it means if you had a million dollars of SolarCity shares that you were selling short it would cost you $900,000 in fees to hold it for the Year�
1/1/2015
guest This €1 Billion Power Plant May Never Be Switched on - Bloomberg Business
Generator glut, anyone?�
1/1/2015
guest Call up Leilani. Let's get the texts projected by the Racing Extinction Model S.
(if we can't find the texts, I'll make some up)�
1/1/2015
guest The video in your link was very well-done. Nothing compelling in terms of information, but still worth a watch. I like the way they mentioned electric cars eventually knocking-out oil�
1/1/2015
guest Should we start a "Cost to Borrow SolarCity Shares for Shorting Hits 90%" thread specifically for shorts commentary? That might be fun.
Reading the Seeking Alpha and other nonsense in the Tesla thread is a good time.�
1/1/2015
guest Nevada Bureau of Consumer Protection files for immediate stay on PUCN decision.
Strikes right back at Sandavol and gang...
Nevada agency seeks to block new rates for rooftop-solar customers | Las Vegas Review-Journal
"Further, the Commission's Order does not recognize or acknowledge there could be significant value of a robust roof-top solar program that could negate the need for a $900 million investment (in a) natural gas plant in the near future; a plant that would likely only be needed for a few months out of the year," the filing says.�
1/1/2015
guest Merry Christmas all! I hope saint nick brings us all a short squeeze of epic proportions.�
1/1/2015
guest Happy Holidays, my very best to all and all your families.�
1/1/2015
guest Welcoming the Bright Daystar this Christmas. Wishing you light and energy all year through!�
1/1/2015
guest I wish my broker allowed me to lend my shares.�
1/1/2015
guest Happy Holidays Everyone!!
I have to admit that the rebate rates on christmas eve have been rather volatile, moving between 90% to 41%. So I am not entirely sure if it is due to short overcrowding or just some holiday season anomaly.
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I also noticed strong correlation between recently exchange reported short interest data and MarkIt's daily data. As per MarkIt, short interest went down pretty much every day this week. Again adding evidence to theory that shorts are covering into weakness (NV ruling). That aligns well with the rebate rates in the last column of the above screenshot.�
1/1/2015
guest Layoffs already started in Nevada, merry Christmas solar installers, from the puc.
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Layoffs have already started in Nevada, merry Christmas solar workers, compliments of your local PUC
SolarCity employees laid off after PUC decision - Story�
1/1/2015
guest Merry Christmas all.
http://napavalleyregister.com/news/local/napa-sanitation-plant-to-store-power-in-tesla-batteries/article_acd83a48-cfa2-5946-921c-8974ce3bff16.html
�
1/1/2015
guest
SunEdison, SolarCity Robbed of Urgency by ITC Relief, Says Axiom; SUNE Surges - Tech Trader Daily - Barrons.com
Youre absolutely right SBenson. Here is another example of short covering trying hard to use media to create a short exit window. I have to say this is one of the most pathetic one at that. Solarcity will not suffer any demand from the passage of the ITC because this is not a selling point to 95% of their customers. Actually, the demand go up due to California net metering changes before the end of 2016(including New York and others). Yes, grandfathering better net metering rates is much more of an accelerant then ITC which is something rolled into the Solarcity cost/watt of leases/ppas/solar loans... Again, this gordon johnson guy is going to fry if he doesn't get out of his short, and I think he knows that and is doing some standard media spin tactics to do it.�
1/1/2015
guest I found the handy analyst roundup link, the Axiom Capital note might have contributed to the 12/24 rebate pricing weirdness.
SolarCity Corporation (SCTY) - Stock Predictions Price Targets�
1/1/2015
guest Hello all! I'm considering adding SCTY to my long-term portfolio, and looking at the SEC 10-Q (30 Oct 2015) in order to understand the company's financials: http://investors.solarcity.com/sec.cfm?view=all
If I am reading this correctly, Solar City expended roughly 1.7 Billion USD in the first 9 months of 2015. These expenditures funded operations, about 500M USD, and construction of new solar arrays 1.2B USD.
The company raised approximately 750M USD from a line item described as: "Proceeds from investment by noncontrolling interests and redeemable noncontrolling interests in subsidiaries" Question: Is this cash raised through some kind of debt obligation? Like bonds sold to some private entity?
The other big line item for cash raised is about 780M USD from "long term debt". How is this different from the 750M mentioned above?
About 400M USD in raised $ comes from Solar Bonds and asset backed notes, which I understand. The SolarCity website has a section where I could actually buy bonds directly from them.
As I understand it, the basic business model for SolarCity is to spend a lot of $ up front deploying Leased Solar Arrays to homes and businesses, and realize cash flows over the 20 year lease period[paying for the cost of the hardware and/or the electricity the panels generate]. This seems to be similar to Internet services companies (like a health insurance brokerage), which spend a lot of money upfront in the hopes of realizing subscription revenue that will eventually greatly exceed the upfront cost.
I guess one could attempt to model the expected cash flows and attempt to see when SolarCity begins to take in more $ than they expend in expansion. In the first 3Q of this year they took in about 285M USD in revenue. I am trying to figure out what this year's massive capital investment will yield next year.�
1/1/2015
guest I believe the noncontroling interest line refers to the contribution of tax equity partners. They provide project equity in exchange for the Investment Tax Credits, accelerated depreciation and a portion of customer payments.
Regarding your second question, tax equity and debt are two separate sources of funding.
You will want to read the recent Analyst Day presentation deck to understand management's strategy and the sort of metrics they use to track progress along that strategic path. It is a complex business model, so it will take a fair amount of time to digest it all. In this forum we have debated just about every conceivable angle on this business. So we'll be happy to engage any questions you may have.�
1/1/2015
guest Events & Presentations - SolarCity
Find the Analyst Day on this page under archived events, December 15, 2015.�
1/1/2015
guest Thanks. Page 19, which discusses the Tax Equity partnerships, pointed me in the right direction. I did not understand that the "partnership" referred to entities owned jointly by SolarCity and financial companies providing the capital for the purpose of optimizing the distribution of tax benefits and $ flow.
The example of the economics of a hypothetical deal are helpful, but I wonder about the specifics of the actual partnership or LLC agreements with the other companies like Goldman and Google.
Broadly speaking, what are the risks of such arrangements for SolarCity? The continuance of the ITC was one such risk, but I saw on the news it was extended. Depreciation and cash flow are the other 2 factors. Depreciation would seem to be a fairly constant item, absent book cooking. Cash flow is likely only a problem if a lot of hardware goes bad or customers don't pay their monthly bills (as in the sub-prime crisis), though SolarCity claims to have generally creditworthy customers.
TSLA is fairly straightforward to understand in comparison to SCTY
I'm reading through this entire thread... I'm only on page 16 or so�
1/1/2015
guest Couldn't keep up with this thread the last several days with the Holidays going on, but I've had a chance to catch up and wanted to say thanks for all the links. Seems the battles are starting to heat up with this transition.
jhm - I really like your idea about keeping up with the oil/utility industry and digging into some of those articles on oilprice.com. Not sure if I have the time, but I'll start checking some of them out as well.�
1/1/2015
guest Thanks, with investments in Tesla, SolarCity and other solar compqnies, I find it important to understand the overall energy transition that is in play. I can't help be think that much of the extreme polarization in these stocks has mostly to do with the blindness of incumbent energy sector. The denial and vehement hatred of renewables betrays an insecure and increasingly threatened world view. The whole energy sector is having its Kodak moment, and psychological defense mechanisms are on high alert. As long as energy investors are in denial, the market will systematically over value investments in fossil fuels and its infrastrures while under valuing renewables and Tesla. I think this massive denial is what gives renewable investors a persistent advantage.�
1/1/2015
guest Not news to any regulars on this thread, but another article laying out the stranded asset case: Why Big Oil Should Kill Itself by Anatole Kaletsky - Project Syndicate
Renewable energy is a big part of these predictions, but the article also points out how shale producers force OPECs hand: OPEC can limit supply to drive prices upwards (and send more business to shale producers) or they can keep production steady, which depresses prices and drains reserves.
So now that oil is subject to actual competitive forces, we should just use the cheapest oil we can get. Oil companies in turn should take this time to gracefully exit from their incredibly expensive quests for new and harder-to-develop reserves, since there's little reason it will make economic sense to produce from those sources in the absence of a cartel to protect prices.�
1/1/2015
guest This is a pretty good piece. However, the author is still of the mind that renewables are not yet at price parity with fossil fuels. He sees this as a future development when at the margins it has already happened. It is certainly not necessary for renewables to be cheaper than fossils in every application. If renewables are able to address just 5% of the market for fossil fuels, this is sufficient to create a glut until 5% market share is taken from fossils.
But even at a gross level, solar already is cheaper than oil. Consider a solar PPA at $40/MWh. There are 5.8 MMBTU per barrel crude oil, and an oil-fired generator uses 10.33 MMBTU to make 1 MWh. Thus, ignoring the cost of refining and shipping oil to make it useful, a $40/MWh PPA is at parity with crude at $22.41/bbl. Or if one wants to back out 30% ITC (as if any energy prices are free of political influences anywhete), then we have solar at $57/MWh is at parity with $32.08/bbl. Either way crude is trading at a premium to solar per unit of electricity.
I believe that OPEC understands that oil cannot trade at too high of a premium to solar or any other energy source. It has often been said that solar does not really compete with oil because not much oil is used for electricity production. But in 2012, 5% of electricity was petroleum-based, about 1.13 TWh. This amounts to about 5.5 mb/d of demand for crude, or about 6% of total crude consumption. Because solar power can be obtained local just about anywhere, solar competes with the 5.5 mb/d oil demand in a way that is inaccessible to coal or natural gas, though LNG can make in roads too. Obviously, if oil is priced at too much of a premium to solar, it will lose market share. Moreover, with batteries solar could take 5 mb/d or more. Now it takes about 145 GW of solar to offset 1 mb/d of oil. So while OPEC thinks about putting a cap on production to cut output 1 mb/d, they also have to consider the impact of higher oil prices pushing 145 GW of solar into oil-fired generation markets. So with $32/bbl at parity with $57/MWh, oil above $64 allows utility scale solar in this market to breakeven in about 7 years. Now this is not even considering the cost of refining or shipping, so all-in savings can accumulate even faster. These other costs continue to make solar energy cheaper than oil generation when oil is under $32/bbl, just look at Hawaii. Even so, the uptake of solar would be much faster with oil over $60. So the folly of OPEC pushing the price back up to $60 is that in just two years at this price solar could wipe out over 1 mb/d in demand. As it stands, the world will install about 70 GW solar in 2016, growing at just 30%, but if oil were still floating around $90, solar would go into hyper growth, say 50% per year, 115 GW in 2016 and 170 GW in 2017. OPEC knows they can't afford to prime that powder keg.�
1/1/2015
guest Very insightful post about he tricky position oil producers & oil producing countries are in. Thanks.
If companies like Shell, BP, Exxon etc do not act now and turn into energy companies instead of oil companies, they might get in big trouble soon. Best option for them could actually be to become energy storage & energy producers by investing in solar cell & battery cell production.
Once investors start moving away from them in bigger number than they already do now, they will no longer have the funds & credit to invest in large solar and energy storage, and their current customers (the utilities, car companies and consumers) will no longer need them and do that themselves in growing numbers.�
1/1/2015
guest I think that is a really tough transition for oil companies. They may have capital for now, but lack competitive competency in alternative energy. So their investors are not likely to go along with this. If you're an oil-focused investor in Exxon and they start delving deeply into solar and batteries, you think management is waiting money on terrible investment, so you're not happy. If you are a shareholder in Exxon who happens to see the potential in batteries and solar, then you're already invested in competent pure plays. NRG ran into this problem with splitting it's investors. So it is spinning off the renewable business into a separate company. The other sort of option is for an oil company to focus on returning capital to investors as the oil market shrinks. The big problem for investors is wasting capital on new exploration and development leading to an oversupply of the market. So consider the $650B that oil companies are investing in expanding reserves. If these companies simply return that to shareholder as stick repurchase and dividends, the glut could be minimized, the price of oil stabilized, and oil investors satisfied with their return on investment. Note also that vertically integrated oil majors can do quite well on other parts of the supply chain, refining, distribution and retail.�
1/1/2015
guest Importing industry.
How does a state like Nevada with no inherent energy industry push renewables out? Protecting entrenched utility companies is an obvious enough incentive, but how do you put off importing millions of dollars in tax revenue?
It's obvious enough why Pennsylvania's legislators protect the natural gas industry, we're awash in methane and lots of folks are employed by frackers so we're somewhat willing to be influenced against our own interest. But the economic impact for a state like Nevada must be astronomically negative.
Are there any good articles out there calculating the financial impact to a "non-energy" state's bottom line? What kind of return can NY expect if they turn western NY into the solar hub of the east coast?�
1/1/2015
guest Excerpted from Governor's Sandoval's Statement
I am particularly hopeful that we will hear more from the Nevada Bureau of Consumer Protection and the Nevada Consumer Advocate. The Nevada Consumer Advocate is an independent office created by law with the statutory charge to protect the interests of all Nevada consumers. I, like other Nevada ratepayers, look forward to hearing more from the Consumer Advocate and his position on the PUC's final order.
I await the PUC's final decision and remain committed to working with the renewable energy industry and Consumer Advocate moving forward,� said Governor Brian Sandoval.
For myself, I do not understand this decision being "retroactive". I cannot imagine a legal standing for it being imposed retroactively.�
1/1/2015
guest Governor Sandoval's response to the Solar Industry (Lyndon Rive)
Sandoval Issues Statement Regarding Solar Industry Critique of Solar Industry Ruling
�
1/1/2015
guest Short Situation Update:
As of this morning, ETrade does seem to have some shares available for me to borrow whereas there were absolutely no shares to borrow last week. I am still getting a "hard to borrow" warning with an "Estimated Borrow Rate" of 35%. It does appear that the shorties are covering!
OptionsHouse still gives me the following error message when I attempt to short: "This stock is not available to borrow. Short sales cannot be accepted."�
1/1/2015
guest Scientists have invented a new glass coating for omnidirectional solar panels - ScienceAlert
Glass coating lets solar panels absorb light from multiple angles, clean themselves : TreeHugger
This is pretty nifty, a way to boost cell efficiency by 5.2% to 27.7%. It sounds like this could boost SolarCity's 22% efficiency panels to 27%. And this could be particularly useful for rooftop installation were the roof angles are less than ideal. Hopefully, a glass coating would not be too expensive to produce or apply.
To put this into perspective, SunPower and other panels makers are striving to add 0.5% each year. So this coating could be a 10-year leap forward in technology. This is about a 23% gain in panel output.�
1/1/2015
guest Also note where this coating research has come from, Saudi Arabia. The Saudis would like to become a solar power exporter in the region. Here's the twist...
The Saudis consume about 1 mb/d oil generating electricity. They need need to install about 135 GW of solar to free up this domestic consumption of oil. So what happens to that oil? It will likely get exported.
Will the Saudis build up their solar export business, it has the potential to increase its oil exports by upto 1 mb/d, about 10% of all the oil it produces.
If this coating is a go for production, the economics get even more compelling for the Saudis. Could it be that this solar export has factored into their change in oil policy. Before they become a serious solar exporter, they've got to dump another 1 mb/d on the oil export market just by adding solar domestically.
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Dewa sets record-low target for third phase of Mohammed bin Rashid Al Maktoum Solar Park | The National
This article also indicates that Acwa, a Saudi solar installer is contemplating using coatings to help with the problem of rooftop solar on high rise buildings. I wonder if this means that they are considering vetically mounted panels.�
1/1/2015
guest Yes, indeed. Short covering is happening through the weakness.
The rebate rate history in the last column (Max Rates) is the best indicator of short trajectory.�
1/1/2015
guest Greentech Media: Headlines
A Schism in advocacy?�
1/1/2015
guest Nevadas Solar Flare - WSJ
�
1/1/2015
guest Until I see one actual step toward solar I'm not buying anything the Saudi royal family says regarding solar. They've announced tons of massive "plans" for solar in the kingdom only to delay them for 5-10 years for random reasons.
It makes all the economic sense in the world to go solar crazy in that neighborhood and still they do nothing. I think it's infinitely more likely we see the royal family stall until they're overthrown than for them to somehow form a logical sustainable energy policy.
If we had a decent plan of our own we'd frack like mad for 6 years in a subsidized fashion and let the angry mob handle these totalitarian "governments". Frack like crazy and tax like crazy with renewables getting the vast majority of the subsidy. You'd end up with no OPEC and a halfway energy independent US that was on it's way to sustainability.�
1/1/2015
guest 
http://www.eia.gov/todayinenergy/detail.cfm?id=24152�
1/1/2015
guest That news story is full of hate. WSJ clearly wants the NV issue to become an example that others would follow. We know for a very long time that WSJ has been ultra anti Tesla and SolarCity. They are trying to make the most out of the NV situation.�
1/1/2015
guest I was looking everywhere for some material news to explain this morning's move and didn't find any. So bought some Feb calls, looks like at the very bottom so far.�
1/1/2015
guest I think it's more accurate to say that WSJ is a very right-wing publication with an obvious anti-renewable / anti-green agenda that is not specific to Tesla / SC. I say this as a daily reader and subscriber to the print edition.�
1/1/2015
guest Does anyone have a link to spec sheets or reviews of recent vintage Silevo panels? I'm curious if they've improved on the technology since the buyout by Solar City.
Thanks!�
1/1/2015
guest I thought today's move was in response to yesterday evening's WSJ piece. The one that doggusfluffy posted. Google search "Nevada�s Solar Flare" to read the full story while avoiding the pay wall.�
1/1/2015
guest Yes thank you, that's venomous enough. I did say "material news" not "opinion piece" though
So to recap the current situation, the halt that was petitioned for by Consumer Protection Agency didn't do anything (yet?), and we don't have any timelines on the litigation that would resolve the conflict over retroactive changes. Anything I'm missing?�
1/1/2015
guest Merchants of Doubt
I just finished "Merchants of Doubt" by Naomi Oreskes & Erik M. Conway. The cover describes "How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming". Throughout the book it proves how the issues of Acid Rain, the Ozone Hole, Secondhand Smoke, and Climate Change were misrepresented by conservative think tanks such as the George C. Marshall institute. Interestingly, the "Wall Street Journal" and "Investor's Business Daily" played a central roles in disseminating misleading information and attacking peer-reviewed scientific articles.
When publishing articles about climate change, and/or clean energy neither the Wall Street Journal nor Investor's Business Daily should be trusted.
I highly recommend reading "Merchants of Doubts" and verifying the references. Every American should.�
1/1/2015
guest Sticking with the pattern, the rebate rate went further lower to 32.15% today. So shorts are continuing to cover into weakness.
This persistent weakness is frustrating though. I wonder what will arrest it.
ABS, ABS, where are you...�
1/1/2015
guest Reid Statement on Public Utilities Commission Decision on Rooftop Solar
December 23, 2015 | Press Releases
Las Vegas, NV � Nevada Senator Harry Reid sent the following statement after today�s Public Utilities Commission (PUC) Decision on rooftop solar:
�Everyone knows how I feel about solar, including rooftop solar. This decision by the Public Utilities Commission is a setback in our efforts to make Nevada the solar capital of the country. I also question the legality of the PUC�s decision to interfere with existing rooftop solar agreements. Nevadans, who already have rooftop solar, have made a financial commitment to do so. No level of government, including the Public Utilities Commission, should be able to retroactively make it more difficult for those Nevadans to pay their power bills.��
1/1/2015
guest Regulators urged to delay new rates for solar customers - Las Vegas Sun News
Arizona regulators seek compromise for solar installations
I guess we're just waiting on revised guidance from SolarCity with 5 years of ITC now...any day now...right? Get back to that explosive growth again? :wink:�
1/1/2015
guest Solar City lures spin off complex to South Buffalo | wivb.com
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Why SolarCity Corp (SCTY) Bears Shouldn't Worry - Schaeffer's Investment Research
Put/call parity indicates more demand for puts than calls. Bears are trying to short with options.
Watch implied volatility when buying options. Conditionas are ripe for put IV to exceed call IV, in violation of put call parity. Longs can exploit this by buying call and/or selling puts in lieu of holding shares. Bears are paying a premium to attract counterparties.�
1/1/2015
guest Option prices are definitely coming back to Earth. Good opportunity for my homies and family to get in on the game. Will buy on a dip next week(if there's no revised guidance by then!)�
1/1/2015
guest
Thanks for sharing. Reid's questioning of the legality of PUC actions is very encouraging.�
1/1/2015
guest Kind of interesting...indirectly related to SolarCity.
http://www.reuters.com/article/us-china-pollution-idUSKBN0UB1KB20151229
Cowen updated SCTY
http://www.streetinsider.com/Analyst+Comments/ITC+Impact+on+the+Solar+Industry+in+a+Nutshell+-+Cowen+(SUNE)+(FSLR)+(CSIQ)+(SCTY)/11181182.html
�
1/1/2015
guest This is an interesting thought. SolarCity may have avoided going into certain marginal states like Georgia out of concern for decline during ITC stepdown. This is no longer an issue, so we may see SolarCity move into a few new states this year.
It would be nice to hear this from Lyndon.�
1/1/2015
guest Looks like a MACD reset, with support confirmed around $50, not to mention an almost perfect inverse Head and Shoulders.�
1/1/2015
guest Short-Term TSLA Price Movements - 2015 - Page 1847
My latest thoughts on OPECs scenario for extending oil dependency.�
1/1/2015
guest I don't believe the organization once known as OPEC exists anymore.
ETA on the Saudi royal family being overthrown?�
1/1/2015
guest Short interest stood at 48.7% of the float as of Dec 26th. So looks to me like a decent group of shorts covered just after the ITC announcement, but there's still half the float out there. If Chanos is to be believed, folks of his mindset may even add to their short position in the first week of the year as shares become available.
This slightly lower short total will still trigger a massive squeeze at some point, no?�
1/1/2015
guest Swiss Oil Trader Vitol Biggest Buyer So Far for U.S. Shale Crude - Bloomberg Business
�
1/1/2015
guest Will the Politics of �Net Energy Metering� drive SCTY�s Price Action?
California
On Tuesday December 15th California CPUC proposed a future net metering regime will preserving retail payments for residential rooftop PV.
Tuesday�s proposed decision, however, specifically declines to impose any demand charges, grid access charges, installed capacity fees, standby fees, or similar fixed charges on solar power residential customers. while the commission continues to evaluate the need for them. That�s a big victory for the solar industry, which has fought hard for keeping the retail rate.
Utilities reacted negatively to the CPUC proposal, which is open for public comments until Jan. 7, and could be voted on by the full commission as early as Jan. 28, 2016.
http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M156/K443/156443378.PDF
Arizona
The state of Arizona approved a monthly fee on rooftop solar customers in 2013. In doing so became one of the first states to challenge net metering. This fee reduces the savings which result from customer�s investing in clean energy technology.
A clean energy watchdog group, �Checks and Balances� has began a systematic inquiry into the Arizona Corporate Commission (the Public Utilities Commission of the State of Arizona). They are seeking to expose bias against the solar industry. The group launched an extensive investigation into Commissioner�s Bob Stump�s phone records, alleging his involvement in �dark money electoral schemes� and inappropriate ties with Arizona Public Service (APS), the largest utility in the state. A judge is currently reviewing thousands of text messages retrieved from Bob Stump�s cell phone.
In addition, a conflict-of-interest lawsuit has led to the resignation of Susan Bitter Smith, chairwoman of the Arizona Corporate Commission.
SolarCity disclosed earlier this month that it is a financial backer of the Checks and Balances Project.
Nevada
Sunrun is currently suing Nevada Governor Brian Sandoval for failing to comply with a public-records request showing communication between his office, utility regulators and NV Energy. The solar company claims that Sandoval�s close ties with the utility industry led to the recent repeal of retail-rate net metering in the state.
The Politics of Net-Metering
With over 190 countries uniting together at COP21 Paris to address climate change, the extension of the Investment Tax Credit, the presidential election in full swing, and over 40 states considering �net metering� policy changes, the politics of utility regulation should drive SCTY price action. The position of California�s CPUC looks to be squarely in favor of solar power and distributed generation. My hope is that it raises the bar for the rest of the country to follow.
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1/1/2015
guest This bill won't see the light of day in a Republican Congress, but it's a nice read anyway:
Sanders Introduces Major Clean Energy Jobs Package - Senator Bernie Sanders of Vermont�
1/1/2015
guest Nevada net metering service charge hike announced | Las Vegas Review-Journal
Some good info in this article the new fees have been set they're not as bad as I thought right out of the gate the monthly fee moves up to around $17 from its current $12 but then continues to ratchet up around $35 in the coming years.�
1/1/2015
guest Did you notice that in addition to the $35/month fixed charge, the credit drops to 2.6cents in 2020?
The issue is SolarCity's contracts are for 20 years. Over each of the 20years the contract should make sense for the consumer. NV Energy pricing in 2020, which is mere 4 years away is disastrous. The consumers will have to decide between defaulting on SolarCity vs paying roughly 1.5X to 2X for electricity (than the guy next door who doesn't have solar).
Of course, even people who bought their systems outright will be in the same predicament. If they paid in cash, their systems now have much longer payback periods than initially assumed, to a point where the system may not even pay for itself over it's life. If it's financed the consumer needs to pay the bank as usual in addition to paying a much higher electricity bill to NV energy than assumed earlier.
This will be a phenomenal deterrent for new consumers everywhere. If grid credits are not *guaranteed* over the lifetime of the system, then there is no guarantee that a solar system makes economic sense, because you really don't know what the future cashflow is. It doesn't matter what the procurement model is - PPAs, leases, financed or fully paid in cash. This is a huge setback for consumer side solar.
Once again, the magnitude of losses in NV itself are minuscular. NV in itself doesn't matter. The real issue is that this sets precedence and brings in a serious question for all consumers everywhere.
I hope I am wrong. I hope someone puts this in a better perspective.�
1/1/2015
guest Well, most solar panel owners are on average richer. So why not do what rich people do? Clog up the legal system with hundreds of thousands of lawsuit about the same thing.
Do what scientologists do.�
1/1/2015
guest Anything that affects solar users universally should not be a concern, that just builds up demand. Anything affecting only smaller more easily corrupted states should not be a concern. These little battles are going to go on constantly until entrenched fossil fuel interests have mostly divested.
And worry about anything past a couple years on the horizon is pointless, changes are happening MONTHLY.�
1/1/2015
guest 
California's "proposed" Net Energy Metering will be voted on January 28th. Since California's solar market is at least ten times greater than Nevada's it will have a much greater impact. The proposal rejected any demand charges, grid access charges, installed capacity charges, standby fees, or similar fixed charges on Net Metering residential customers while the Commission is works on how, if at all, any such fees should be developed for residential customers.
While the CPUC is still considering input from the IOUs (Investor Owned Utilities), TASC (The Alliance for Solar Choice), SEIA (Solar Energy Industry Association), the Sierra Club and others, it is being reported with a positive spin by GTM Research and other pro solar media sources.
California is the 800 pound gorilla in the room.�
1/1/2015
guest The demand charge would still be crippling, and the fact that NV Energy uses their crony math to make everyone stay on the grid or pay Huget exit fees would be a problem. That being said , in 4 years net metering wool not be as large of an issue imo. With battery storage scaling up so quick we will in short time enter an Era where a power wall brings most solar homes to near 100 percent self consumption�
1/1/2015
guest Benson, I don't quite get your impulse to jump right to a default scenario with something like this.
Suppose you bought a Tesla with a loan thinking that it would save you money only to discover that the price of gasoline dropped after your purchase. Would you default on your loan?
Suppose you have SolarCity install a system on your home thinking that you would save money under the agreed upon terms of your PPA. Then your utility jacks up your rate. Would you default on your lease?
It makes no sense to me. We have all made financial decisions thinking that it would save us money, but then it does not work out that way. This happens. We experience frustration, even regret, but defaulting on our financial obligations and ruining our credit only makes matters worse. Even when home owners find the value of their home seriously below the value of their loan, most just keep paying the mortgage. Generally people only default when they are under serious financial distress such as losing a job or a major illness. People do not default simply because they regret losing money.
If I were a SolarCity customer in Nevada today, I would be pissed at NV Energy and the PUC. Indeed, I would feel very good about SolarCity because they are keeping true to their promise, while NV Energy is really trying to screw me. So what do I do? I start looking to SolarCity for help. I would want to see just how quickly they can install a Powerwall. I don't give a shirt how much it cost. I'm just angry enough with NV Energy to go off grid. I figure for $35/month I can get a Powerwall and a little backup generator and tell NV Energy to kiss my ass.
Sorry about the language. Just trying to channel what a true Nevadan would say. From what I hear they don't like getting screwed by the government or cronies.�
1/1/2015
guest The only problem with that is your not allowed to go off grid if your in Nevada. The casinos tried and they would be charged like 10 years worth of electricity to prevent other rate payers bills from going up. .. might be different for residential users but I doubt it. NV Energy seems to be run like the mafia�
1/1/2015
guest With the huge disconnect from the grid fee, me?, I'd just pick up and move out of Nevada, I'd be so pissed.
BTW, does anyone know what the disconnect from grid fee is for residential in Nevada?? I wonder if a person built a new house and never hooked up, they wouldn't be able to charge now would they.�
1/1/2015
guest In one article I read where the casinos were protesting the fee they said to put it into context, NV Energy made more money last year then the entire Vegas strip. Crazy they claim this cost shift bs�
1/1/2015
guest From what I gather, even new houses MUST be connected. It's insane fringe nonsense and won't last. If it does last, no one will go solar in NV and the demand will simply build until there is political momentum for reversal.
Also, there are more people within a 5 mile radius of where I sit in Philadelphia than live in the entire state of Nevada. Not a soul in Philadelphia or Southeastern PA has even really been approached yet about solar in any real fashion. We just got a great new governor who is a lock for an 8 years.....�
1/1/2015
guest I can't find anything to substantiate the idea that there is an exit fee for residential rate payers. The issues with large industrial rate payers is at a totally different scale. Both situation are outrageous, a total contradiction to any sort of competitive market place or economic liberty.
So NV Energy is making lost of political enemies. At this point the solvency of the company comes down to political protection. State legislators need to step in and change laws to reassert basic market principles. If the state government fails to rectify this situation it will become economic blight to the whole state.
Consider Switch. They are building out a large facility next to the Gigafactory in TRIC. Switch, Tesla and companies like them are a huge part of what is growing the state economy. Making Switch pay a $27M exit fee is outrageous. If Switch or Tesla were deciding on a new facility in Nevada today, how would they view the prospect of having to "partner" with NV Energy? I can't believe it would be favorable. At this point as a Tesla investor, I don't want Tesla to build out anymore capacity in Nevada than they absolutely must, until this gets sorted out. Tesla, for its part, should have the right not to do business with NV Energy and to trade power with Switch and any other business within TRIC. If this can get carved out, then TRIC will grow like crazy and the Nevada economy will blossom. But without it, Nevada will find it increasingly hard to attract the likes of Tesla and Switch.
So politicians who care about economic growth seriously need to break down the monopoly powers that NV Energy is exploiting. NV Energy is an economic parasite.�
1/1/2015
guest Well, what can I say? Nevada - so it's a tossup.
And the house always wins. But - which house?
Ride the painted pony, let the spinning wheel turn. :tongue:�
1/1/2015
guest One more thing, it's been said that Warren Buffet simply likes to invest in well run businesses. Any company that has over 7% of its customer base (by revenue) willing to pay hundreds of dollars in exit fees is pretty much the epitome of a business that is not well run. If Mr. Buffet had any integrity left as an investor, he would dump NV Energy for the basket case of a business that it is. At this point I have lost all respect for Buffet as an investor. He is just a two bit crony capitalist, nothing more.�
1/1/2015
guest Agreed.�
1/1/2015
guest Like Night And Day: How Two States' Utilities Approach Solar : NPR
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1/1/2015
guest Nice, but I would never trust Georgia Power to put solar on my roof. They only got into this after the state legislature changed the law to allow solar leasing and PPAs in the state. Up until that time they were totally about opposing solar in the state. They are only in the rooftop business to try to preempt loss of business to solar financers. That, of course, is a rational, competitive response, but I have a hard time believing that they will not simply entrap solar customers in their monopoly. What I want is real competition that forces utilities to offer market rates for power.
I sure hope SolarCity comes to Georgia soon.�
1/1/2015
guest +1. He went from an icon in my mind to trash as I have followed the NV energy debacle. That might be harsh and I don't know how hands on he is but he also owns the only bank that does not let customers use their bathrooms.... trashy�
1/1/2015
guest The future looks bright for solar power in India
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1/1/2015
guest It's nice that the are looking at SolarCity's business model. No doubt Modi's visit with Musk gave the Indian President some exposure to how SolarCity works. Basically, if the Indian government sets up the right set of policies, SolarCity and many other solar lease companies could take off in India.
India want to grow solar from 10%, or 100GW in 2022, to 25% in 2030. I think this also includes growing all generation by close to 10% annually. So solar may need to be about 500 GW in 2030 to hit 25%. So the grow rate assumed here for solar is only about 22.3% pa. Why I point this out is because the SolarCity model has demonstrated that it can grow at a much faster rate so long as policy is supportive. Certainly 50% growth is plausible. So if solar leasing could hit it's stride by 2022 and grow 40% thereafter, then solar could hit 1.5 TW by 2030 providing near universal access to electricity in the country. Imagine SolarCity driving the cost down below $1/W for rooftop solar. So we are still looking at an investment over $1T, but this would be at substantially less cost than building out expensive grids to serve remote populations. The economic stimulus for the whole country would be absolutely enormous.
FWIW, I've started dreaming about what it would take for the whole world to go 50% solar by 2030. That would be about 8TW. Starting with 233GW last year to get to 8 TW in 2030 requires a mere 26.6% annual growth rate. Certainly panel producers and other solar component producers can scale at 30% per year. So this is doable on the manufacturing side. Solar leasing can double annually if conditions are right. So the main challenge globally is suataining financing and policy. So if Indian leadership can get the policy right, this can be done. India will need 1.5 to 2 TW of solar and about 2 to 3 TWh of batteries. In 2030, India is likely to be the most populous country on the planet.�
1/1/2015
guest NV Power has a great racket: "You are buying less product than I anticipated, so therefore I must charge you more."
For customer disconnect, according to the rules on the NV Energy website (Southern Nevada - Rules) they require 5 days notice. If you have time remaining on a service agreement contract, they will also levy "minimum charges" for the remainder of the contract period. It sounds like most residential customers would only have a service agreement contract in the first place if they had to build a line extension or other facilities to hook them up.
Better hurry up and close this loophole Nevada!!! Nevada PUC, I think you should approve an exit fee equal to all the profits you would have obtained from that customer and all subsequent customers at that address. Sounds like a good use of monopoly power to me!�
1/1/2015
guest Great! Thanks for digging this up. It does seem pretty minimimal. If you have a contract with the utility you've got to honor that contract. Otherwise, not bad.�
1/1/2015
guest Better Solar Stock: Enphase Energy or SolarEdge Technologies? (ENPH, SEDG)
For those following SolarEdge or Enphase, I like this comparison. Author claims companies like SolarCity could start producing their own optimizers. I think there's a good chance that SolarCity would simply license the optimizer tech from SolarEdge or house a production line in Riverbend. These would be low capital ways for SolarEdge to grow.
BTW SolarCity uses SolarEdge optimizers with ABB string inverters. I don't think that SolarEdge has the fab capacity to supply SolarCity. That's a damn good growth op.�
1/1/2015
guest Of course Buffett is a crony capitalist. He plays politicians (and the public, with his folksy image) like the violin.�
1/1/2015
guest Does he every do commentary on tactical issues like this? If so, I'd love to see them. While I know in my heart he plays the politics and loopholes just as any other large or other capitalist, I'd like to think of him as playing by the rules and wishes the rules were shifting more in favor of the less capable (maybe not the best choice of words) investors/business savvy.�
1/1/2015
guest I am long TSLA, SCTY, and SEDG. Solar power combined with batteries and intelligent controllers/software dovetail into the perfect solution for commercial "Demand Management" and residential "Time-of-Use" rates. Interestingly, California's "Proposed Decision" for its successor net energy management will require time-of-use rate plans for all solar systems. In addition, they are rejecting "Demand Charges" for residential but retaining it for non-residential. I see California's successor net metering tariff becoming a strong catalyst for SolarCity, Tesla and SolarEdge.�
1/1/2015
guest Well, Buffett isn't a criminal, he does play by the rules. So do 99.999% of CEOs. I just find him gratingly hypocritical. He carefully cultivates a dear old uncle Warren image, while being a very ruthless, capable, smart CEO who only does things for his own benefit (and Berkshire shareholder's benefit).
The epitome of this was a couple of years ago, he proposed raising income taxes on the rich, which got spun in the press as The Buffett Tax. The irony, lost on almost everyone, is that the proposed tax wouldn't have affected Buffett's taxes one iota since he makes all his personal money on capital gains, and his proposal would have raised taxes on earned income. Chutzpah.
And to your question about commentary, Buffett does comment on things from time to time. In the depths of the 2008 financial meltdown, he took to the pages of the Wall Street Journal to pen an opinion piece which effectively sowed even more panic about the health of the insurance industry in an attempt to get insurance industry friendly laws passed.�
1/1/2015
guest Do you _actually_ think that he would suggest something with such an obvious hole that people would jump on straight away?�
1/1/2015
guest
I don't dispute that Buffett is at times hypocritical, but you have completely misrepresented his public position on tax rates for dividends and capital gains--he is in favor of raising them: Log In - The New York Times�
1/1/2015
guest Why California�s Net Energy Metering Decision Matters
California�s Public Utilities Commission (the CPUC) has rejected the requests of its three main investor owned utilities PG&E, SCE, and SDG&E to institute residential demand charges, grid access fees, installed capacity fees, standby fees, or similar fixed charges on Net Energy Metering (NEM) customers. Importantly, the CPUC has retained �Demand Charging� for non-residential customers.
In establishing its successor Net Energy Metering (NEM) program, the CPUC followed California�s legislative mandate to ensure that customer-sited renewable generation continues to grow sustainably.
The successor NEM program mandates that customer-sited generation will utilize �time-of-use� billing rates.
Why �Time-Of-Use� and Non-Residential �Demand Charging� matters to SolarCity, Tesla, and SolarEdge
Electric bills are maddeningly complex. At any given moment, the energy use in a building can be driven by weather, occupant behavior, and equipment issues. By design, electric utilities layer a web of charges that vary by time of day, day of week, and season. Determining the true cost of your electricity use can be daunting.
Time-Of-Use (TOU) rate structures
Under time-of-use rate plans prices are higher when electric demand is higher. This means when you use energy is just as important as how much you use.
Non-Residential Demand Charging
At a base level, utilities bill commercial and industrial customers for electrical power consumption, and demand. To use an analogy, think about consumption as the number on your car�s odometer, telling you how far you�ve driven, Think of demand as the instantaneous reading on your speedometer. Consumption is your overall electricity use, and demand is your peak intensity, or �maximum speed�.
Consider a large commercial facility with lighting, HVAC loads, process equipment and associated motors all being turned on at the same time as the business first opens. The momentary demand as lights come on, AC units start up, and motors, compressors, and pumps begin to spin can result in a tremendous spike in the load (in demand terms �maximum speed or peak demand�). The utility supplying this load, must have the generation, transmission, and distribution equipment online to service this peak demand, if only for a short duration. This is the basis of utility �demand charges�. Demand charges represent substantive revenues for all electric utilities. In contrast, they are the soft underbelly of electric utility business models, and present strong opportunities for disruptive solar companies and customer self-generation.
SolarCity, Tesla, and SolarEdge have created an smart energy management system. It gives residential customer the ability to generate power, store and intelligently control their consumption. Commercial and industrial customers will have the ability to intelligently manage consumption as well as energy flow, reducing their consumed power and mitigating load spikes. Often non-residential demand charges represent 30 to 40 percent of business� electric bill.
Since California is SolarCity�s home state, the company is well positioned with the right products to advantage of this tremendous opportunity.�
1/1/2015
guest Would be nice if this gets passed end of Jan and then we get some good news in the quarterly. Much more important than Nevada BS.�
1/1/2015
guest Solar Energy Is the Future; You Cant Stop It - WSJ
Nevada regulators to consider solar rate-hike pause Thursday
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1/1/2015
guest Happy New Year Californians: US Largest Utility Jacks up Rates the Most since 2006 Despite Collapse of Natural Gas Prices | Wolf Street
PG&E in California is raise electricity rates 8.5% and natural gas 4% inspite of the fact that generation costs for yhe utility have fallen 8.8% and NG 36%.
I bet that 2.3% escalator on SolarCity PPAs is feeling pretty ok. Are the Nevada SolarCity employees willing to work in northern California? They may be needed there.�
1/1/2015
guest Great news!�
1/1/2015
guest Rooftop solar producing more energy than WAs biggest turbine - ABC News (Australian Broadcasting Corporation)
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1/1/2015
guest I couldn't find an answer to this on their website, so I sent an email to customerservice at nvenergy asking specifically what the exit fee would be for a residential customer. Here's the reply:
Thank you for contacting us. We have confirmed there are no additional fees to exit the grid.
We look forward to serving you.
Sincerely,
Sharon?
How many short years will it be before the monthly payments to SolarCity on a rooftop solar system, with battery backup, will be lower than the monthly bill from NV Energy?�
1/1/2015
guest That is great, thank you. With all the costs shifting going around protect profits I don't think it will be long at all laugh out loud�
1/1/2015
guest With every customer(or more likely group of customers) that goes this route, the utilities will lose peak payments and jack up retail prices to maintain profits. So while I can't tell you 1, 2 or 5 years I can say with certainty that the economic forces pushing towards this inevitable end will feed back on themselves so that each month is more forceful than the last.
I'd like to see a nice transition success story from somewhere in the world to give these guys a blueprint for this new reality. All they've got as of now is striking out in desperation. Hopefully RWE or EON in Germany will make strides in 2016.
Edit to Add: Back on topic I must admit I was kind of looking for a market sized drop in SCTY this week of maybe about 3-4% to bring down options prices. Such a supposedly fragile stock seems very resilient today and techs get slaughtered.
I'm reading in Forbes today that 2GW of solar installs will likely "slip" to 2017 now that there's less ITC urgency. Any thoughts on this affecting the entire sector later this week?�
1/1/2015
guest I think that SolarCity will be able to install and lease/loan a 7 kWh Powerwall for under $32/month. This provides daily backup to a solar system. Add to this a cheap, low Watt generator for deep back up for about $1000 plus fuel and maintenance. So that is another $10/month for 10-year financing (for comparability). So combined $42/month plus fuel for deep back up. Basically, NV Energy can't get away with charging more than $40/month in solar access fees especially if feed-in tariffs are really low too.
Let's consider what NV Energy is really providing the solar owner, a backup energy service. How much is back up service worth. For most families probably not more than $600 per year in total cost. This is the folly of utilities trying to push more cost onto solar customers. They can only extract less than $600/year. If NV Energy really wanted keep some revenue from solar owners, they would offer a feed-in tariff high enough to discourage any installation of additional back up devices like batteries and generators.
NV Energy has a really hard time understanding the limited value they provide to their customers. If they understood what this value was, they would negotiate within that range. When the casinos are willing to spend hundreds of millions of dollars in exit fees, this is a clear indication that NV Energy was attempting to extract multiple amounts of cost out of these customers. They failed to negotiate to mutually beneficial compromise with these customers, because they substantially over priced their service relative to what these customers could obtain from other providers. This is why I believe NV Energy is horribly mismanaged. They don't know what their service is really worth and expect customers to pay quite a premium.
I suspect they have the same blindness regarding solar customers. As they start pushing more than about $500/year in cost on solar customers, they will induce them to leave the grid. As it is, they could extract about $250/year for decades, but $500/year for only about a year. So NV Energy is giving up a $5000 multidecade revenue stream for $500 in one year revenue. This is extraordinarily short-sighted, really dumb management. Moreover, this is a oneway transition. Once a home goes offgrid, it only gets more economical to remain offgrid. For example, the price of batteries fall 10% or more each year, better panels can be added to the system at lower cost, and other power management technology comes to market. So once NV Energy burns out a customer, they lose that customer for life and whoever buys their home.
A scary situation that utilities should consider is what happens to property values as solar customer leave the grid and those who can't install solar are stuck paying jacked up utility rates. Look at it from the perspective of a homebuyer. You are comparing to home one with inexpensive solar installed and the other is incompatible with installing solar. Otherwise, they two homes are equally desirable. Which one do you make the better offer on? Clearly the one with solar can fetch a higher price. As this reality works it's way into the real estate market, home buyers become increasing concerned about the resale value of a home without solar. If you can't trust the utilities not to jack up rates, then this becomes an added risk of owning a home without solar. So while this may not immediately impact the utility, it does create a system where solar adoption skyrockets if only to preserve homevalues. Utilities don't want to face that sort of stigma in the real estate market.�
1/1/2015
guest How did we end up with a 3.5% gain today? Not complaining.�
1/1/2015
guest I don't believe NV Energy is blind or dumb, nor do I think they're having a hard time understanding their value. I think their eyes are wide open and they're taking the only avenue left that allows for short term profits to be maintained.
What happens if SolarCity rolls into Nevada and scales up the entire rooftop industry there? Customer acquisition soft costs go down to zero for everyone, PPAs and installs alike. Everyone and their mother gets on board because they live in the goddamn desert and solar is logical and cheap. All legacy utility production loses profitability nearly instantaneously.
Think of NV Energy's lifespan if solar is allowed to get to scale within the state. It's not 5 years or 10 years, it's immediately worthless once solar gets above 5% of total supply because every single rooftop install negates 5 customers worth of profits at midday. Given that absolute reality, wouldn't you expect them to take one last dying lunge?
This will pass. My hope is that the people of Nevada figure out they're being royally screwed and don't just allow NV Energy to transition out of production without punishment. That will never happen of course.�
1/1/2015
guest Well SolarCitycould come back in a few years once it has a pile od Powerwalls and total cost under $2.25/W. It could really clean up at that point. It would go for the jugular taking everyone off grid.
So tell me why Buffet owns this hot mess?�
1/1/2015
guest Everyone makes bad investments, it probably looked great to a chart person who wasn't following the goings on in Germany in 2013.�
1/1/2015
guest Because last year they made more money than the entire Las Vegas Strip and he thinks he can control this threat through regulation�
1/1/2015
guest
Because I sold some $51 covered calls. :scared:�
1/1/2015
guest He's partial to monopolies. Always has been.�
1/1/2015
guest And he's on good terms with the mafia too?�
1/1/2015
guest Big spike in pre-market. Thoughts? Short squeeze beginning to take hold?�
1/1/2015
guest A lot of solars are up pre-market, particularly FSLR, which was upgraded to $100 from $61 at Goldman Sachs. It's helping the whole sector.�
1/1/2015
guest Got it - thanks!�
1/1/2015
guest CES 2016: Las Vegas solar project faces trouble - BBC News�
1/1/2015
guest I don't see the squeeze happening until there is revised long term guidance, the street has still not woken up to why SCTY is the US installs leader.
A lot of chatter out there about 2GW of 2016 installs will naturally shifting to 2017 due to lack of urgency now that the ITC is extended. The opposite will be true for SCTY in my mind, correct? SCTY is more customer acquisition and cost constrained, not install capacity. Their share grows as people understand solar and more importantly the value of their PPA product, and those aren't ITC related. ITC extension allowing them the freedom to dump more money into sales annoys the living bejesus out of me, but it adds tons to 2016 revenue. Thoughts?�
1/1/2015
guest Has anybody gotten maximum-pain.com to work for SCTY recently? I've been trying since Fri on both Chrome and IE and get nothing. Works fine for TSLA.�
1/1/2015
guest Anyone have a short interest update on SCTY? Seems like rates to carry have been dipping, but daily volumes are nowhere near high enough for significant short position covering.�
1/1/2015
guest Could someone tell me if the below chart pattern is warranted?
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1/1/2015
guest Latest data shows solar installations to surge across the globe : Renew Economy
58 GW of solar was added globally, bringing total cumulative installations to 236 GW. This is a 32.5% increase in cumulative installations.
IHS is forecasting 67 GW for 2016. I think this is too small. First off, they are attempting to forecast from the demand side, not the supply side. My view is that global solar is supply constrained. What gets manufactured will be installed. It's just a matter of finding the clearing price. The solar industry has been growing supply about 30% per year for decades. And last year it grew 32.5%. So my view is that cumulative installations will grow 30% to 34% on a base of 236 GW. So this is a range of 71 to 80 GW for 2016. IHS forecasts 67 GW, which seems tepid to me.
Another driver here is the emergence of batteries. On the demand side, reliable, moderate cost batteries will make solar more attractive for many applications. It also mitigate policy risks and barriers. I believe this will accelerate solar growth globally. But to my first point about solar being supply constrained, the critical issue is whether solar manufacturers are willing to accelerate capacity expansion in anticipation of battery aided demand. My expectation is that this is the case. For a fact we know that SolarEdge is ramping up production of inverters optimized for Powerwalls. We also know that SolarCity is ramping up 1 GW/y panel capacity to pair with batteries. It takes multiple years to bring new capacity on line, so it seems to me that the anticipation of batteries is boosting supplier confidence even now. So this is how I get to 32% to 34% growth potential for 2016. But this driver clearly depends on how well batteries do in the market. So 2016 will be an important year to see how consumers warm up to Powerwalls and its competitors. If this is strong, then I would expect cumulative solar to grow 33% to 36% in 2017. IHS is forecasting 71.5 GW on a base of 303 GW, 23.6% growth.
In sum, IHS sees cumulative solar growing from a base of 236 GW in 2015 to 303 GW and 374.5 GW in 2016 and 2017 respectively. I see solar going to 309 GW and 411 GW, respectively. A more conservative scenario based on 30% grow gets to 307 GW and 399 GW. I do think that IHS is being overly pessimistic.
To their credit, they had forecasted 59 GW in 2015, while most were predicting 55 GW. IEA failed miserably with a forecast of 38 GW. So IHS is probably one of the best forecasters of solar, but I suspect they are missing emerging demand that will snap up hardware on any softness in prices and the boost that batteries will bring to the market.
FWIW the IEA predicts that solar will hit 400 GW by 2020. I think it will get to that level by end of 2017. The fossil fuel industry loves the IEA forecasts because they suggest long lasting demand for fossils. It is hard to know what a "conservative" forecast should even mean. The IEA puts out a very optimistic forecast for fossil fuels and pessimistic forecast for renewables. These biases imply very serious economic consequences if proven wrong. These biases are part of why all fossil fuels are in a massive glut right now, why there were years of over investment in fossil supply for demand that never materialized. Bad forecasts lead to bad investments. So if IEA truly wanted an economically conservative forecast, they need to route out their bias against renewables and energy efficiency. Both are driven by technology, are driven by cost savings, and have the potential to undermine investments in fossil fuels. If solar misses it's forecasted demand by 1% in a year, it would have practically no impact on the economy. But if oil misses 1% of forecast, it is an economic disaster, a glut that takes years to resolve. So a conservative forecast really ought to stress test soft demand for fossil fuels. Conversely if supply for fossils prove tight, then energy prices go up. This triggers hypergrowth in renewables and EVs. This is not nearly as bad for the global economy as a fossil fuel glut. Indeed, if it is not too extreme, say oil over $115/b, then it may actually benefit the global economy. So the IEA really has their biases pointing in the wrong direction.
- - - Updated - - -
There is a huge gap traders may want to fill. This may be the last hope of some shorts.�
1/1/2015
guest Got it - assuming that's the $44 level, correct?�
1/1/2015
guest $100 2018 calls just dipped under $3. Not bad for some very conservative squeeze leverage.�
1/1/2015
guest Well, on Dec 15, the high was $44.50 and the close was $40.05. I don't know the trader folklore well enough to know what level really counts as closing the gap.
It is also important to know that these prices were before Congress struck a deal to extend ITC. So there are serious reasons why the market may not want to test those prices.
It might be fun to put a limit order to buy somewhere between $40 and $44. Shorts should know they're not going to get off that easy.�
1/1/2015
guest +1 for your chart. Notice the perfect symmetry. If it can break above $60, $80 should, based on technicals happen soon after. Thursday in my view will be the deciding factor. Thousands of very angry people will be represented at the meeting on Thursday.�
1/1/2015
guest Brokerage offering
Well, this could be an indication just how desperate the shorts are getting.�
1/1/2015
guest ELECTRICITY: SolarCity plans to sell Hawaii on off-grid solar package using Tesla battery -- Wednesday, May 6, 2015 -- www.eenews.net
lets remember, Hawaii hasn't been a growth market for over 2 years now for Solarcity. At the analyst day presentation, Lyndon rive stated Hawaii in 2016 will finally be a growth year for them with the new solar+storage offering.
peter rive also stated powerwall is $4k installed, not $5k stated just 7 months ago. In addition, 30% tax credit applies to the entire system, storage as well... So, what is the lease/ppa cost per kWh after full 30% credit? Also how attractive is 50% depreciation to tax equity investors now with the new ITC extension?
In addition, we all need to realize demand will not change with the new extension as some short players are pumping in the media. Solarcity lease/ppa customers don't care about the ITC, that's not the selling point. Solarcity customers only care about cost per kWh. So, the idea demand will sag because of lack of urgency is completely nonsensical. The truth is Solarcity will see a trendies influx of tax equity demand now. Which, translates in greater capital support for increased compounding growth(which then translates to further cost reductions). The abs offerings will be much bigger and more frequent as a result of 50% depreciation and the scale of installs/growth Solarcity. It's a powerful reinforcing cycle, not even close to what gordon johnson is pumping in the news.
with regard to solarcity's legal cases, they haven't lost a single one they've been apart of, afaik. We should see movement on the Arizona utilty anti trust case, as well as resolution to the 1603 treasury case in the first half of 2016. In addition, we should see some interesting results from Hawaii through the appellate process and probably the same with regard to Nevada's PUC decision(as I feel this will go to court as well).
Lastly, we all have to remember that Solarcity and company are breaking new legal ground here and will most likely see success through the court system as a new legal precedent will established for all future cases that may come down the line. The results of Arizona, Nevada, and Hawaii cases will give momentum to how the rest of the country will forge forward with dg. A massive deterrent to bad policy is strong legal precedent supporting proper valuation of dg as well as legal protection against anti competitive actions of monopoly utilities.
2016 will be a very informative year for Solarcity and dg in general. If the conditions for a massive squeeze were ever possible, 2016 might be the year for it...�
1/1/2015
guest Thanks, Foghat. It's good to hear from you. I like the idea of re-engagement in Hawaii with Powerpacks in hand.
After Tax-Equity, the customer will likely need to come up with about $2800 worth of payments over 10 years. So this works out to $29.91/month. Or if the customer signs up for 20 year battery contract, to include a replacement in year 11, they can back load some of the cost of the first battery recognizing that the replacement battery will be much cheaper. Assuming replacement cost comes down from $4000 by 10% per year for two years and discounting by 6% gets to a present value replacement cost of $779. Also SolarCity does not even need the cash for the replacement upfront. So the 20 year lease could be offered at $24.53. If you stick a 2.2% escalator on this, you can start at $20.63/month in the first year. Tack that onto a 5kW generating about 600 kWh/month at 13c/kWh, and you get a combined monthly payment of about $99, or 16.44c/kWh combined solar plus storage. IIRC, HECO is charging north of 24c/kWh so this is a killer deal. Moreover, there's not much left that HECO can do to make it worse. The feed-in tariff is 0, and time varying rates only make the stored power even more valuable, discharging when rates are highest.
It will be exciting to see just how they package this. I believe that for a 5kW PV plus 7 kWh PW, the price per kWh will be about 16.5 cents. That's my prediction. We'll see how close it is.�
1/1/2015
guest James, what are your observations on the power output of powerwalls? Here is a related quote and this has bugged me since a while. Looks like you are generally using a single powerwall for your math. I wonder if that is enough.
Here is the source. But rest of the article is not very relevant to specific scenarios like HI, so please feel free to ignore the rest.�
1/1/2015
guest This is fantastic news. I was worried that shorts were taking this $49-55 lul in news-triggered momentum to close out their position and cut losses. That just doesn't seem to be how they operate. Thankfully!
I hope Lyndon's team is crafting their comments very carefully for the next earnings call. Keep it moderate and then drop the real guidance bomb in April/May to trigger the mega-squeeze.�
1/1/2015
guest Hawaii has their self supply option so an "off-grid" customer can still be tied to the grid if necessary. Avg power usage is < 650kWh/month. In many areas weather is consistent year round and the west side of most islands get minimal rainfall. If the panels can supply power during the day and use excess power to charge the powerwall, a 7kWh might just scrape by. But the math to add two powerwalls would probably put the cost at 20c give or take and that would suffice for off grid in Hawaii.�
1/1/2015
guest Dalal, Looks like you are thinking of the energy. I am questioning the power.�
1/1/2015
guest Tesla boosts power output of its home battery, keeps prices the same | Computerworld
The Powerwall batteries will go from having a two-kilowatt (kW) steady power output and 3.3kW peak output to a 5kW steady output and 7kW peak output, Musk said.�
1/1/2015
guest That's encouraging. Good to know, I missed that one. Thanks�
1/1/2015
guest I know Elon said at the shareholders meeting that the Powerwall would be increased to 7 kW peak, but why does Tesla's own website still show 3.3 kW? I also see the 10kWh is not shown in the Specs.
https://www.teslamotors.com/powerwall#specs�
1/1/2015
guest because that page is hopelessly outdated. It still says this:
Powerwall begins shipping in late 2015 and requires installation by a trained electrician. Reserve yours today and you'll be contacted to arrange installation.�
1/1/2015
guest No doubt there's parts that don't get updated, but I could have sworn I've looked at that page in the past and it referenced both the 7 kWh and 10 kWh batteries in the specs.�
1/1/2015
guest That's based on outdated information. When Tesla unveiled the Powerwall, it was at 2 kW. They got feedback from consumers, and reconfigured it to a higher C rating. Now Tesla Powerwall has the spec at 3.3kW, which on a 7 kWh battery is about 0.5C. If there is demand for it, Tesla could offer a version with even higher C rating, but if you really need to draw more than 5 kW to run your AC or something, you're probably going to want more than 7 kWh of storage. This is why someone may want multiple Powerwalls or additional back up power.
Personally, if I were going off grid in a place like Nevada, I would start with solar, a 7kWh Powerwall, and a cheap 5kW gas/diesel generator. The first year would likely lean heavy on the generator, but I'd learn how much fuel I could save by adding another Powerwall or more panels. So I'd add to the system the next year and prices would be cheaper, and I'd see how much fuel that would save me the next year. Year after year I'd do this until generator use gets cut down to a trivial level, like fewer than 12 hours per year. So the difficult step is the first year off grid. After that everything gets cheaper each year.
Fortunately, the PUC plan phases in over several years. This means that the 17k solar homes in Nevada don't have to go completely offgrid immediately. And that should not be the goal any way. Suppose 10k of these homes simply added 7 kWh of storage each remaining on the grid. This already gives them some protection against the rate plan changes. Collectively this is 70 MWh of storage which can also be aggregated. I think this alone would be enough to get the attention of NV Energy. Any utility would want to have some level of control over that much aggregated storage. This becomes a bargaining chip. It can be used to halt the rate plan changes or to create alternative value streams for solar+battery owners. For example, granting some limited control over aggregated batteries could easily be worth waiving the $40/month solar access fee. If utility doubts this, imagine a scenario where demand peaks with the spot market hitting $500/MWh while those 70 MWh of aggregated batteries are happily charging at $150/MWh retail rates. Yes, indeed the utility is stuck losing $350/MWH charging batteries that really don't need to be charged at that particular point in time. If NV Energy intends to play hardball, they had better see this coming. OTOH, NV Energy could participate in a program that gives them a call option to discharge batteries at say $200/MWh, 20c/kWh, at any time of peak demand. This would allow them to buy local stored power netting a gain of $300/MWh when the spot price goes to $500 while avoiding getting reamed by aggregated storage. So I don't know if NV Energy will play ball or not. My sense is that they are too stubborn and will need to be taught a lesson. But once there is enough storage behind-the-meter, the ball game will change. Worst case for the utilities is massive grid defection. Solar owners may need to be willing to walk away to negotiate a much better deal for all parties.
Seriously the casinos may be missing out on a much better game to be played with NV Energy. Instead of paying hundreds of millions to exit, they could buy 100 MW / 400 MWh of Powerpacks and totally play NV Energy for all they are worth.�
1/1/2015
guest AAAAAAnnd.....there goes oil. $34 and dropping, down 6+% today.
The Saudi royal family is gonna regret this move when they're run out of town in 3 years, but I guess they had no choice. Desperate times. Take note NV Energy!�
1/1/2015
guest So - can we confidently say that SCTY is now at a bottom? Huge run up in the last couple months against plummeting oil. Is there truly a "low" enough price for Oil to hurt Solar stocks, or is this signaling the true beginning of the end for oil as we know it? Wouldn't more expensive oil in the future just give a higher incentive for solar and renewables across all markets?
I have to say - regardless of socio-political happenings, I'm surprised at the level of strength from SCTY in this environment, regardless of short interest. The fact that it's being shorted so heavily is a little too-good to be true.
Am I taking crazy pills?�
1/1/2015
guest Conservative case for solar subsidies
Nice op-ed for change.�
1/1/2015
guest Governor Sandoval releases statement on SolarCity layoff announcement - News3LV
CARSON CITY, NV (KSNV News3LV) � Governor Brian Sandoval released the following statement Wednesday after SolarCity announced the company would eliminate jobs in the State of Nevada.
Governor Sandoval says his office was advised by lobbyist Robert List that CEO of SolarCity Lyndon Rive was initiating layoffs of 550 SolarCity employees as a result of the Nevada Public Utilities Commission�s decision regarding rooftop solar and net metering on Christmas Eve.
�As a result, action was taken to deploy the State�s Rapid Response Team to provide affected SolarCity employees with resources to find new employment. The Rapid Response Team stands ready to host a job fair at SolarCity as soon as it is allowed to do so,� said Governor Brian Sandoval.
The Governor also responded to recent statements by Mr. Rive who encouraged the Governor to �do the right thing� with regard to the PUC�s decision.
Governor Sandoval says, ��I attempted to call Mr. Rive on Christmas Eve regarding his layoff of 550 SolarCity employees. Mr. Rive did not answer my call and I was later advised that he was in Mexico and unavailable. I am also unsure what Mr. Rive meant by his statement for me to �do the right thing.� If such a statement suggests that I somehow influence the PUC�s decision Mr. Rive knows, or should know, that such conduct is inappropriate.
�My suggestion is that Mr. Rive respects the process and pursue his legal options which include seeking reconsideration of the order or ultimately judicial review. I have also called for the Nevada Consumer Advocate to engage in the case, which it has done.�
�During my time as Governor, I have signed legislation benefitting the rooftop solar industry and supported an award of $1.2 million in economic development funds to SolarCity for employment and workforce development programs. I also signed legislation in 2015, with the public support of Mr. Rive, which initiated the very process at the PUC that he now disagrees with.�
�I will continue to support the renewable energy industry in Nevada and capitalize on our state�s incredible resources for solar, wind, and geothermal power. I will also respect the process at the PUC provided by law and, most importantly, assist the 550 employees SolarCity has laid off,� concluded Governor Brian Sandoval.�
1/1/2015
guest Sandoval seems to be responding to this press release:
Following Nevada PUC's Decision to Punish Rooftop Solar Customers, SolarCity Forced to Eliminate More than 550 Jobs in Nevada (NASDAQ:SCTY)
�
1/1/2015
guest A little more context:
Solar company sues Sandoval's office over refusal to release text messages | Las Vegas Review-Journal�
1/1/2015
guest No you are not taking crazy pills. Checking off the ITC extension is a minor negative in my mind because SCTY could have benefited from forced cost cutting and increased marketshare from an industry shakeout, but the positives obviously faaaaaaar outweigh the negatives.
SCTY can be competitive in nearly any state now, at today's cost structure. As a fellow Pennsylvanian you know that solar has barely touched our state because we had Corbett for the last 4 years, but that all changes now. SCTY is up and operating in states like PA and as a critical mass of everyday investors get a first-hand look at the product, the stock will squeeze like crazy. It'll be just like when Tesla started nationwide Model S deliveries in 2013, people drove the car then bought the stock.�
1/1/2015
guest The wider public is completely misinterpreting this NV situation and it's starting to hurt my brain. Once again I would ask that someone at SCTY put a bit of effort into their PR. They need to get out in front of these thing, not just announce layoffs and expect everyone to connect the dots on their own.�
1/1/2015
guest http://lasvegassun.com/news/2016/jan/06/clinton-sanders-and-omalley-draw-a-raucous-crowd-i/
Sanders rallied supporters before the dinner, speaking at the Tropicana, introduced by the co-creator of "The Daily Show" Lizz Winstead and Red Hot Chili Peppers drummer Chad Smith. Sanders took a dig at the PUC�s solar decision, saying that it had �moved in exactly the wrong direction.��
1/1/2015
guest
Solarcity is setting up for an anti trust lawsuit. Just listen to the language. Lyndon has specifically chosen his words and actions to build on the SRP(Arizona utiltiy) lawsuit. if Sandavol had any sense, he would not put out anymore public statements. He's really giving Solarcity a lot of ammo in addition to his text messagesto NV energy debacle. As I've outlined before, the legislative hearing Sandavol referenced was absolutely hostile toward Lyndon rive. This should also be another point of evidence in the case as well. Again, their is video evidence of legislators laughing at rooftop solar... This all fits within the hostile environment for competition with NV energy during the "process" of getting to the PUC decision.
lastly, I just have to add, Sandavol also mentioned Solarcity receiving 1.2mln to set up its training center as being "generous" to Solarcity and this shows he supports rooftop solar. Ha, that was an incentive to lure Solarcity to Nevada. Again, this was to entice Solarcity to come to Nevada. Sandavol was asking Solarcity to come to his state to provide jobs. His statement yesterday proved only to show a broken contract. It would be as if he said tesla got a handout of a billion dollars from him and should be happy with the welfare. Let us not forget, these states give incentives to tesla and Solarcity because they want them to bring jobs to their state. Solarcity and tesla could go anywhere. Lyndon was absolutely right by saying this was an anti-business move by Sandavol. The evidence is overwhelming and the legal system will recognize this.
Solarcity is playing its game and setting up anti trust legal case with its current actions.�
1/1/2015
guest This is gonna be a good day to buy 2017 options, might see the $3 70 again.�
1/1/2015
guest http://www.streetinsider.com/dr/news.php?id=11201153
Solar City wins bid to install 40000 panels for John Hopkins�
1/1/2015
guest Dipping below $47, please please please don't let these shorts cover before mid-Feb.�
1/1/2015
guest Another rooftop solar company says it's leaving Nevada | Las Vegas Review-Journal
�
1/1/2015
guest IB rebate rate is now at 18.5%
Collectively, shorts have been smarter than we hoped. Shorting increased when ITC spike happened all the way up to NV announcement coming out. Covering started promptly after the NV news came out and a stock slide accompanied it. Covering continued throughout the time as stock kept sliding, even including today.
I'm afraid we won�t see any short squeeze. Not worth counting on it.
- - - Updated - - -
Doesn't mean that the stock won't go up. Only saying that forced covering by shorts may not happen. They have been very diligent in covering in the dips and slides.�
1/1/2015
guest There hasn't been nearly enough volume for them to cover, has there?
Edit: Elon owns 21M shares. Short interest was 29M shares at year-end. Volume is low ~2M per day. How did these guys buy so much stock while it drifted lower over a couple weeks? Longs wouldn't be selling after the ITC extension.�
1/1/2015
guest MarkIt data indicates that the short interest currently is at roughly March levels - around 20mil, as opposed to 32mil level that we saw at the peak.
Even at 20mil level, it is pretty high short-interest. Nevertheless it is not high enough to force a squeeze. At aggregate, at these levels, shorts can linger on for a long long time. Similar to how Tesla has high short interest even today (despite a massive squeeze in may 2013).
There is simply no forcing function to squeeze them.�
1/1/2015
guest I don't believe the shorts are done abusing this stock. They have merely retreated to reload.�
1/1/2015
guest http://mobile.reuters.com/article/idUSL1N14R33920160107
Another legal victory. Mark this one off the 10k risks section.�
1/1/2015
guest Nice. Pretty much every management in every public company that has ever existed has had both motive and opportunity.�
1/1/2015
guest Wasn't Nevada's ratepayer advocate supposed to submit a motion to stay the rate increases today?
Nevada regulators to consider solar rate-hike pause Thursday�
1/1/2015
guest Anyone have actual average wholesale rate information for Nevada? If I'm not mistaken, the peak is handled by out-of-state natural gas plants? How much are they getting at midday, 8 cents? And solar customers are going to eventually be compensated at 2.6 cents?�
1/1/2015
guest
No one knows. That's the crazy thing. The commissioners say that the rates go in effect Jan 1st, but yet NV Energy doesn't have the rate information available for solar customers to review! It is hilarious that the same commissioner saying solar customers have to follow the new rates urging the NV Energy to get the rate plan up on the website in the meeting today. I guess they forgot today is not the 1st of January, but the 7th. This entire thing is back assward.�
1/1/2015
guest Governor weighs in on solar flare-up - Story
Nevada governor Sandavol says it's a cost shift, yet he has no clue what the actual math of that cost is! He says he doesn't take sides, but yet it appears he takes NV Energy's word on the math. Unbelievable.�
1/1/2015
guest Wow. I would say that guy is an embarrassment to governance, but we the wise people of Pennsylvania put a very similar character in office for the last 4 years. At least the look on his face says he knows this is all gonna backfire.
Wake up Nevada! You're getting hosed.�
1/1/2015
guest Governor Sandovol stated that on one side of the issue there were 17,000 solar customers. On the other side side were 700,000 non-solar customers. 17,000 is less than 2 and half percent of 700,000. The math is actually quite simple.
He and the Nevada PUC are claiming that 2.43 percent of the customers are placing an unfair burden on the other 97 percent.�
1/1/2015
guest Are there any Nevada residents monitoring this thread? If so, what do you think of recent changes?
Sorry if I've missed that contributors are Nevada residents.�
1/1/2015
guest I'd just like to know the numbers. Pretty sure once those come to light and there's more clarity to the situation we'll hear a hell of a lot less about solar customers being subsidized.
From my halfhearted reading:
Retail rate avg - 11.8 cents
Wholesale baseload - 2.6 cents
Wholesale peak avg - 8 to 12 cents
Solar customers currently get the retail rate and will gradually shift all the way down to the baseload wholesale of 2.6 cents. Is that about the story? Why not tie the solar net metering rate to the wholesale peak with maybe a rate floor of some sort. Even a ceiling would be doable. Much closer to an open market price.�
1/1/2015
guest I hope shining the light on the actual costs involved will make this backfire on NV energy and their spur some locals into action or at least Powerwall reservations. How much do the coal and natural gas energy providers pay for the grid maintenance I wonder? :wink:
Utilities and enviros agree on radical shift in Oregon's energy supply | OregonLive.com
�
1/1/2015
guest Solar energy poll results called warning for Nevada legislators | Las Vegas Review-Journal
CARSON CITY � A poll of 300 likely Nevada voters suggests that state lawmakers could suffer at the polls come election time next year if they do not support expanding rooftop solar efforts through a net metering program.
The poll, conducted by WPA Opinion Research by telephone on April 20-21, was paid for by the Alliance for Solar Choice, a coalition of rooftop solar companies operating in Nevada that wants the state�s 3 percent net metering cap raised by the Nevada Legislature.
The poll also shows strong support for solar energy efforts and net metering, where rooftop solar customers get a credit from the power company for excess energy they produce.
NV Energy, which operates as Nevada Power in Southern Nevada, is fighting the effort by rooftop solar companies to raise the cap, said Bryan Miller, vice president of public policy and power markets for the rooftop solar company Sunrun Inc.
�As much as NV Energy is asking for a political favor, this is not a political favor for politicians,� he said.
�This is political suicide for politicians.�
The strong support for net metering among voters is because Nevada is blessed with an enormous solar resource and they view rooftop solar as a positive, Miller said.�
1/1/2015
guest http://pucweb1.state.nv.us/PDF/AxImages/DOCKETS_2010_THRU_PRESENT/2013-7/39428.pdf
All, here is the independent study commissioned by the Nevada PUC. Everyone signed off on his, all stake holders. It's funny how it says in 2016, all rate payers will benefit from NEM, net metering... I guess the current commission completely disregarded everything their own report revealed.
It can't get any more bizarre then that folks.�
1/1/2015
guest Actually from these numbers you can make a good argument for keeping net metering. Consider this.
Under net metering, solar customers tend to export power at peak hours when the wholesale is about 9c/kWh. During these hours the spread between retail and wholesale is so thin that power sold at this time does not cover the full cost of the grid.
Next, solar customer tend to redeem these exports at at off peak hour when wholesale price is near 3c/kWh. So power sold to solar owes tends to have a very high spread retail to wholesale, which provides lots of revenue to cover the cost of the grid and profit for the utility. Essentially, those who conure off peak power are paying the full cost of the grid and subsidizing those who consume peak power.
So net metering creates an advantageous situation where the utility buys power from solar customers when wholesale price is at 9 c/kWh and sells back when wholesale is at 3 c/kWh. Thus, the utility nets 6 c/kWh on this trade. That trading gain goes richly to cover grid costs and the utility's own profit margin. It also minimizes the required capacity of the grid since that capacity requirement is driven by peak load demand, not off peak consumption. Under net metering, one can argue that solar consumer are actually paying more than their share of grid cost. Again those who consume in off peak hours are in fact subsidizing those who consume grid power in peak hours. So by in large, solar owners under net metering are subsiding non-solar owners who run AC at peak hours.
But now let's see how removing net metering changes the situation. Some 17,000 have solar. As the feed-in tariff d3clines, those customers will be incented to install batteries rather than accept a pitance for their surplus power. Thus, they will charge their batteries during peak hours. This will increase net demand during peak hours which will drive up wholesale prices and increase the capacity requirements for the grid. These incremental costs will be pushed out to all ratepayers. Next, the solar customers will tend to discharge their batteries at off peak hour. This will minimize the contribution to covering the cost of the grid and the utilities profit margin. So the net result of killing net metering is to increase total costs to all ratepayers will minimizing the contribution of solar owners to supporting the grid.
This I think is the essential economic argument for grandfathering existing solar owners. The utility cannot make a coherent economic argument to show how pushing existing solar owners to charge batteries at peak hours is any kind of benefit to non-solar owners. Indeed, it will only raise rates on non-solar owners to impose this punitive scheme on solar owners.
As behind-the-meter batteries come into play, the utilities will need to be challenged on any policy that induces charging at times of peak demand. I would recommend that SolarCity begin pushing this line of critique now. NV Energy is pushing a policy that has the unintended consequence of raising the cost of electricity for all ratepayers. So while it is good to challenge NV Energy on fairness issues, we cannot afford to let them off on unintended negative economic impact.�
1/1/2015
guest Nevadas Solar Job Exodus Continues, Driven by Retroactive Net Metering Cuts | Greentech Media
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1/1/2015
guest Another thing that gets overlooked considering the wholesale price of peak power is that peak power plants also collect capacity payments regardless of utilization to cover the fixed cost. In 2014 in California, these capacity payments where $190/kW for the year. So NV Energy customers are paying the rent on these same plants. If you levelize the capacity payment of $190/kW assuming say 5% capacity factor (438 produced kWh in the year), that works out to 43.4 c/kWh and this cost is strictly in addition to whatever the wholesale price is. Essentially, capacity payments are public assistance for a fleet that is at least two times larger than it needs to be. That is, if the peaker fleet were just half its size it would have a 10 capacity factor which would greatly improve the levelized costs of the remaining plants. There is a glut of standby capacity for which ratepayers are being overcharged.�
1/1/2015
guest Solar companies should bite the bullet, let people in Nevada out of their contracts if they so desire and uninstall their systems. That should cause a major black eye & PR disaster for the state and the governor in today's times.
"85 MW of solar leaves one of the sunniest states thanks to corrupt govt."�
1/1/2015
guest That's an expensive way to go. I think the state is getting a pretty good black eye just the way things are.�
1/1/2015
guest I would not want to give up solar panels in this situation. NV Energy is making a policy error that will force them to raise rates even faster. A big part of what makes the current economics of solar tenuous is that the retail rate is under 12 c/kW. But once this monopoly is able to bully out solar, they will raise rates. So in spite of all the trickery, your best protection against monopolistic pricing is to hold onto your panels. Once retail rates have been driven up to 16c/kWh, solar installers armed with batteries will be back in business, maybe sooner. NV Energy may have won this battle, but they have lost the war. So solar owners need to take a long view, and I believe many of them do.�
1/1/2015
guest I think if SCTY offers this option if the new rule sticks, the decision will be quickly reversed. Maybe free batteries to existing users is a better option. How many of the 17000 solar users in nevada is an SCTY customer? Not sure how fast rates are rising in NV but 12c -> 16c might be another 4 years. And to make it compelling, the system needs to cost at least a little less than the grid, let's say 10%, so rates need to get to 18c before adoption starts really going. This might push it into the next decade. Also not grandfathering existing users is a dangerous precedent. It will hamper solar adoption everywhere else.�
1/1/2015
guest That is the logical way to think about it.
We need to verify these wholesale rates somehow so a clear picture can be painted of just how much these folks are being ripped off. Average residential retail rates are well documented at 11.83 cents, but do they have peak and non-peak pricing? From your post it looks like they do not? If that's the case then solar customers are getting even more royally screwed than originally estimated.
Lets try to confirm some of these rates and extrapolate a few one year scenarios with NV Energy profit included. I bet it's pretty ugly. Does NV Energy own these peaker plants or are they mostly out of state sources?�
1/1/2015
guest I still don't understand why the argument is the subsidy is being shifted to the rate payers...yet no examination of the obvious problem which is protecting of the utility investors profits. It's a dying model that needs to adapt to a future of distributed generation...especially in a state exactly like Nevada.
PUC Hearing: Anger And Scolding At First Of Two Meetings | Nevada Public Radio�
1/1/2015
guest That is the part which I tried to highlight in the previous posts, which didn't seem to get enough traction here.
To me it feels like this is far beyond NV Energy or NV. This feels like a coordinated attack to destabilise rooftop solar throughout the nation. The spike in short interest (even though ITC came out) right before NV ruling is also very telling. How well SolarCity responds to this is the biggest question.
If SolarCity announces one or two big ABSes that will clear any doubt on the funding side. If they announce good bookings and booking guidance at low Sales costs that will also put aside doubt on the consumer side.
Strategically though SolarCity will eventually need to do something about the NEM risk. It may need to update future consumer contracts and ABS contracts to isolate both parties from this risk. SolarCity should bear the entire risk of this (and address it with batteries if this risk unfolds). Keeping the risk out on other parties can kill the entire business model. By taking up the risk, this can even become a great selling point too. It will be far better for people to signup with SolarCity and give away the risk than to buy the system outright from a local installer and keep the risk.�
1/1/2015
guest Almost nobody will have an understanding of that risk let alone be able to quantify it. The thing people need to remember is that this is not the tip of an iceberg, it's the single most easily corrupted state in the union trying to pull something off that looks like it may have a lifespan of another 2-6 months and never be implemented.
Unless you subscribe to the theory that solar can somehow be "stopped", why would you worry about little battles like this affecting the industry as a whole in the US?
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Here is the rate schedule for NV Energy and apparently there is no standard time-of-use rate. It's optional, but so lopsided I don't think anyone takes it.
So with this in mind solar customers are actually a HUGE subsidy to the non-solar customers as we suspected from the start. Ironically they're kind of a subsidy to NV Energy as well since they're only eating baseload, even though their carving off peak demand in huge chunks is simultaneously destroying the NVE profit scheme. Speaks to the power of solar I guess.�
1/1/2015
guest
Wow, they cut the show off right when it was getting good! No wonder no one tunes into NPR Nevada in actually respectable numbers.
The key is state senator Farley keeps calling net metering a subsidy. So does the governor. So does NV Energy. That's the problem of this entire situation. The very study that says it's a net benefit for all Nevada rate payers in 2016 days it's not a subsidy. If their own study says it's a net benefit, how the hell do you keep saying it is a cost on non solar rate payers? I can see NV energy saying this, but how is this possible for representatives of the citizens of Nevada just point blank say the same?
This shows how extreme their position ... Even if roof top solar wasn't a benefit and was a compete drain on the grid , right now, each NV energy customer would pay an extra .85c a month. That's only 85 cents per month extra! NV energy wildly exceeded their state mandidsted profit by such a gigantic margin that they made more profit then the entire Las Vegas strip combined. Combined. I'm not even going to get into the legality of that. Now let's just calculate the fact that roof top solar is already transmitted and distributed to the place of demand... Just this alone... And see how much solar is actually under valued in this exchange of value to the grid. And that's not even calculating the multitude of other benefits of greater reliability, reduced infrastructure investments, reduced need for additional capacity investments, etc... All of this is a benefit to all rate payers using the grid.
Like I said before, this entire situation is not meant to stick, it is meant to delay. This will be tied up in the court process and buffet is happy with that. Sandavol himself said it best, Solarcity will have to go through the "process" aka delay tactic in order to resolve this. Sandavol is on his way of out of the governors office and looking to run for senator. He's looking to line up campaign contribution and looks like he's got a major war chest coming his way for being a good nv energy employee. (Recall this post when he starts to run for senate and see how much nv energy and affiliated groups pad his campaign.)
add:
even the big casinos recognize nv energy making unprecedented(and possibly illegal) profit from captive rate payers:
Las Vegas casinos, NV Energy locked in 'toxic' defection struggle | Utility Dive
Nevada casinos say exit fees could prevent their defection from NV Energy | Utility Dive
have to remember, monopolies in the past have used the argument that consumers will pay more if they don't follow the monoply rules. Just listen to nv energy (all monopoly utiltiies) argument of cost shift, and you will recognize the tactic.
If you go solar, you will have to pay more for grid energy. This is a threat to all those current captive rate payers considering solar. Secondly, if you allow your neighbor to go solar, we will raise your rates. This creates a fear and resentment among captive rate payers for solar customers, creating a manufacturered divide. Distracts the captive rate payers from the real issue of monopoly anti competitive actions. Lastly, if you decide to go off grid, we will charge you an exit fee. So this prevents current solar from leaving and again provides a massive threat to all those captive rate payers from considering a competitor to nv energy. Remember it is law that all utiltiies must allow access to the grid to competitors. It is law Solarcity must be able to utilize the grid to serve its customers. Also remember, the current grid has already been paid for many times over. It is not a cost on any current customers. The vast majority of the bill is on future investments. That's why they get a mandated profit. However, what happens if roof top diminishes those needs to invest in future capacity/infrastructure investments? Since the PUC is set up to benefit ALL rate payers which means ensuring cheap reliable energy in the face of a legal monopoly profit motive... Then what is in the best interest of all rate payers when given a option of lowering future costs which immediately impact consumers bills positively and for the foreseeable future after? You damn well explore that option.
however, if you can DELAY the competition for long enough, you can force the PUC to approve nat gas generation and other CENTRALIZED cap/infrastructure investments. Again, buffet owns pretty much the entire supply chain of nat gas production and centralized utiltiy infrastructure. It would be in his best interest to slow down roof top solar just enough to get this multibillion dollar investment paid for by his captive rate payers(under his current pro nv energy commission/state government), get his mandated profit, then sell it off for another profit on the way out...
Cant get more anti-trust case then that.�
1/1/2015
guest Just want to squeak out my admiration and amazement at the commentaries here!
Informative and insightful.
Thanks all round!�
1/1/2015
guest I'm inclined to say SCTY needs to get moderately aggressive with their talk mid-Feb when they announce 4Q15 earnings and potentially revised guidance, but this whole mess is such horseshit that I can't imagine it sticks for very long. That being said, do we want these guys to make enough illegal profit to pad the cost of divesting from nat gas production in a few years? How much of their $750M+ in profits could be considered over 10% and therefore somewhat illegal? If they can delay 2 years and make a couple billion that might give them enough room to ease out of the mess they're in.
Again, take a look at the three major utilities in Germany. They've been begging the government to allow divestment of production for 2-3 years now because there's simply no money in peak supply anymore. The German government has socialist leanings so they put the kibosh on these plans, but I could easily see US utility conglomerates paying off the right people to do what they like. Imagine what would have happened if Germany let their top utility "split" operations as they wanted to, they would haev kept the grid and renewables then carved off all the fossil fuel and nuclear into a separate company. What happens then? The fossil/nuke business goes bankrupt and everyone associated with them gets screwed. I would imagine this is what Warren and every other major utility is planning for long term. Just buying time to maneuver.
Consumers should be forcing a long term transition plan not bickering between themselves with all the wrong arguments.�
1/1/2015
guest The cost of not grandfathering net metering solar customers
I will attempt to connect the dots with the cost of NOT grandfathering 17,000 customers with solar. This will be a stylized mathematical argument meant to get at the key drivers. I do not have access to the sort of detailed information required to do a precise analysis. But I think the burden of proof is on the utilities to show that not grandfathering is without net cost to all ratepayers. So here goes.
So there are some 17,000 solar owners with 85 MW of solar. Let's assume on an average day such a customer currently exports about 5 kWh or more during sunny hours when there is peak demand across the grid. This is about 85 MWh per day. As feed-in tariffs decline, these customers will take steps to reduce the amount of energy they export. This may be as simply as running the AC extra cool just prior to sunset so as to consume as much solar as possible and minimize grid consumption for cooling just after sunset. Other load balancing within the home can also minimize exports. The most extreme response would be to install a home battery. SolarCity could provide a Powerwall lease for about $360/year. Over 17,000 solar customers this could am out to about $6.1M in annual expense for storage. This is a cost to ratepayers, but it is localized to just the 17,000 who are not granfathered.
So as the feed-in tariff declines, peak hour exports to the grid will fall about 85 MWh per day, or 31 GWh per year. This will require the utilities to secure more peak generating capacity. While the wholesale price of peak power may average around $82/MWh, standby fees for this capacity can run over $420/MWh. Ratepayers must bear both costs. At around $500/MWh, this amounts to an incremental cost of $15.5M per year. However, the utilities are entitled to a 10% profit margin, whence the retail price is $17.2M. Across 700,000 retail ratepayers, this work out to adding $24.62 to the average power bill.
So not granfathering exposes all ratepayers to any incremental $17.2M per year plus upto $6.1 M per year in expenses to non-grandfathered solar owners. The average ratepayer may find an additional $24.62 on their power bill. Moreover, the utilities earn an extra $1.7M in profit on the imposition of all these costs, and it does nothing meet the energy demand shortfall. Not only is this punitive to impose an extra $360 in annual costs on customers who happen to own solar, but this raises rates on all ratepayers. NV Energy should be compelled to justify the imposition of all these additional costs on ratepayers. Simply grandfathering net metering would avoid these and perhaps other costs.�
1/1/2015
guest The simple act of reprogramming air conditioning and doing laundry during the peak hours would eat up a large chunk of what is currently shipped onto the grid just when it needs supply most. Nevadan, ALL NEVADANS, are taking millions of dollars and putting them directly into Warren Buffett's pocket.
Fortunately they were only able to keep up this charade for what.....3 weeks? Well done jhm.�
1/1/2015
guest Survey: Regulators Expect 3rd-Party Service Providers to Take Lead in DER Aggregation | GTM Squared | Greentech Media
Solarcity train just getting started and it seems regulators and policy makers prefer it!
Aggregation of roof top solar systems is the prize and Solarcity is already leading the charge. Solar+powerwall/Powerpack is the answer to hurdling the buffet et al. Delay tactics. Would love to see their faces when Solarcity flips the switch on 10s of thousands of solar+tesla powerwalls networked together over the grid. Buffet might have to change his shorts soon after.
- - - Updated - - -
JHM, I think NV Energy plans to eat those costs... the run up in profits recently was set up to have the cushion to temporarily absorb these costs.
They even announced today they are lowering rates by 4.9% to placate the captive rate payers. I have to admit, they are pulling out all the stops to delay roof top solar right now. It must be a real pivotal moment for buffet in Nevada with future utiltiy investments, especially when a $900mln nat gas peaker plant is on the slate to be approved by the PUC soon...�
1/1/2015
guest Foghat, Jhm and others, I am starting to get worried about the gigafactory in NV now. Tesla's original plan was to make the factory self sufficient by having enough renewable power (solar and wind). But initially they may need to rely on NV Energy. When Tesla is ready, will the gigafactory be allowed to exit the grid? What if NV Energy and the corrupt PUC [email�protected] say that it can't and ask for exorbitant fees?
Maybe one day we will find out that NV Energy is making more money off of gigafactory than Tesla is?? The predicament that the casinos are in is really very sad.
My question is - does Tesla have enough legal protections against this? Especially given that they are starting out now maybe they can negotiate and set the exit agreement in stone upfront.�
1/1/2015
guest By the time the Gigafactory is fully operational this garbage with the PUC will be dealt with.�
1/1/2015
guest Most likely yes, but I hate to rely on hope. It would be very good to know that Gigafactory has agreements in place against this bs up-front.�
1/1/2015
guest It all depends on how much NV Energy says they had to invest in serving tesla at the Gigafactory. I'm sure Elon is making sure his plan to go all self generation is well known to nv energy as well as PUC. It's a different situation from the casinos in that nv energy can't hide its numbers since their arnt any to hide from the sympathetic PUC and thus the public is just as well informed about tesla and the gigs factory not costing the grid.
Im still anticipating Solarcity making a big announcement on the Gigafactory microgrid set up. They will really show nv energy and PUC they still will install multi megawatts with out of state employees. They literally will install nearly half of all current rooftop solar in Nevada in one fell swoop and nv energy or PUC can't do one thing about it.
in this case, Nevada is still a massive growth market even in the face of no net metering and fixed charges. I would say, in the face of buffets delay tactics, Solarcity has a hedge in place. In other words, you can't outsmart Elon warren. By the time they get judgement, Solarcity will have still increased Nevada market growth and will be prepared to add onto that immediately when residential/commercial market opens back up again.�
1/1/2015
guest POLL: What do you think of the solar subsidy? - Story
wow. Even trying to word it as a big old bad subsidy, net metering is wildly supported today in this Nevada poll. You think Sandavol and PUC are out of touch with the people of Nevada?�
1/1/2015
guest Is anyone here a subscriber to GreenTech Media's "gtm squared" service? Is it worth the $250?�
1/1/2015
guest Did I forget to mention that this was an annual recurring cost? The extra $17M will continue and grow each year for 25 years or more. Sure, they can lower rates for a year or two as a sort of loss leader, but the accumulated cost will be born by ratepayers ultimately.
I guess if you just paid $900M for a shiny new gas peaker, you want to be sure someone uses it. It looks like a future stranded asset to me.�
1/1/2015
guest Dem primary in NV is Feb 20th, let's see who latches on to this issue first and what they say.�
1/1/2015
guest Germany is 20 years away from 100 percent renewable power – not! : Renew Economy
This is interesting. Renewables in Germany supply 33% of the electricity consumed, but even here there is effort to slow down the pace. If renewables were to continue at the same pace, about 3.1% of consumption per year, the country would hit 100% in 20 years.
I wish the article had looked at how quickly the fossil fleet is depreciating. If no new fossil plants were built and existing plants retired per schedule, how fast would fossils be replaced?
It does seem that distributed solar and batteries simply need to push ahead. The grid is the bottleneck for this whole thing.�
1/1/2015
guest David Crane Exits NRG With a Warning: | Greentech Media
A very moving departure letter from the former CEO of NRG.�
1/1/2015
guest I like that idea in the comments that he could head to SUNE. Buy some options????�
1/1/2015
guest The difficulty David Crane experienced at NRG is indicative of just how hard it can be for a traditional power producer to move into clean energy. Crane understood well what change was needed both transition from fossil to renewables and from centralized utilities to distributed. Moreover in this letter it appears that employees were quite willing to go in this direction. I'm not sure where things broke down. It seems the problem lay with investors. Even spinning the renewable energy business off as separate entity did not resolve the problems with investors.
I think this suggests very limited capacity for utilities to change. The incumbents will mostly need to be replaced.�
1/1/2015
guest If the injection of solar into the marketplace had a 1-to-1 effect on the profits of traditional utilities it would be easily doable, thats simply not the case.
Every solar customer makes it exponentially more difficult for natural gas to compete until you get to 3 or 5 percent of total. After that it's game over for peakers and therefore the entire profit model of most utilities. (see: every German utility)�
1/1/2015
guest Right, it is curious how some "defenders" of fossil fuel generation like to argue that the more intermittent renewables you have, the more peaker capacity you need to back it up. If that were really true, peaker operators would enthusiastically endorse solar. There is a little bit of need for batteries to smooth this out, but it think is is quite minimal. I think if you paired 1 kWh storage with 1 kW solar that this would pretty much suffice for storage, eliminating all need for fossil peakers.
So the generation business makes it profit in peak hours. This is true of both peakers and baseload. Baseload may be marginally profitable to operate at off peak hours, but this is too thin to cover capex. So shrinking peak load deprives all thermal generators the revenue they need to be fully profitable. Thus, there is no future for this business. And it is an impairment to economic growth for governments to stall the inevitable. It amounts to forcing an extra tax on the economy simply to protect an incumbent industry. Very backwards. Germany should know better.�
1/1/2015
guest Germany does know better. Renewables are always given grid priority and utilities are not being allowed to quickly divest from and "write off" fossil fuel generation.
Once the legacy utility interests have seen there's no way out, maybe they'll come to the table for a grand transition scheme, but I doubt it. And I certainly doubt the ability of the US public to handle the DoE leading the transition.�
1/1/2015
guest http://www.ladwpnews.com/external/content/document/1475/908175/1/Solar-German%20Delegation-Sept.%2028,%202010.pdf
Interestingly, back in 2010, the Los Angeles Department of Water and Power (LADWP) held a meeting with executives from the German Utilities E.ON and RWE to discuss the feed-in-tariff being developed for the city of Los Angeles.�
1/1/2015
guest Yeah, I think the German government preventing utilities from writing down assets is pretty problematic. If the government thinks there is some value in keeping these assets operational, then the government should buy the assets and write service contracts with the utilities to operate them, albeit at nearly zero utilization levels.
In the US, I think the driver for change will be distributed solar and aggregated DERs. Basically, the utilities can drag their feet quite a bit. We're near the point where no new fossil plants will be approved. (NV Energy got their $900M gas peaker boondoggle in just under the wire, since batteries are cheaper going forward.) So once there are no new fossil plants, the natural thong for the utilities to do is to keep using the aging fleet as it depreciates into retirement. So that is a 30 to 40 year process. PUCs would probably let the utilities get away with this. However, distributed energy and aggregated DERs throw a wrench into this scenario. DERs compete more economically with an aging grid and fossil fleet. Thus, the utilities lose share of the powerbill. This makes theit fleets unprofitable before they are fully depreciated. This is true disruption.
What I am most excited about right now for SolarCity is their opportunity to grow the commercial, small to medium size business segment. They've got the racking and panel efficiency now to deliver small commercial installations at near the cost of utility-scale installations. So this bites into any scale advantage that utilities once had for solar. Second, SolarCity has Powerpacks and can empower commercial customers to defeat demand charges which can be $12 to $20 per kW per month. This totally pays for the batteries and enhances the value of solar. So SolarCity will be able to compete head to head with utilities on delivering to power solutions.
Also note this John Hopkins deal. There is another entity that is doing all the financing on this. This is cash business for SolarCity. So, heck yeah, I want SolarCity to do alot of business like this. If the commercial segment could be largely cash positive like this deal, it actually could help finance the residential installations. So this has the potential to ship the business model to something that is not so highly leveraged.�
1/1/2015
guest Panasonic Bets Big on Tesla�
1/1/2015
guest Old news and wrong thread.�
1/1/2015
guest I would suggest that more need for 'peaker' capacity does not necessarily equate to funding for peaker capacity.
distributed solar is akin to having a GM volt without an ICE motor, its all good, but the motor really is required (ie the grid)
distributed solar + 1 powerwall is akin to having a Nissan LEAF, its all good, but sooner or later a loaner car is required (ie the grid)
distributed solar + many powerwalls is akin to having a Tesla S without supercharging, its great, until the annual trip to see the relatives. then a plane is needed (ie the grid)
until batteries and solar can handle a polar vertex type scenario, the grid is required, even if only for 1 day per year, that is why there literally are peaker power plants built for use 1 day per year. Off grid people instinctively do not instinctively ration electricity, because they have propane/butane backup, Off water grid people instinctively ration water, and survive very happily, sans fluoride.�
1/1/2015
guest Any perspectives on buying SCTY versus buying shares in inverter suppliers like SEDG (Solar Edge) and ENPH (Enphase)?
I like SCTY because of its approach to reducing "pain points" for potential solar consumers by solving the problems of high upfront cost and maintenance. Building a Giga-panel factory to ensure supply of high performance panels, and the tie-in with Tesla Energy for storage seems promising as well. However, I am still having difficulty understanding the financials of the company. I understand how the tax partnerships work, even if they are convoluted.
SEDG and ENPH are much easier to understand from a financial standpoint -- they mostly sell product and don't have the leasing and tax partnership complications. I tend to favor SEDG because of technical reasons (I believe the "optimizer" topography is generally more elegant and scalable than "micro-inverters") and because SolarCity seems to favor SolarEdge as a supplier. SolarEdge optimizers appear to be easier to integrate with Tesla Energy solutions because they are DC-DC units, so DC can be sent directly to an energy storage system, as opposed to the Enphase units, which covert to AC.
I have limited cards to play.
Trying to decide between SCTY, SEDG, or MBLY�
1/1/2015
guest I think you're missing the significance benefit of a small backup generator. I lived off grid in the mountains one winner and we had a small solar array with a battery backup and a very small generator for backup power. If my batteries were full I could almost watch one movie on the small TV and VCR we had and yet the small generator had enough fuel to last me through all winter. It was only me and my wife and we did not have many of the creature comforts that so many are used to but with a slightly larger battery backup and or solar array a very small generator still works very well.
The grid is nice to have but if I was in Nevada with the ridiculous connection fees and I already had solar I would be saying Adios!!�
1/1/2015
guest
One of of us is wrong on both counts.�
1/1/2015
guest solarcity will use the grid to connect all distributed storage devices and be able to control flow of energy when and where it is needed. Imagine 90 million homes and 40 million business with tesla powerwalls and powerpacks connected to the current grid. Now imagine utilty level solar + Powerpack. Now imagine a software platform that manages an energy market for peer to peer and utiltiy to consumer.
Instant demand response, voltage control, and market value determination with a nationwide continuous collection "net" of unlimited fuel supply regardless of any local weather disruptions.
And, there isn't a polar vortex big enough to disrupt this process given current base load generation (which will become less and less as the network of solar+storage grows across the nation wide grid).
And this is just a simplified list of benefits of a massive network of distributed renewables + energy storage will provide.�
1/1/2015
guest Think self-managed municipal micro-grids with 100% rooftop solar, interconnected battery backup and Bloom Boxes or something similar to cover 10% of generation and keep batteries topped off in winter.
As of today my completely uneducated microgrid vision for lower North Philadelphia would consist of 2 large aqueous hybrid ion batteries per square block sufficient to 125% of expected demand, east/west mounted solar on every square inch of available flat roof space(removable with no roof penetration), and a central Bloom Box bank run off natural gas with smart controlling for all. Every AC unit and home thermostat would be linked into the smart grid for optimization and the micro-grid manager would kick out feedback to each user every month to help "voluntarily optimize" usage(if they so choose) and do things like targeted free winterization(that we already do in Philly).
I could fit enough solar on my roof to net out all my demand, so it should be doable in total for my neighborhood. Not a lot of moving parts there so the only major additional cost over 30 years would likely be battery upgrades/replacement. Just thinking of the folks on my square block.....I think I could get 95% of them interested. So long as it was financed and cheaper than today's grid prices.
If that's all somewhat doable with today's technology at today's prices, think of what we'll be looking at in only 5 more years. The whole scenario above might cost HALF.�
1/1/2015
guest I have both SolarEdge and SolarCity stock. Yes, the business model for SolarEdge is much simpler. They make product and sell it globally. No complexities of lease financing. SolarEdge gives you broad exposure to global solar demand with a bit of concentration in North America and rooftop solar. But this geographical diversification is very nice considering policy risks that solar may face within a single jurisdiction. Moreover, SolarEdge seems to technology edge for now and is rapidly taking market share from market leader Enphase. So there are a lot of pluses for SolarEdge. On the downside there is the risk that newer technology might emerge to compete with their products or that their slice of the supply chain might get squeezed for profitability. So on these two minuses SolarCity has advantages. They are primarily a technology consumer so advances in inveterate technology helps SolarCity, and they are verically integrated and can maintain profitability when slices of the supply chain are squeezed. But the downsides are geographical concentration that exoses them to policy risk. So I am happy to own both as their pluses and minuses seem to complete mentioned the other.
There is something to be said for a simpler business model: it's probably more robust against bear attacks. Complexity can easily be translated into uncertainty.�
1/1/2015
guest Thanks for this. I hadn't considered the global solar demand and geographical diversification angles. I'm leaning towards investing in both SCTY and SEDG now, so I guess I gotta cough up some more cards to play or find some treasure buried somewhere in the near future :biggrin:�
1/1/2015
guest Suppose you have enough battery storage capacity to smooth out intradaily fluctuations. Then you only need deeper back up to handle situations where daily consumption is higher than daily renewable production. For this kind of back up a coal or CCNG plant is just as helpful as a peaker plant. For the next 30 or more years there will be an abundance of thermal plants with very low utilization. So if you really only need to run a plant just a few days per year, there will be plenty of them. I see no need to build new peaker plants for such limited utilization.
Do you really want to spend $1/W for 10 hours of use each year? Over 20 years, that is 0.2 kWh for $1 capex, or $5000/MWh capex only. Of course, the utilities are happy to spend that kind of money because they know they can recover the cost plus profit from ratepayers. Do ratepayers really require this? If ratepayers had to pay the wholesale price whenever it was higher than the retail rate, there would be so much demand response, that you would never see spot prices get that high. The truth is that very few ratepayers demand this. It is simply a pretext for utilities to build out unneeded capacity and force ratepayers to pay rent on it.�
1/1/2015
guest I forgot to mention that Enphase is responding to the inroads of SolarEdge by cutting prices. So until they can match SolarEdge's technology, their margins will be squeezed. They are a very capable company, but I would not want to own Enphase at this time. This competition in the inverter market is a benefit to installers like SolarCity. If solar demand in 2016 is strong enough both Enphase and SolarEdge will do fine because SolarEdge does not have the manufacturing capacity to out production Enphase. But if demand is soft in 2016, SolarEdge could still have a good year while Enphase suffers. So either way, I think SolarEdge will do well until someone beats their technology.
I also like SunPower as a technology leader in solar modules.
Good luck!�
1/1/2015
guest Is there a video or transcript of what was said on Thursday or Friday at the public hearing? Very surprised it didn't receive any media coverage.�
1/1/2015
guest My position on this is "yes". TSLA+SCTY is a bet that hinges too much on one person's well-being. My strategy is to hold a bit of all 4 with a slant towards TSLA/SCTY. I don't have time to follow the other two closely, and I also don't think their management is as much above competition as the first two (could be just my ignorance). I hold stock and LEAPS, and also somewhat betting that these four won't move together so I'm prepared to rebalance LEAPs and reap more benefit if one or two shoot up before the others.�
1/1/2015
guest South Africa
South Africa is calling. Tesla sees the country as a major maket for Powerwalls. Recent reports such as the one below suggest that Tesla may actually be contemplating building a Gigafactory in South Africa primarily to produce Power products. And of course we all know that Musk and the Rive brothers are South African natives.
http://www.timeslive.co.za/thetimes/2016/01/06/Cape-jumps-in-as-Tesla-aims-to-switch-on-SA
So here's the question. Will the Rive brothers want to take SolarCity into South Africa?
Powerwalls make a ton of sense in this country because power outages where the grid is available is a daily occurance. But solar too makes huge sense. It's very sunny. In the US average solar radiance is about 150 W/m2, but in South Africa it's 220 W/m2. So while about 1314 kWh/kW per year is typical, in South Africa it is more like 1927 kWh/hW in annual solar production. This really boosts the economics of leasing solar. According to Wikipedia cumulative solar installations in 2013 were just 122 MW, but this jumped to 922MW in 2014. I'd love to know what 2015 brought the country. Electricity is affordable at about 13 c/kWh a few years, but unreliable. The high isolation makes solar quite competitive. While in the US, SolarCity can offer a PPA starting at 13 c/kWh after a 30% ITC, with the amount of sun in SA 13 c/kWh without subsidy or lower could be offered, assuming all other costs the same. So SolarCity could be within striking distance on an unsubsidized basis.
No doubt SolarCity is monitoring the potential for entering South Africa. If the government were to provide some support for distributed solar and batteries, it could be enough. It the government is courting Tesla to build a Gigafactory, it may well be ready to support solar as well. We'll have to stay tuned.�
1/1/2015
guest Well it came out 3 days ago and was discussed quite thoroughly in other threads so it's old news, and doesn't mention SCTY, so which of us is wrong?�
1/1/2015
guest Solar exec Lyndon Rive thrives in Elon Musks shadow | The Seattle Times
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1/1/2015
guest The link I posted was published Thursday afternoon. I posted it Saturday evening. Please forgive my laggardly response.
In addition, I believed that Tesla's storage business was directly related to SolarCity. Again, I apologize.
Oh, JRP3, can you tell me, is anal retentive hyphenated?
JRP3 I will not make any future posts without your explicit permission.�
1/1/2015
guest Not sure why you're getting worked up about it, around here three day old news is old news and has usually been thoroughly discussed, which I assume you know. I usually try to do a search before I post something but of course I have at times posted redundant information, and I don't get upset when someone makes me aware of that. Not a big deal, just pointing it out, but if you wish to clear all future posts with me first that's fine.�
1/1/2015
guest Is any of this nonsense necessary? Just add.�
1/1/2015
guest SolarCity, perhaps in partnership with Tesla, should buy Bloom Energy if the price is right. It would round out their offering and fill in all the blanks needed for a micro-grid future. Current costs are about $7-8/W and these things are still being made by hand for commercial application. If they can get down to $3/W, the entire distributed residential market opens up and the SolarCity offering can be a closed loop. I still feel all single unit off grid applications are illogical, but a setup like I noted above with interconnected solar/battery setups in each home and a methane fuel cell "server" backing up a few hundred homes works nicely.
It sounds like the plan is to IPO this year or next and is at least 2 years behind schedule. Why not take this opportunity during these last moments of uncertainty to lunge in with an outright purchase offer? Would it be easier to just develop their own fuel cell tech and scale up from there?�
1/1/2015
guest If there's a pop this week in SCTY I think we are off to the races. Chart pattern is dying for a confirmation on the flag.
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1/1/2015
guest Still too much broad negativity and solar uncertainty(I hope!). Once the whole Nevada debacle clears up in a few weeks then earnings/guidance are announced....perhaps.
Trying to get my last few options purchases in. Shhhhhhhhhhh�
1/1/2015
guest Wafer Carrier For Reducing Contamination From Carbon Particles And Outgassing (Solarcity)
A new patent showed up for scty, this seems to be the first one that is for the manufacturing process that was filed under Solar City instead of silevo
"
Most of the current solar cell manufacturing facilities, however, are insufficiently equipped for large-scale production. The emerging solar market demands factories that can produce hundreds of megawatts, if not gigawatts, of solar cells per year. The design, size, and throughput of present facilities are not intended for such high-volume manufacturing. Hence, various new designs in the manufacturing process are needed."
I like the sound of that paragraph�
1/1/2015
guest Nevada Solar-Law Author Concerned as Solar Companies Flee - Bloomberg Business
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1/1/2015
guest Farley seems pretty clueless and a bit naive.�
1/1/2015
guest Politicians clueless? Always. Naive? Never.�
1/1/2015
guest PUC official urges new rooftop-solar rate not be stayed | Las Vegas Review-Journal
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1/1/2015
guest If the order is erroneous, would it not be better to not issue it until corrected? / Clueless & Naive :wink:�
1/1/2015
guest Clinton condemns Nevada solar policy for endangering situation | PV-Tech
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There Are Now More Solar Jobs In America Than Oil Jobs�
1/1/2015
guest NV Energy, PUC price solar energy beyond residents reach - Las Vegas Sun News
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1/1/2015
guest SolarIndustryMag.com: SolarEdges StorEdge Solution Is Now Available Internationally�
1/1/2015
guest Oil is 30 freakin dollars, amazing. Looks like it has further to drop too.
2017 & 18 options are looking cheap, gonna let them coast til Thurs/Fri.�
1/1/2015
guest I commend your optimism in SCTY. But you really ought to build a robust valuation model that you can fully believe in to be playing with LEAPs. For stock buyers, they only need to be right about the overall macro direction over the course of years. As a LEAP buyer you need to be additionally sure that the price moves adequately over the time frame. Without a robust valuation model you would be left with dumb luck to determine your losses or gains.�
1/1/2015
guest Well - the gap is filled. Will we bounce back?�
1/1/2015
guest Market burped. Solar City is testing resistance. If it doesn't bounce, end of today, or beginning of tomorrow is probably a perfect opportunity to buy calls.�
1/1/2015
guest Lower BB at $41.58�
1/1/2015
guest When China and oil prices stabilize in a few weeks and this correction bottoms out we'll be looking at $26 oil, nearly free commodities and nearly free money. nom nom nom nom nom nom nom nom
Where's Bernie Sanders with an analytical tirade over this NV Energy nonsense? The Nevada primary is 3 weeks from today(I think).
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You need to start having more faith in facts, the winds are blowing your emotions all over the place and leeching into your analytics.
Is solar no longer the future?
Is SCTY not at the forefront of solar?
Has the ITC not been extended to infinity?
This is why it's been very difficult for me to accept the veracity of your sentiments on "down days". NOTHING HAS CHANGED�
1/1/2015
guest And the donkeys keep nodding.�
1/1/2015
guest As far as I'm concerned that is actually a good thing. OPEC has been cracked into pieces never to be put back together again and the Saudis are so desperate they're thinking of selling. We should think about subsidizing oil production a bit further in the short term until these last few oil oligarchs crumble. Would take 3-5 years at the most if we really tried.
Renewables have won. We now need to decide how we want to handle the wind-down.
Extending the ITC in exchange for oil exports was a great deal. Taking the NV energy example and working out a compromised transition plan would be a nice next step. Though it doesn't seem like we have quite the leverage that the German citizenry enjoyed when they went through this transition process. Perhaps that will change once the election is upon us.�
1/1/2015
guest All of those are very correct and hence I hold a very large set of shares.
I was specifically commenting on the LEAPs. None of the answers to the above questions guarantee that LEAPs will be in cash 1 or 2 years out (the answers in fact more or less guarantee that shares will be profitable over the long run).
LEAPs make sense when you have a very good valuation model and the model says that some price point is rock bottom and will foster strong buying from other players. For example many people in Tesla threads currently believe that the current TSLA price is very low and they base that on credible valuation models. So TSLA LEAPs right now make sense. But I am not so sure about SCTY because 1) it's very hard to build a valuation model 2) it's conceivable that the current price may not be rock bottom and/or an year or two out the price will be above the thresholds that one desires.
Having said that if you own shares the risk is low because you can stay in for an extended time and ride out any extended downturns if that were to happen.�
1/1/2015
guest If you find LEAPs that are guaranteed to be in the money, please do let us know. For now, I'll bet on a Musk company with an expanding lead in the industry supplying half the world's energy moving forward.
Buy low, sell high!�
1/1/2015
guest Jon Ralston interviewing Lyndon Rive will be aired tonight.
Also:
Clinton condemns Nevada solar policy for endangering situation | PV-Tech�
1/1/2015
guest Now 209k solar industry jobs in America. Up from 174k last year.
Fastest growing job sector in America.
Also, Lyndon Rive said he expects to hire 6k people in 2016, raising total full time employment count at Solarcity to 21k employees.
Now that is a major deal in political circles(among most other circles). To employ that many people is a game changer within many congressional districts, especially when a big Election Day turnover is coming in November. The political landscape could become very interesting come 2017.
Also, interesting thing to point out about Nevada PUC...
State PUC chairman not a fan of solar energy - Sunday, Dec. 20, 2015 | 2 a.m. - Las Vegas Sun Mobile
Governor Sandavol appointed the new PUC chairman, Paul thomsen, right after the whole net metering Cap debacle in August/September, started his first day as PUC chairmen on October first, right in the midst of the "formulation" of NV Energy's new rate for solar customers, so he literally came into his chairmen job, over the past two months,during this whole net metering situation. Again, he was appointed, put in place by the governor during this key process.
It's funny, all you have to do is read his quotes from the article above and see roof top solar doesn't have a chance in hell to get a "stay" on this new rate plan by nv energy. In addition to that new chairman thomsen's former employer has multi-megawatt ppa aggrements with NV Energy! Potential for a little conflict of interest maybe??
Wow, this all just gets better every minute...�
1/1/2015
guest He reminds me of that roger von whatever his name is on SA. Solar is bad because geothermal is better. ..�
1/1/2015
guest The short interest update for Dec 31st is this evening?
Edit: Apparently yes. 25.448M
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1/1/2015
guest That's a pretty strong statement. For me it's just a leverage mechanism for long-term investing. I don't care if my LEAPs are under water and I will keep rolling them forward half a year or more before expiry. If I was just going by overall macro direction, I'd be buying index funds (which I do with a good chunk of my investment money). The investment thesis is dead simple: SCTY is best positioned to take a big chunk of this market share, and the market is going to expand a lot based on simple physics.�
1/1/2015
guest But if you just keep rolling them indefinitely without doing trading (trying to time buys, sells and rolling) you're paying for a lot of time value decay over the years, that eat up part of the leverage (this is the price of the leverage). All this versus the risk of options expiring worthless. You'd be better off just dollar cost averaging shares.�
1/1/2015
guest A lot of my rationale for going with ~50% options out of all my cash allocated to SCTY investments was timing the short squeeze. Looking back at the 2013 TSLA squeeze there are just way too many similarities to ignore. Now perhaps these guys got the message and have covered, we shall see. I doubt it.
Either way, the massive chasm between consensus of value and reality tells me there's tons of room to run. I despised PPA until I was forced to really think about it, now it's pretty clearly half the market for the foreseeable future. SCTY is the #1 installer for a reason. Once people understand the product, nearly all the sales cost is removed. Then.....zoom.
Maybe that's this year maybe it's next, but I'm betting it'll be prior to Jan2018. It's just too compelling to ignore and certainly worth the 10/1+ leverage you get.�
1/1/2015
guest Yes we have to consider investment horizon. I'm not a pro and only have this much time to invest into understanding what's going on. So the strategy is to use low cost index funds for most and use my head to pick a few stocks that I believe have high upside potential within the next 3-5 years. I'm using leverage to make the little play $$ I'm allocating to this justify the use of my time (in addition to enjoying the process, that is). If in 3-5 years nothing spectacular happens (or situation changes to remove breakout potential) I write off the losses and move on. I'm also Ok sitting on cash if I don't see any breakout situations developing.�
1/1/2015
guest You misunderstood. I am not referring to the 'macro' as in S&P index. I was referring to macro as in "SCTY is best positioned to take a big chunk of this market share, and the market is going to expand a lot based on simple physics." which is from your very own post right above.
That quote actually implies that 'eventually' (over unknown timeframe) SCTY will get very big. So that's the case for buying shares.
To buy leaps, you need to ensure that the current valuation is very low with respect to what is in horizon over next 2 years. And how would you know that if you don't have a valuation model?�
1/1/2015
guest Bounced nicely off 50DMA and an almost perfect 50% retrace.
The move today only has a little to do with the macro environment. Lyndon held an upbeat meeting with many employees today, and an interview with Lyndon about recent events will be airing tonight. Let's see what he has to say. My guess is he will talk about how he plans to challenge the decision in Nevada.
It would be great if Elon would Tweet the link to SolarCity's blog post. Doing this would make a lot more people aware of the situation, and would probably lead to a lot of media coverage.�
1/1/2015
guest Yes that's the risk involved. I AM timing the market, but on the span of years. Time decay on LEAPs is not that much. The bet on triple-digit percent SP moves. One only need to be right one out of maybe 3 or 5 bets to make this work. The exact moment of inflection is unpredictable (at least for me). I can't model disruptions and other major structural changes with any precision, but I do seem to have a good sense of when one is brewing. If it happens sooner, I make more money. If it happens a bit later, I am likely still Ok. Basically if my "strength" as an investor is in sniffing out structural changes, what other tactic can I use that is better than getting margin or LEAPs? Dragging out some 10% gains on precise valuation models is not my thing.�
1/1/2015
guest Can I ask that we not have a discussion about LEAPs here? If someone wants to use leverage, that's their choice. I think its much better to keep focus on what we are investing in than how we are investing in it.�
1/1/2015
guest An interview with Lyndon Rive happened about an hour ago and not a single person has Tweeted about, commented on, or written about it. Anyone know when a recording will be posted to the website or where I can find a transcript?�
1/1/2015
guest U.S. coal production dropped to 30-year low in 2015 : Renew Economy
I'd like to request a moment of silence for the US coal industry.
(Pause)
Ok, that's enough. It is astounding to me that coal production can decline by 25% over the latest 7 years, obstensively replaced with natural gas, and yet natural gas is in an abysmal glut itself with prices well below breakeven for gas producers. I think this kills the argument that coal was the victim of regulation. Regulatory costs on coal would have simply propped up the price of gas as an alternative. But this did not happen. With gas prices so low, it would have eroded coal's price and market share even without any regulation. Regulation only makes things more expensive, it does not create a glut of alternatives.
I suspect that the real culprits here are energy efficiency, wind energy and solar energy. All three have challenged fossil fuel prices across the board. It used to be said that alternative energy was not really cost competitive. And yet the price of every fossil fuel has had to decline severely while losing market share or being on the verge of it.
The decline of 1.2B short tons of US coal in 7 years is monumental. Imagine if we saw the same in 7 years for oil. The US produces about 9.5 mb/d of oil. Imagine that dropping to 7.1 mb/d by 2022. It could happen especially if oil remains below $40/b for long enough. And the same will happen to natural gas too, if gas remains under $3/MMBTU. Renewable will continue to exert price pressure. The question is not whether renewable will ever be price competitive with fossils, but how low can the price of fossils go.�
1/1/2015
guest Lyndon
Video: Lyndon Rive 1-12-16 | Watch Ralston Live Online | Vegas PBS Video�
1/1/2015
guest Found this:
Video: Lyndon Rive 1-12-16 | Watch Ralston Live Online | Vegas PBS Video�
1/1/2015
guest What a mess. I now agree Lyndon should not be talking to the public much. That's a problem. He clearly has people on his team who can do this job well, he simply can't.
Now this raises the question. What happens to all these folks with PPA when solar penetration is at over 20%, solar panels are much cheaper than today, and batteries are a dime a dozen. The $11K of value that Lyndon is talking about when buyback is at $.02 is gone, that's going to definitely happen in under 20 years even if net metering sticks around. I haven't seen this modeled in any of their material. Looks to me the "grandfathered" contracts aren't going to be worth much and folks would have to upgrade their systems to include energy storage to keep up with those developments, but since it's a PPA that's not up to them.�
1/1/2015
guest I'll have to take a look at the Lyndon video later today, but I still don't see a scenario where a PPA is anything but a blessing. If solar penetration hits 20% then the excess supply at peak must be somewhere above 200% and that opens up all sorts of fun possibilities. Those days are a loooong way off and in the mean time protection from rising grid rates is infinitely more valuable.
We've been through all these scenarios earlier in the thread. The only thing threatening SCTY (and solar in general) is when utils are allowed to pay base wholesale for peak supply like NV is trying. That has zero chance of happening because it only makes things much worse for rate payers by driving earlier adoption of batteries and jacking up grid prices even more.
Energy as a service will be the future and SCTY looks like they're going to stay out in front. Much like a PPA owner, you don't have to worry about every little hiccup, solar will always have the advantage.�
1/1/2015
guest
The reality is this will not stand. They will be grandfathered. The entire political spectrum is against what the PUC did. This is unprecedented to the nth degree. It is an extreme case that does not stand legal scrutiny.
In addition, the entire decision, all changes to the rates, are not within the what the bill specifically states the PUC actions must ensure: renewable investment, private investment must be able to grow(venture capitalists have already sent a letter saying they can't invest in renewables in Nevada now), create jobs and economic growth (Solarcity, sunrun have laid off more then 700 people already, vivint has closed down its business in the state), streamline the net metering process(already a massive confusion to how the rates work in addition to being charged these rates without any public information available on he website), ensure renewable diversity in nevadas Portfolio(no more roof top solar installs pretty much closes that down real fast.
The entire decision of the PUC was required to balance these objectives with their decision. Clearly that has not happened.
this has not and won't happen in any other state... Even Arizona.
Like I said before, the intent of this entire saga is to delay, push this into the legal system, take as much time there as possible. Since it is clear NV Energy has strong political influence like in no other market in the US by far, bar none, they can create this delay effectively.
to add: Lyndon did a good job with that hostile interviewer. It was clear to see he was clearly dealing with someone deeply aligned with the talking points. If you took a drink for every time they interviewer said "subsidy" you would be comatose in the hospital right now. I really liked how Lyndon said, show the numbers and the interviewer couldn't deal with it.
add2: forgot to mention the show Lyndon was on last night is sponsored by NV Energy. Also, it is telling to note that NV Energy is a member of ALEC.�
1/1/2015
guest Again haven't watched the video yet, but he should have been hoping for aggression and been able to rip it to shreds with ease. That apparently did not happen.�
1/1/2015
guest Watch the video before you make a statement like that.
He did a good job with what was puked at him. Key things: Lyndon challenges the net metering "numbers" Nv energy gave to the PUC, then the PUC rubber stamped as fact, as well as the governor and writers of the senate bill 374... All rubber stamped the numbers and "subsidy" assertion as fact. The reporter had no answer, doesn't have a a clue what the numbers actually are nor did he try to validate his own accusations. Among various other points, Lyndon looked good and won the debate. He got viewers to ask questions about what they are being told by their own officials and media... To start connecting the dots and following the smoke...
my only real issue is that he didn't promote the supposed rally at the Nevada PUC at 9am today on air. Imagine if something like a 1k people showed up and crammed the building with supporters of roof top solar because of it. Maybe he didn't need to do that, but it wouldn't have hurt.�
1/1/2015
guest Why has the stock been persistently sliding? Is it all due to NV?
AFAIK short interest has been declining since the NV ruling came out. So it has to be people on the long side selling.
What are your thoughts on when we will see trend reversal? I am hoping for a positive ABS announcement but things seem to be dragging. The ratings on the MyPower deal came out mid Dec. So a month has passed. The holiday season might have delayed things a bit. But I am still hopeful we will hear something soon.
Any other catalysts or news that can potentially turn this around?
Is anyone keeping tabs on any other sources other than this thread, to get other perspectives which could shed light into what's going on (whether we accept with the reasoning or not).�
1/1/2015
guest Just about exactly what LR is saying in the video. He seems to do a good job at deflecting the interviewer (Ralstons 'rude' questions as it seems he is trying to get LR to say something about corruption or generate a similar headline) while still getting his point across about how his big concern about existing NV Energy customers getting massively penalized and future owners not having any financial motivation to go solar under the new law.�
1/1/2015
guest Lyndon kept his composure in the face of extremely hostile questioning and refused to take the bait that the host kept trying to push down his throat. As a result, Lyndon managed to make his points logically and backed by data, while the host came across as the one with an agenda. Which is no wonder, seeing as NV Energy was one of the most prominent sponsors of the show (judging by the order in which the sponsors were acknowledged at the beginning).
My blood pressure still hasn't recovered because of the extreme hostility of that host, but Lyndon did great.�
1/1/2015
guest i also keep hearing that governor and many other politicians say the PUC is "quasi-judicial." There is nothing judicial about it. The governor appoints everyone of them, he picks them and they sit on the commission.
there is no hearing process before the state legislature on the "nomination", their is no vote on their being placed on the commission or not. Nothing. How can they be validated as "experts" with untouchable judicial authority if the state representatives of all Nevadans can't interview them and have a vote whether they are qualified or not? It's all a complete joke.
It just shows how dumb this governor and supportive legislature(and media) think he people of Nevada are. This crap may have been effective before the Internet, but not anymore.
Seems they are going to quasi-judicial themselves out of office. Good luck Sandavol on your vice presidential bid with Cruz because that the last chance you'll have to rep Nevada again.�
1/1/2015
guest Just watched the video. Horrendous. Absolutely horrendous. It would be the easiest thing in the world to refute "cost shifting" and "subsidies", all he did was add more confusion. If SCTY had a proper PR group and a proper spokesperson we wouldn't have half the volatility that we see when these little attacks pop up. The next 10 years is going to be made up ENTIRELY of these little battles and meandering through them properly is vital.
At 7:32 any moderately informed solar advocate should be able to destroy that guy to the point where he stops dead. Do we have to go through this line by line? SCTY is FAR worse off today than it was yesterday because of Lyndon's poor explanation of their product and solar in general. How long is this going to go on?
When I could do a better job than the guy you throw up there, you need to rethink strategy.
To Add: If I'm a short specialist, I'd carve that video up and use it to make millions. I suspect that's what we'll see over the next little bit. Another accumulation opportunity yes, but at some point SOMEONE needs to articulate this company properly in a public forum. I recommend elevating Radford Small to some C Level position if he's still a SVP and make him the media face of the company.�
1/1/2015
guest Lyndon maintained his composure very well. He did a good job laying out the data and refuting the 'subsidy' debate. He also did a good job not falling for the anchor's bait in calling out corruption. Although I am not sure which way it is better - calling out corruption or not.
I think if this whole NV debate dies away it will actually relieve the stock. But Lyndon is doing what needs to be done. As he said on the Analyst Day they shout as loud as they can deliberately to affect change. That doesn't mean SolarCity is permanently screwed or anything like that. But Mr.Market doesn't seem to get it.�
1/1/2015
guest Hard for the market to "get it" when your platform is not being articulated in a fashion that analysts and individual investors can understand. He's an absolute genius and one of the handful of people actually savings the world, but Lyndon comes off as a 2nd year Environmental Studies major in every public appearance I've seen.
The noise needs to be ignored, but at the same time you don't want to give people reason to believe the noise when it's shouted in the CEO's face and he has a stuttering/disjointed response.�
1/1/2015
guest How A Solar Decision In Nevada Could Shape The 2016 Presidential Results | ThinkProgress
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1/1/2015
guest Thanks for the link!
What a freakin prick that host was though! Almost like he was playing a role to stir things up for his show. Lyndon was destroying him at the end and then he just cuts him off. boo!
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haha, oh man, that makes it even better. And yeah, I'm sitting here trying to eat lunch and the more I watched, the less I wanted to eat.�
1/1/2015
guest If the concern is for the stock. He should have said something like - oh _____ it, it's just 17,000 users. SolarCity has maybe 5,000 of it. That translates to less than 2% of our consumer base. Who gives a ____. The Retained value growth within two weeks will more than make up for it. So we are not impacted. It's just that the state lost jobs. It's your loss.
All this yelling and screaming potentially implies two things. 1) He is genuinely concerned that the precedence will be a detriment to sales even in other states and thus he wants to get it reverted. Remember it's about consumers 'perception'. Facts may not warrant a detriment but perception could. 2) He wants to fight it to create a detriment to PUCs and utilities elsewhere thinking of doing something like this elsewhere.
Market is worried about what it all means to the future. The uncertainty is driving the market down.
So quite honestly this NV issue silently dying away is really better for the stock. But Lyndon is trying to fight his best to stave off potential issues elsewhere.
What do we do, it's a tough situation. You can't keep accumulating forever. At some point everyone gets tapped out. Market can stay irrational lot longer than one can stay solvent. So we just have to accept the volatility and live with it, it seems.�
1/1/2015
guest Ok, it's time to deconstruct NV Energy's claim that solar power is cost shifting about $1.20 per month onto ratepayers without solar. While such a find runs counter to published research, it's just to trivial of an impact (if believed) to merit any sort of rate change.
Suppose one half of ratepayers decide to buy a single LED light bulb to replace a 100W bulb they run 10 hours per day. This saves them about 85W, which is a savings of 25.5kWh per month or about $2.96/month. Over a year's time on 350k ratepayers who switch a single light bulb, this produces a $12.4M revenue shortfall. Thus, NV Energy makes the claim that the customers who switch a lightbulb are shifting a cost of $1.48 per month on every ratepayer. Thus, NV Energy seeks a special fee for ratepayers with LED lights ($3 per month per 100W equivent LED bulb) to protect the other ratepayers from this unfair subsidy. Clearly the LED customers are not paying their fair share for the grid.
As silly as that sounds, their case against solar energy is aledging an even smaller amount of cost shifting. Moreover, with all the LED lights that solar customers install in their homes how can we be sure that alleged impact is not simply due to those LED lights and other energy efficiency measures? NV Energy's assertion should have been laughed out of the PUC for lacking materiality.�
1/1/2015
guest There's no need to deconstruct anything, you and others have broken down this nonsense already and it only took you a week or two at most. What needs to happen is the wider public needs someone to cut through the rhetoric and paint a clear picture of who is getting the subsidy here.
Clear as day that the only people benefiting are Berkshire Hathaway shareholders and the cogs that are paid off to do their bidding(Governor, PUC, etc). No one has made that clear case to the public in a way that can be easily understood and that puts the "argument" to rest.�
1/1/2015
guest But it's so much fun!
Seriously, I think SolarCity could use this sort of comparison to better communicate what is at stake. SolarCity could tweet something like, "If half of Nevadan homes replaced one 100W light with an LED it would shift more cost onto ratepayers than NV Energy alleges for solar net metering."
People need a rational basis for saying that $1.20 per month cost shift is really a triviality. The utilities have framed this as a fairness issue. Should anyone who has installed an LED feel badly because they are imposing a $1.50 cost shift on their neighbor? Of course not. Their neighbors should all get LEDs too, and the utilities should not be allowed to jack up rates just because we use less power. Ultimately, it is the utility that is shifting the cost when they should be cutting their costs in the face of revenue shortfalls. Moreover, utility investors need to wise up, and recognize that the utilities can't just raise rates to make up for declining revenue.�
1/1/2015
guest I am actually more interested in knowing what's going on elsewhere and if NV caused any harm elsewhere. Are all funding streams ok? Is the selling machine ok? etc. We need data/press-releases on those to calm our own nerves as well as market's nerves to propel this stock back up.
The stock trading persistently low is not good for the business either. Bonds are strongly correlated to the stock, even though they have first dip advantage into the RV pool. The convertible bonds in theory should never trade below par. But in reality the bond traders are not that smart and they are simply moving in correlation to the stock.
The market and bears in particular turn around and say, look the cost of capital is so high (based on how high the bond yields are). So the fundamental business model is unsustainable. So the stock should fall even more!
See how perverse this whole thing is?
It's really in the best interests of the company to keep the stock up, higher than at least $50 to keep the bond yields at a reasonable level, so that this argument doesn't come into play.
Lyndon and management should really keep attention to the stock up to a threshold and manage it well.�
1/1/2015
guest Nevada has no domestic fossil fuel energy source, no natural gas deposits, no coal, no associated jobs, only the Sun. Every hour that NV Energy is allowed to operate their 1998 model of production and distribution means another $86k that could have remained in the Nevada economy($750M annual profit/hours in a year). Round figure, but it's safe to say all their profit would be gone if solar were at 5% by now as it should. All that instead goes to Berkshire Hathaway shareholders. Why is this very simple point not highlighted in a public discussion?
Where is the old couple who bought solar in 2013 because the Governor told them to? Why are they not on set with Lyndon talking about their life savings, etc...?
This FUD delay doesn't kill anything since it will be sorted in a matter of weeks/months, but what about the future impact to the Nevada economy? NV was on it's way to being a major Western US hub for solar and battery tech with Tesla and SC leading the charge. Do they think companies are now going to want to set up in their corrupt business environment? No way in hell. They'll go to Arizona or New Mexico or somewhere else in the desert than gives them more certainty. At the residential rooftop sales level this is a mere blip where demand gets pent up for a 6 months, statewide it's a longterm disaster.
All these things need to be thrown in the face of FUD spewers and they're not.
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ITC extension takes that permanently off the concern list.�
1/1/2015
guest Nope, the longer bond with 2019 maturity has higher than 10% yield now.
That is a cost of capital at which SolarCity can NOT operate. So we are back into that stupid vicious cycle all over again!
Management's solution to this issue is to become cash-flow-positive so that they don't need to come to market for capital at all. Then this vicious cycle will fall on it's face and they get to operate freely.
Secondly if they show strong funding streams in ABS world through announcements, then too the vicious cycle can break.
Without material news, this negativity will feed into itself. And hence I keep saying that Lyndon should come out with some material news (and/or let the stupid NV debate die down - not worth putting the enterprise at risk for a 2% RV base).�
1/1/2015
guest Hopefully with the Nevada primary near this will move to center stage. The only thing really cared about is reelection. According to this article this decision will hurt anyone associated with Sandoval.
How A Solar Decision In Nevada Could Shape The 2016 Presidential Results | ThinkProgress�
1/1/2015
guest OMFG just as I was asking
SolarCity Prices 5.76Y BBB ABS at 5% Yld, 4.80% Coupon�
1/1/2015
guest Translate that to English for me[please]. Your points above make sense, but IMO the ITC extension essentially makes them cash flow positive within a very short window now that install costs are so low. The last thing to trim is customer acquisition cost, which can be taken care of over the next 6-18 months without issue.
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In Nevada(and Pennsylvania to a degree) energy actually trumps re-election. Natural gas interests from Oklahoma and Texas are the ones moving the peices around the board in my state and in Nevada clearly it's NV energy and Berkshire Hathaway. Why would Sandoval want to get re-elected when he's already been cut huge checks and guaranteed a job for life at NV Energy? Sitting on the beach is much better than sitting in a mansion in the desert.�
1/1/2015
guest BREAKING: 1,000 Nevadans protest retroactive changes to net metering: pv-magazine
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BREAKING: 1,000 Nevadans protest retroactive changes to net metering: pv-magazine�
1/1/2015
guest It appears that the ABS bond that was rated in mid December was priced at 5% yield. I got excited as I considered it a big positive. But the stock is continuing it's down slide. So I am not sure what to make of it. Maybe we need to wait for press releases and time for the news to be digested. I hope 5% yield on ABS is not considered as a bad deal by the market. Note, this is the first time MyPower loans are being securitised. So this is really a positive thing.�
1/1/2015
guest OK. Yes, FUD is winning out over fundamentals, that's what's getting me fired up. It's my understanding that SCTY sells their own bonds direct and this is a growing percentage of total, is that true? If so, I would imagine those rates(or at least cost to SCTY) are far lower than what's noted above?
Apparently Mark Ruffalo showed up at this protest and dropped a better line than anything Lyndon added last night. "This is reverse Robin Hood, taking from the poor and giving to the monopoly."
Simple as that. Give them a tag line and then back it up with numbers that can't be refuted. Done.�
1/1/2015
guest Good One�
1/1/2015
guest The Hulk in Vegas to support Iron Man. Avenger solidarity.�
1/1/2015
guest No one is buying a thing(and certainly not solar) until oil bottoms. Another month maybe? Lets hope the shorts are taking this opportunity to double down again.
LEAPS are drifting back to amazing prices, gonna use all my emotional intelligence to not buy more cheap 2017's and stick to 2018's.�
1/1/2015
guest I think you are referring to Solar Bonds sold on the website. Per latest SEC filing the 5year maturity bond was at 3.6% yield, while the latest ABS with similar maturity seems to be priced at 5%.
There are some subtle differences between the two though. Solar Bonds seem to be backed by both SolarCity credit as well as the cashflows from the underlying contracts. Where as ABS as far as I know are only backed by the underlying contracts (so slightly more risk and thus higher yield). Secondly, the Solar Bonds are sold in lots of $1000s and typically bundled at $5mln each cusip. The ABS are generally much bigger at 100s of mlns. The latest ABS is for $185mln for example. These are institutional purchases.
So comparing two is a bit of apples and oranges. It's good to have both funding streams for SolarCity. But for modeling purposes and understanding the business the ABS are a better data point as they represent bigger chunks of funding.
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And yes, sentiment is driving the overall markets, and solars more so...
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Shorts have been actively covering pretty much every single day throughout the slide since NV PUC announcement came out. Right now the rebate rate per IB stands at 15.64%. I don't have much hope for a short squeeze.�
1/1/2015
guest Timing the bottom for oil and China combined with revived insane short interest and then a revised guidance announcement makes me more set on a massive squeeze. Imagine if oil and China stabilize, new guidance is announced and Bernie Sanders runs the table in February primaries. Think on that a bit because there's at least a 10% chance of it happening as of today.�
1/1/2015
guest A 15 percent rebate is still massive compared to a "normal" stock right. A squeeze is all very possible, as the share price rises many of the shorts booking profit now may pile back on "knowing" the price is unsustainable. All speculation. Time will tell�
1/1/2015
guest energy (kWh) is not power (kW)
Coal 10,500 BTU / kWh (fuel required for electricity)
Gas 8,000 BTU/KWh
25.5kWh = 267,750 BTU of Coal or
204,000 BTU of Gas
1 tonne of coal is about 27,778,243 BTU
267,750 / 27,778,243 = 0.96%
0.96% x coal price = savings in fuel cost = 0.96% x $30 = 29 cents (USA coal price is between $10 and $40 per tonne) choose $30
natural gas is $2.30 / MMBTU
$2.30 x 267,750 / 1,000,000
0.96% x coal price = savings in fuel cost = 0.96% x $30 = 61 cents
apart from the fairness implications for solar leasing and the general public, 25.5 kWh is a decent approximation for energy used for 100 miles of EV travel.
so for every 100miles travelled using 100% (max) fossil fuel, and EV consumes between 30cents-60cents of fuel.�
1/1/2015
guest Solar Firms Stop Selling Panels In Nevada To Protest State Rule Change : NPR�
1/1/2015
guest Ok, let me show you my math. An equivalent LED uses about 15W. So replacing 100W is an 85W saving. Now 85W � 10 hours/day � 30 days/month = 25,500 Wh/month = 25.5 kWh/ month. Retail rates in Nevada are $0.116/kWh. This is a saving of 25.5 kWh /month � 0.116 $/kWh = $2.958/month. So the savings on a retail power bill is a loss of revenue for the utility. So if theregulators are 350,000 ratepayers saving $2.958/month over 12 months, that is a revenue shortfall of $12.4M.
Let me know if you see any problem with my math. Thanks.�
1/1/2015
guest U.S. solar created more jobs than oil and gas extraction : Renew Economy
This is better than the Huff post peice.
Remember the last Republican National Convention? It was all about praising the "Job Creators". Somehow I don't think that theme will fly this year unless they honor Elon Musk and Lyndon Rive. Yep, that's right. Real American entrepreneurs born in Africa. Creating jobs and being manufacturing back to the US. I'm glad Libertarians and Tea Partners are calling out the crony GOP for what it is. Using government to pick monopoly winners in Nevada over competion for real Job Creators. The GOP is F'd up.
Sorry about the political rant. I have no beef with conservatives who are true to their principles. It's the hypocrisy that drives me nuts.�
1/1/2015
guest If I may say, I think SCTY is holding up OK in the face of market carnage. Buying opps here are hard to identify. If not solar, then what do you load up for the future. Utilities?�
1/1/2015
guest http://www.forbes.com/sites/peterdetwiler/2016/01/13/schneider-electric-promising-battery-at-lower-cost-than-tesla/#2715e4857a0b37bfcd017e29
Schneider enters the great battery race. The think they can be Tesla on total installed cost. Utilities are looking more like deer in the headlight or scopes depending on your prefered metaphor.�
1/1/2015
guest Yea I'm kinda shocked that some folks here think that was a reasonable performance on Lyndon's part. I'd say it's on the lower end of Ok but this is such a critical issue that anything but "killed it" is not good enough. With such an excellent execution otherwise I'm surprised he's not self-aware enough to understand he's not a good improviser and send someone else out there to do the talking.�
1/1/2015
guest Ha. I think I'll hold out for the Aramco IPO. It should be the world's single greatest stranded asset.�
1/1/2015
guest Nevada regulators keep new rate hikes for rooftop solar
Nevada regulators deny requests to pause rooftop solar rate hike - VEGAS INC
�
1/1/2015
guest Californis looms large.
Elon should have built the Gigafactory in California.�
1/1/2015
guest Now is that retained value or NET retained value?�
1/1/2015
guest Ha�
1/1/2015
guest Speaking of that, Tesla is going to cover the roof with solar panels, WTF was the mayor thinking? Tesla has already created jobs in the state from building just the small portion they have and will indirectly help bring other business to the state. Talk about biting the hand that feeds you......�
1/1/2015
guest This drop is comical.�
1/1/2015
guest Got notice on thinkorswim that Height Analytics is saying that Nevada PUC Solar NEM decision will be reversed.�
1/1/2015
guest I would like to smile with you guys but I can't. The resets in Retained Value have been utterly punishing.
- First came the reset from RV to NRV
- Then came the NRV reset from bookings to installs.
I don't know how many here realise that the NRV now is about $17/share based on latest math in Analyst Day presentation. That is a reset from $33/share announced in Q3 ER.
- Just now apparently Bernstein put out a note saying that management is considering asset sales to institutions to raise cash. And the discount rate is - 7.5%
That throws the 6% discount rate assumption for RV computation into the drain. Based on the new 7.5% I wonder what the NRV/share will be.
- That still includes the renewal 'assumption' fully by the way. If the asset sale comes through, all SolarCity and it's shareholders are left with is the rusted system at the end of the 20 year lease. Anybody is free to put what ever fair value they want to put on it. But management's assumption is 90% value on 100% of the systems. That is included in the soon to be reset $17/share.
�
1/1/2015
guest Good luck to all.
I am out of here.�
1/1/2015
guest Nevada PUC: Yes To Casinos, No To Rooftop Solar Customers | Nevada Public Radio
�
1/1/2015
guest Panic!
Buy low, sell high.
Options prices......wow....2018 $80's @ 2.90 and dropping.
Not going to be able to resist 2017 $70's when they hit $1.70.
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You mean today's market action doesn't feel like questions were answered sufficiently?
I get a little fired up in the moment, but something needs to be done about this. Engineers belong far far away from cameras!�
1/1/2015
guest Oil is non-renewable. So Renwals = 0. Thus, NNRV = NRV for Aramco.�
1/1/2015
guest I estimate that a change in discount from 6% to 7.5% would have the following approximate effects:
Initial 20 year term -10.6%
Renewal 10 term -28.7%
Initial + 90% Renewal -14.1%
I would point out that none of this actually changes the underlying assets. It only changes the valuation placed on these assets. So what we get is a more conservative valuation, which Benson has wanted to see for quite some time.
To be fair, SolarCity has always published sensitivity analyses showing how retained value changes varying the discount rate.
As we move into a potentially increasing interest rate environment, it is prudent to use a higher discount. The discount needs to be high enough that SolarCity is confident that it can secure financing well below it. This way adding financing increases NRV rather than decreasing it.
Of course, in the short run investors can freak out over this, but in the long run I think it is prudent to use a more conservative discount. In fact, I would argue that they should use a 10% discount as this is customary for utilities. This would make it easier for investors to compare SolarCity to utilities, and in a high interest rate environment where financing is for utilities it will be tough for SolarCity as well. For quite sometime utilities will be SolarCity's primary competion, so it makes sense to use comparable valuation assumptions.�
1/1/2015
guest What did Elon say... The market is bi-polar?... I'd have to echo that just by some actions of the apparent investors in Solarcity of late. There is no revelation here. Did some forget what was said at the analyst day brief almost a month ago? Tanguy Serra clearly stated Solarcity could easily capitalize approximately 32% more of its cash flows if they wanted, and this was pre ITC decision. To suggest a 7.5% discount rate is completely false and without any actual data what so ever. lets get a grip here.
Lets all remember, the point of Nevada situation is to DELAY. Put this in the courts where it will take a long time to resolve. In the meantime, nv energy still pursuing utiltiy business on the nat gas front and utiltiy level renewables(more as renewable compliance then anything). They still have to raise rates to pay for all of this "infrastructure" investment, so once the decisions are made to make these investments, you can't put the toothpaste back in the tube as they say... Nevada will build the new nat gas plants, will build the big geothermal plants, etc... This has nothing to do with actually winning against rooftop solar.
Just a cursory look at SB 374 and the other LAWS regarding the PUC, and it becomes painfully clear: they have violated the law. I've talked about the legislative purpose has not been followed. That is clear. In addition the PUC has made multiple PUBLIC statements that are unequivally BIAS against rate payers with solar. Both noble and thomsen, 66% of the commission just yesterday said they are looking to protect all rate payers without solar over rate payers with solar. This is just the tip of the iceberg here with their comments on this case. Unequivally, a court of law will see impartiality was out the window and as a result there are grounds to overturn the commissions decision, dissolve the commission, and require a new commission to be appointed. Commissioner noble already said rate payers with solar will be reimbursed if this turns out wrong for them, so he's already padding the nest in that sense.
this is a massive legal situation now, and they are okay with it because that is the intent. While this is in court, they will approve new capacity/infrastructure investments and nv energy will happily receive payment for them.
Delay, delay, delay is the mantra.
If you think anti grandfathering will happen anywhere else in Solarcity markets, think again. There is not another political/PUC/state legislature like this anywhere else in their markets. Even Arizona has a PUC election, which is another story. However, look what is happening to Arizona commissions right now and you'll see the path of Nevada is not going to end well for that PUC/governor/nv energy. Tell me why all of the sudden two Arizona commissioners are personally flying to Solarcity headquarters to meet with Lyndon Rive personally to "turn the page" "start anew" and "compromise"? Why such a dramatic action? What caused such a u-turn in their sentiment???
Nv energy might have delay as their mantra, but distributed energy has "follow the email/texts" as theirs...�
1/1/2015
guest That is extremely interesting. Can you please provide a link to confirm it?�
1/1/2015
guest Here's an article:
Arizona regulators seek solar net-metering compromise
All stemming from the smoking gun of commissioner stump's text-gate:
Roberts: Reason No. 847 for why Bob Stump's texts must stay on the QT
Nevada PUC/governor/nv energy text-gate to follow?
also, let's not kid ourselves... Warren buffet is not innocent here. His nv energy is apart of ALEC. So are the Koch Bros companies. ALEC is heavily, heavily involved in anti-solar campaigns nationwide, that includes Nevada and Arizona. Again, let's not kid ourselves into thinking good ol warren and the Kochs dont pay attention to what their companies do or has any say in how they act. And for some to say warren is democrat politically, ask him what he would think of a Bernie Sanders win...
here is an article on ALEC:
ALEC calls for penalties on 'freerider' homeowners in assault on clean energy | US news | The Guardian
Ted Cruz was a featured speaker at ALEC event mentioned in this article. Funny, Nevada governor Sandavol is rumored to be considered a leading Vice presidential candidate should Cruz win the republican nomination. Hmmmm...�
1/1/2015
guest Lyndon needs to do a better job answering questions when being interviewed.
His points should be something like this.
1) Incentives for Solar are in place for a reason.
2) Solar is good for people who buy Solar Panels, Nevada tax payers, and Nevada.
3) The cost to utilities, for every additional person with Solar panels is negligible. Any independent study suggest there is no added cost to the utility, when you look at the big picture.
4) Maybe those who don't use Solar should pay a bit more than those who have Solar? There are many reasons the state and Federal government is encouraging (INCENTIVIZING) people to buy Solar Panels.
5) It is immoral, unethical, and possibly illegal for the utility to introduce fees that make it impossible for Solar to make sense.
6) It is most likely illegal for the utility to IMPOSE fees on customers who thought they were being REWARDED for doing a GOOD THING by installing solar panels, only to find out they would be arbitrarily PUNISHED by the utilities?
The Good news is Bernie and Hillary, the only SANE candidates, have very clearly stated they believe what Nevada has done is unethical, probably illegal, and unquestionably unreasonable.
1) It is almost unquestionably illegal for the new fees to be imposed on existing customers.
2) SolarCity, and all customers in Nevada will likely sue, and based on what has happened in other states, will likely win. RELEASE THE HULK!�
1/1/2015
guest The possibility of a 7.5% discount rate was merely speculation about SolarCity selling equity positions in PPA and leases to insurance companies and other financial out fits. It really is a nice idea for SolarCity to tap into insurance companies because they need to invest reserves in pretty stable bond-like assets. The thought of having an insurance company cash upfront for the whole asset is worth taking a 14% haircut on the NRV. This avoids having to raise capital from both debt and equity. Shareholders are much better off taking the haircut to get immediate revenue and profit than straining shareholder value having this sit on the books for 30 years.
Think of it this way. Some installers like SunEdison have a yieldco just so they can liquidate a longterm asset. This cleans up their balance sheet and they get to post immediate earning when they sell the assets to the yieldco. So what if a couple of insurance companies were willing to function as your yeildco? You sell the asset and get the cash. But here you don't even need to bother with spinning off a yieldco. Other financially stable firms can provide all the advantages of a yeildco with less risk to the the parent company. That is, financial turmoil with SunEdison's yieldcos actually contributes to risk for SunEdison as a parent conpany. If the yieldco loses value the parent company which owns most of it loses that value plus it throws into question how the parent would continue to get funding if the yieldco were unable to deliver. That is why yieldcos are not really a stable structure for an installer. What you need are financially stable and truly independent clients that what to buy your assets. If this is what SolarCity is working out, then hats off to them.
Just ask yourself, would the market rather see NRV accumulate on the books or quarterly earnings?�
1/1/2015
guest Well written!�
1/1/2015
guest BTW I used to work in insurance. It is a strange sort of business. You take in premiums, invest them conservatively, and pay off claims as they come in. You never know exactly how much you will have to pay out in claims, you just reserve for them. That's what the actuaries are for. So it is a strange business where cash comes in first with a very slow outflow of cash for years even decades to follow. So this nicely complements what a solar installer is faced with. The solar installer has a big outflow of cash up front with a slow trickle of inflow for decades to follow. Insurance companies will also have some tolerance for a variable cashflow such as from PPAs. Certainly actuaries have the analytic tools to deal with this. Cooler than that, some insurers have risk that is linked to weather and may be able to hedge meteorological risk with solar PPAs. For example, if you insure against fires, a particularly sunny and dry year raises risk across your portfolio. But such a year would also produce an abundance of solar power. So the increased cash flow from your solar PPAs would help offset your fire losses.�
1/1/2015
guest In this Presidential Election Year, solar power net metering will become a political football. Nevada will most certainly be contrasted with California. Jerry Brown took an enormous Republican deficit and turned it into a budget surplus. This was done while driving California's renewable portfolio standard toward 33% via AB32(California's global warming initiative). In addition, the state has incentivized grid storage. California is the new distributed generation paradigm.
The CPUC will vote on Net Metering in the next couple weeks. The Democratic presidential candidates will beat Sandoval silly with facts. This is a historic political blunder.�
1/1/2015
guest Moderator Note:
I am acutely aware how difficult it is to keep this Investor discussion sanitized from any Political discussion, but I also know you folks can meet that challenge.
That is all. Carry on.
Carefully.�
1/1/2015
guest Very true. The main cause of the recent volatility is the incident in Nevada.
The next president will unquestionably make the environment, Solar Power, and Climate Change key points during their time in office. The president has a number of tools at his disposal, to address matters similar to what happened in Nevada.
Any opposition to addressing climate change should be treated as a threat to our national security, and to the world.
This is very relevant to recent events, and will be more relevant in the next few years. It is critical for anyone investing in SolarCity, since efforts that hurt solar assets in states will affect SolarCity.�
1/1/2015
guest well, let's reel it in just a bit here... At the max, Solarcity would do this for only about 12% of the portfolio. This is not the main way of getting capital by any means. So 88% is done the same way they have been doing it. This, in my estimation, is purely supplemental. So even if it is 7.5%, 88% of the rest is sub 5%. Way, way below the net 6% discount rate used in npv calculations.
I say again, there is no change in the overall discount rate of 6%.
i think people need to settle down and realize this. Also, who is Bernstein? I have never heard anyone from Bernstein on any Solarcity quarterly conference call asking questions. How on earth do we believe Solarcity gives them exclusive access to projected numbers? Even if that happened, why would Bernstein release this information the very morning after the negative Nevada PUC decision? All I ask is for all of us to think about his for a second before turning the bipolar switch on...�
1/1/2015
guest Amidst all this noise, let us not forget about this little Solarcity project happening right now...
CEC PON 14-303 - SunSpec Alliance -
make no mistake, Solarcity is already in the process of creating/establishing a global standard for distributed resources and the grid for whole sale markets.
Let that sink in for valuation sake.�
1/1/2015
guest Controversial solar rate changes will stay in effect - KRXI - Reno NV Top Stories - News, Sports, Weather
Offended? For shame. :wink:�
1/1/2015
guest What makes you say this? I've not been following the primaries race closely for the last month or so, but last time I check all of these things were a complete non-issue on the GOP side. Are you simply assuming to the GOP candidates don't stand a chance? Only glimmer of hope I saw on that side was that after the Paris accord, a majority of republican voters want the US to push ahead with 'green' policies, and would think favourably of a candidate who propose to do this - although I attribute this more to wanting 'America to lead the world' than anything else.�
1/1/2015
guest Sorry, I did not mean to give the impression that this was more than speculative or would somehow overhaul the basic financial model for the company. I recognized with reflection that I had been taken in by bearish spin that somehow SolarCity was changing their discount assumption. I'd be fine with that if it were the case, but all we have here is a little speculation that SolarCity may sell a few assets under deals that have a 7% to 7.5% yield. That does imply a haircut off of valuing those assets under a 6% discounts, but it is actually a damn good deal.
I do rather suspect that these deals may be for larger commercial projects. The recent John's Hopkins project involves a third party that will provide all financing. This is really smart because it allows SolarCity to get paid upfront and plow those earnings back into other projects. Large projects might not fit so neatly into an ABS deal, but may be big enough for other financiers to step in.
It's always good for SolarCity to diversify the way it finances. It's purely bearish spin to suggest that seek such alternatives indicates some sort of disparate problem. Creative financial problem solving is part of what make this company great. They truly are some of the best financiers outside of the financial industries.�
1/1/2015
guest apologize, not really aimed at you, jhm... You're a thoughtful person with genuine intentions on scty discussion. Forgive my broad blast under your comment.
California Launches Its First Real-World Smart Inverter Test | Greentech Media
"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."
Here is another reminder of what is actually happening with Solarcity, which should refresh the discussion on the actual valuation of a near future Solarcity. It will become painfully clear to all those politicians/PUC and other stakeholders where the grid is going to be very soon. It's not a question of it, it's a question of how soon.
We all need to remember this.�
1/1/2015
guest I Know it's difficult but please refrain from mentioning either parties name when Republican Democrat or GOP is mentioned emotion start flying and the whole thread gets chopped up and moderated laugh out loud
To be clear it is the post directly above this one that is more likely to get us moderated than yours but any political discussion devolves into chaos here�
1/1/2015
guest I understand your advice and concern. However, the politics of global warming and renewable energy are inextricably linked to investing in SolarCity and Tesla Motors. The corporate mission statements of both firms clearly communicate the goal of advancing solutions for global warming. I am not sure how an honest, comprehensive discussion of these investment matters can take place without delving into politics.�
1/1/2015
guest Jackl1956
As I said, I know all of you can meet that challenge. I suppose it's time to have all review TMC's Terms of Service, specifically
It is inconceivable to me that any of you are so inexperienced as not to realize how divisive to forum comity discussions that veer toward championing one or demonizing another political party are.
You can discuss how the promulgating of EVs or solar electricity present a political challenge. You cannot ?on this forum discuss how this politician or that political party is a moron or a saint.�
1/1/2015
guest Yikes. Never liked the fact that these solar companies were at the mercy of the power companies and the government.�
1/1/2015
guest A Look Inside SolarCity, WNYs Largest Construction Project in 20 Years
I'm sure they're all glad to be warm and indoors.�
1/1/2015
guest Hey, does anyone know how much a 1 GW PV factory costs? I'm looking for some figure I can pair with the $5B investment in the Gigafactory.�
1/1/2015
guest I had thought there was a plan to expand the current 750 million project with the ITC.
SolarCity starting to build Buffalo workforce - Business - The Buffalo News
�
1/1/2015
guest
I disagree. Since I am not welcome here, I will rescind my membership.
Cheers�
1/1/2015
guest Jackl does have a point. How is this not all rooted in politics? Everything about energy is political.�
1/1/2015
guest I think the Nevada PUC decision may crumble sooner then thought... What about the schools, government buildings that went roof top solar? How are they to preceived by the PUC as "free loaders" and "suckers" to the solar industry?
Secondly, Nevada net metering(NEM1) is based one kwh for one kWh. It is not based on price. If a roof top solar puts one kWh on the grid, they get one kWh in return. So if retail price goes up or down, the utility is still mandated to give a kWh back to the rate payer under the NEM1 contract. Under new PUC, those that agreed to the one for one contract have had their contract changed to one kWh for 1/4kwh (precipitously so over next 4 years).
That was not the agreement as written at the time of contract. This is also the same around the country. In other words, all net metering agreements are not dependent on price, but actual quantities of energy aka kWh. Therefore, by law as written, utiltiies are required to deliver equal kwhs for kwhs, nothing more nothing less.
Add:
By Nevada law, SB 374:
Sec. 2.8. NRS 704.766 is hereby amended to read as follows:
704.766 It is hereby declared to be the purpose and policy ofthe Legislature in enacting NRS 704.766 to 704.775, inclusive, and section 2.3 of this act to:
1. Encourage private investment in renewable energyresources;
2. Stimulate the economic growth of this State;
3. Enhance the continued diversification of the energyresources used in this State; and
4. Streamline the process for customers of a utility to apply forand install net metering systems.
Did the decisions made by the PUC instructed by section 2.3 result in 1-4?
Add2: did NV ENERGY include this nem distributed resource study required by law, SB 374 2(c):
(c) An analysis of the effects of the requirements of NRS704.766 to 704.775, inclusive, and section 2.3 of this act on thereliability of the distribution system of the utility and the costs tothe utility to provide electric service to all customers. The analysismust include an evaluation of the costs and benefits of addressingissues of reliability through investment in the distribution system. [/COLOR]�
1/1/2015
guest I missed the kerfuffle I guess, but SolarCity's own blog is commenting on the political implications of the upcoming presidential election.
Election 2016: Which presidential candidate has the best home for solar?�
1/1/2015
guest Nevada net metering billing policy 1997-2015 in which it discusses kWh production vs what is used from the utiltiy. It says nothing of any price for the customer generated kWh. No where does it discuss a possible future change RETROACTIVE to his agreement. No where does this agreement give warnings of such changes in kWh for kWh ratio. This has been the policy for 18 years... And the bottom line is net metering is not a rate based system, it's a kWh put on the grid/credit system!!! It's not apart of a rate case system, thus is absolutely nothing like what the PUC refers to just "like normal rate changes for all grid customers" and it hasn't changed for, again, 18 years which their have been many rate hikes on retail rates to all nv energy customers!!! Absolutely false comparison based on the law and the legal history/precedent of net metering regulation in Nevada!!!
not only does the PUC's decisions not follow the purpose of SB374, but by changing the kWh:kwh, 1:1 ratio, they also violate the law(NRS 704.775) directly stipulating 1:1 net metering.
Absolute illegal action by PUC not only in not grandfathering but in changing the net metering system as outlined by SB 374. Their decision does no result in 1:1 net metering. SB 374 2.3 explicitly states the commission may establish RATES AND CHARGES to avoid, reduce, or eliminate an unreasonable cost shift. This says noting of changing the existing POLICY of 1:1 kWh:kWh put on the grid/credit in the NRS 704.775 developed, established by prior legislatures and maintained current legislature in sb374 and signed into law by governor Sandavol. Therefore, the commission is required to establish a SEPARATE ADDITIONAL RATE AND CHARGES for solar customer CONSUMPTION outside of NRS 704.775. This did not happen. Instead they have unlawfully changed NRS 704.775, which only the legislature can do (and did not do in sb374!) in effect, the PUC was authorized to determine a separate additional rate per kWh consumed of grid energy, but was not authorized to change the 1:1 agreement for excess production put on the grid as stipulated under NRS 704.775. So if excess goes onto the grid, by law, the utiltiy must give that same amount of KWhs back as credit, If then a solar customer consumes mor grid electricity over the credit, then the PUC is allowed to authorize an additional cost for that kWh consumed outside of the NRS 704.755 regulation in excess production put on the grid. In others words, they have to hand you back kwhs as measured by the meter, nothing less nothing more. It you have 100 kWh credit, then you receive 100 kwhs back at the end of the month. Not 1/4 of a kWh, a full kWh. Whatever the solar customer consumes after credits are used, can be charged the special solar customer rate determined by the PUC. they did not do this so in effect the current rate structure is unenforceable.
Remember, SB 374 authorizes the commission to approve utility TARIFFS(rules, rates, charges) but does not give any authorization to change NRS 704.775 (which defines and establishes what net metering is/does). This tariff, by SB 374 law, must be outside of the net metering process codified by NRS 704.775. Again, I think this is a major problem for the commision and the enforcement of the law itself. If they actually wanted to change "net metering," they should have deleted NRS 704.775 or altered it in the regulation. This did not happen.
NRS?704.775??Billing; calculation of net energy measurement; treatment of excess electricity; status of net metering system under portfolio standard. 1.??The billing period for net metering must be a monthly period. 2.??The net energy measurement must be calculated in the following manner: (a)?The utility shall measure, in kilowatt-hours, the net electricity produced or consumed during the billing period, in accordance with normal metering practices. (b)?If the electricity supplied by the utility exceeds the electricity generated by the customer-generator which is fed back to the utility during the billing period, the customer-generator must be billed for the net electricity supplied by the utility. (c)?If the electricity generated by the customer-generator which is fed back to the utility exceeds the electricity supplied by the utility during the billing period: (1)?Neither the utility nor the customer-generator is entitled to compensation for the electricity provided to the other during the billing period. (2)?The excess electricity which is fed back to the utility during the billing period is carried forward to the next billing period as an addition to the kilowatt-hours generated by the customer-generator in that billing period. If the customer-generator is billed for electricity pursuant to a time-of-use rate schedule, the excess electricity carried forward must be added to the same time-of-use period as the time-of-use period in which it was generated unless the subsequent billing period lacks a corresponding time-of-use period. In that case, the excess electricity carried forward must be apportioned evenly among the available time-of-use periods. (3)?Excess electricity may be carried forward to subsequent billing periods indefinitely, but a customer-generator is not entitled to receive compensation for any excess electricity that remains if: (I)?The net metering system ceases to operate or is disconnected from the utility�s transmission and distribution facilities; (II)?The customer-generator ceases to be a customer of the utility at the premises served by the net metering system; or (III)?The customer-generator transfers the net metering system to another person. (4)?The value of the excess electricity must not be used to reduce any other fee or charge imposed by the utility.�
1/1/2015
guest Solar is most definitely a political issue. It shouldn't be, but it is. I hope JackL1956 stays with us.�
1/1/2015
guest Thanks! So $350M for the building and $400M for the equipment. The government is paying for all of this. That is such a huge deal for SolarCity.
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I agree. The utilities only exist as monopolies by government fiat.�
1/1/2015
guest Fair enough. I didn't intend to make any political judgement (maybe I shoudl have dropped the last line), but simply find out more about the political questions regarding solar. My perception was that it was not universally (across all major parties and candidates) considered that climate change and renewable energy was a policy priority, but I have not been following closely recently so that might have changed. From my cursory reading of round-ups from last night's debate, I haven't got the impression that the topic was mentioned at all. Again, no judgement intended just interested in information.�
1/1/2015
guest I hope your right foghot, I'm a little bewildered with the drop yesterday which seems to be about the puc decision to not put a halt on the rate increase. For anyone following this case I figured that was a given die to the corrupt anti solar nature of the puc.�
1/1/2015
guest Looks like another down day is on the horizon, simply because the implications of this NV hiccup has not been explained properly to the public. I guess in the long run its good to have a post- ITC extension buying opportunity and this will likely bring back huge short interest, but it's still unnecessary.�
1/1/2015
guest When the ITC extension was announced, it was a significant win against one of the big arguments from the bears. I thought this being an important move forward that the share price would hold well and stabilize around and above $50 for the most part of 2016, but knowing how volatile the Solar industry can be (especially non-sense like what's happening with NV) and with macro variables always at work, I suppose the recent downtrend isn't surprising.�
1/1/2015
guest In my mind, the certainty level of a near term $100+ stock valuation shot to near 90% once that was announced. It gives SCTY so much flexibility nationwide that these little single state battles will never cause an existential threat to the company. To have these buying opportunities in a certainty-adjusted environment such as this was unexpected to say the least. It also should bring back the sharks trying to short SCTY to zero, which is a good thing. Keep in mind there has been NO ONE buying ANYTHING since Jan 1st, so there's nothing there to backstop against panic sellers. Also keep in mind I know next to nothing about finance.
$70+ option pricing for 2017/2018 LEAPS will be delicious for the next few week until some sort of effective explanation/news/guidance from SCTY. Unfortunately, every time Lyndon has opened his mouth over the last year, the stock has sunk 20%. The man is a genius, but needs to cede PR authority to someone like Radford Small (SVP Business Development and Investor Relations).�
1/1/2015
guest Class-action solar lawsuit filed against NV Energy
Two home solar system owners sue NV Energy over rate hikes
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1/1/2015
guest I think the stock is extremely oversold on the NV thing and macroeconomics. Nevada is simply not a big chunk of SolarCity's opportunity. Now that ITC is extended there are much better states for SolarCity to grow into. Consider Georgia. My state is much bigger than Nevada, retail rates are about 15.5 c/kWh (vs 11.6 c/kWh for NV), we've got plenty of sunshine, and the state passed a law over a year ago allowing solar PPAs and similar financing. Georgia is wide open for solar, but the big installers are nowhere to be found.
So I'd like to see SolarCity kick the dust off and move into new states. It also may be worth considering a slower growth strategy when entering a new state. The faster solar penetration gets to a critical pain threshold for the utilities, the more extreme the regulatory backlash is likely to be. Rushing to hit a solar cap may not be so wise. It may be better to contemplate how much solar per year a utility can acclimate to and stay in that range.
For example, a utility makes a 10% profit. If distributed solar takes 1% market share in a year. That decreases revenue by about 1% without much time for costs to shrink. Thus, the utility sees their profit decline 10% in just one year. This may just be barely tolerable for the utility. If solar insists on doubling every year, the the next year another 20% of profit is destroyed, and another 40% the year often that. So with such aggressive solar growth, a utility can find itself becoming unprofitable in just 4 years. Rate filings are a slow process. So the utility finds itself having to get quite aggressive pretty early on to stall the growth. If a PUC were to impose an annual cap on solar (excluding that which is installed by the utility or a related entity) of say 2% per year (in terms of total power consumption), installers could have a sustainable business, and the utility could be called upon to make necessary changes in a timely manner to accomodate this. Why should the utilities accept such a deal? Because if they don't, then within 5 years solar installers will be able to remove customers from the grid. So an orderly accomodation avoids disaster. Why should solar installers accept such a deal? Because it removes regulatory uncertainty for their business and customers.
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Nice. One wonder if simply grandfathering would have been cheaper than defending against a class action lawsuit.�
1/1/2015
guest Nothing is more expensive than failure to delay the entry of solar into the Nevada energy market.�
1/1/2015
guest "NV Energy has said it will not profit from the change in rate structure." This is an odd claim because NV Energy is absolutely trying to recover from the profit they lost when customers installed solar. This change does not add cost for NV Energy, but it does collect more revenue. Therefore, NV Energy profits from this change.�
1/1/2015
guest Yes but if they profit from it then they are just a big bad monopoly. The whole story they have created about protecting the average consumer from this evil cost shift evaporates. This can not end well for nv energy or the Arizona power company can it?
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guest The PUC who made the ruling, the Governor who appointed the PUC, the Legislature who passed the laws....all running for cover and blaming NV Energy. I hope the people of Nevada realize that all here are complicit.
Edit: Including the masses for allowing a monopoly energy company lawyer to become governor.�
1/1/2015
guest I reiterate, net metering as law in Nevada is not pricing mechanism. It's not about retail rate or wholesale rate, or any monetary value. it is quantity dependent. It is very specific. If a kWh of energy is put on the grid, nv energy must credit one kWh back. It was not changed in SB 374 signed into law.
closely read the following:
Sb374 law:
Neither the utility nor the customer-generator is entitled to compensation for the electricity provided to the other during the billing period. (2)?The excess electricity which is fed back to the utility during the billing period is carried forward to the next billing period as an addition to the kilowatt-hours generated by the customer-generator in that billing period. If the customer-generator is billed for electricity pursuant to a time-of-use rate schedule, the excess electricity carried forward must be added to the same time-of-use period as the time-of-use period in which it was generated unless the subsequent billing period lacks a corresponding time-of-use period. In that case, the excess electricity carried forward must be apportioned evenly among the available time-of-use periods.(3)?Excess electricity may be carried forward to subsequent billing periods indefinitely, but a customer-generator is not entitled to receive compensation for any excess electricity that remains.
The law is clear: no one is to be compensated. It is clearly a kWh for a kWh. If the utiltiy does not deliver a kWh for a kWh put on the grid, then they are explicitly in violation of SB374.
any rate changes on energy consumed net of credits must be done outside of kWh:KWh policy. It is a violation of law to not deliver a kWh for a kWh put in the grid.
again, net metering was signed into law/policy by the governor and is not a utility designed tariff. It is not a rate or charge. Net metering is clearly defined and stated as a kWh put on the grid, receives an equal kWh back. It's not a kWh for a $ value. It is a kWh for a kWh. It's a cookie for a cookie, a gold nugget for a gold nugget, a piece of paper for a piece of paper, add your own comparison...�
1/1/2015
guest Maybe I'm missing the point, it was my understanding that NV Energy was given broad power to balance the "cost shift" by modulating rates and fees. Are you taking that first paragraph to mean rate should never enter into the equation so long as usage outpaces pushed generation? Delivering 1 kWh for 1 kWh is still happening if you're talking about selling an 11.8 cent kWh and buying a 2.6 cent kWh. Right? Either way it'll be found illegal either by your point above or by outright abuse of a monopoly.
This is such a great story and I'm getting annoyed that no one major is bothering to give it in depth analysis and explanation. This is Bernie Sanders on a platter and the only one who's mentioned it is Hillary in passing. These types of outright theft and corruption are usually hidden behind algorithms, shell corporations, 3rd party go-betweens, shady banks, etc. This one is right out in the open and easily quantified, Nevadan's are losing millions directly and billions indirectly through economic loss.
This spring/summer will be fun to be sure.�
1/1/2015
guest as I read it, net metering is defined/outlined by the state law, not by utiltiy. That language was not changed governing 1:1. Utility devises a tariff that PUC approves. PUC is beholden to the confines of the law. The law states "net metering" is a 1:1 that has nothing to do with rates or rules around that are by PUC. If they wanted to change net metering, they needed to change the whole concept as written because the new rate scheme does not comply with 1:1 net metering. The new rate scheme alters 1:1 in that 1kwh put on the grid is then not given back. It now something like 1:.8, for every kWh put on the grid, the utiltiy delivers .8kwh credit. This explicitly not what net metering as stipulated within sb374. As such, the current approved rate scheme can not be enforced as approved by the PUC. It must be redone.
An unreasonable cost shift must be addressed in a utiltiy proposed rate(tariff) and then that tariff approved by the PUC. That's the authority granted to the PUC in oversight of the utiltiy tariff proposal. The law clearly shows that net metering is not a rate based mechanism. In order to address any cost shift, utiltiy can only be applied to grid energy consumed outside of the 1:1 net metering concept defined/outlined and then reaffirmed in SB374.�
1/1/2015
guest �
1/1/2015
guest A number of posts recently have made statements along the lines of, "Nevada is only (tiny portion) of SolarCity's business, why worry since it's nothing in the overall scheme of things?" I disagree.
It can actually be a huge issue for SolarCity going forward. Like ripples in a pond spreading outward from the point of impact, the Nevada PUC decision can and will cause waves and problems in a widely expanding manner:
Example 1 - a hypothetical yet unavoidable situation: Every potential customer sitting down with a SolarCity rep can wonder, "What if the PUC of our state takes the same action that the Nevada PUC did? Then we are hosed." And they tell the sales rep that they need to think about it, and think about it turns into no decision, and no decision becomes no sale as the homeowner sees clearly the potential problem down the road and this single data point overshadows all real and perceived benefits.
Example 2 - an actual situation: In Texas, the Public Utility Commission is currently hearing an application from El Paso Electric Company to raise rates. One aspect of the case is the request to break residential solar customers into a new and separate rate class. EPEC is calling this proposed rate class the "Partial Requirements" class. Just yesterday EPEC filed their rebuttal testimony and managed to ask themselves, "Has any other PUC ever found it proper to discriminate against solar owners by charging them more?" (I paraphrased) and the reply was, "In a decision issued December 23, 2015, [the Nevada] commission found that partial requirement DG customers have different usage characteristics, impose different costs on the utility, and should be treated as a separate class. The Order in Docket No. 15-07041 is accessible at . . ." and it goes on for three more pages cherry picking details from Nevada's ruling. (You can read it here. The pertinent information begins on page 19 of the testimony, which is the 21st page of the document.)
So right now, right here, my electric company is telling my state's PUC, "Look, it's not just us and we aren't being unreasonable. Look what the wise people at the Nevada PUC are doing, you won't be alone if you agree with us."
El Paso Electric's rate case might be even more of a bellweather because they would be the second domino to fall (yes, they are asking for no grandfathering) which adds momentum. And once the third or fourth PUC sides with a utility company then the precedent is set and electric companies across the country will follow the path of their brethren before them in asking for solar price discrimination. And as a Public Utility Commissioner it is so much easier to side with the utility if you are just following along in the footsteps of other states' PUCs.
Which leads me to my last, and scariest, example.
Example 3 - and the lawyer says: What happens when the utility company decides they are "required" to notify consumers BEFORE they switch to solar that the net metering might go away? What happens when a contract to install solar is signed by Helen and Harold Homeowner, SolarCity files the permitting paperwork, and the Electric Company asks Helen and Harold to sign a piece of paper stating something to the effect of, "Net metering in its current form is not guaranteed, it has changed in other states, we cannot promise we will never ask our PUC to allow us to screw solar owners, and we love you as a customer but we feel an obligation to let you know about something that might or might not happen in the future - because we are only thinking of you and what is best for you." (I kind of paraphrased again.) I imagine the utility's marketing department would work hand in hand with the legal department to create a document that the customer would need to sign. A document that is ostensibly a CYA maneuver, but its primary objective is to cause Helen and Harold to exercise their option to cancel.
So even though Nevada is only a small piece of SolarCity's pie, the Nevada PUC decision is the crack in the dam - and the chisel and the sledgehammer needed to destroy that dam - allowing the floodwaters to roar.�
1/1/2015
guest Doubling of renewables will add $A1.9 trillion to global economy by 2030 : Renew Economy
IRENA estimates that doubling renewables could as $US1.3 trillion to the global economy. Most countries benefit. Stand outs (below) include Ukraine, Japan, India, South Africa, and even the US.
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1/1/2015
guest �
1/1/2015
guest @Foghat, forward your posts to Rive and SolarCity, just in case they are not already aware.�
1/1/2015
guest I've sent a message to the group requesting stay/reconsideration.
Also, this has implications nationwide for all public utilities in Solarcity markets since the very foundation of net metering is grounded in KWh for kWh credit. It is not a rate agreement for kwhs delivered. For all those traders considering going short because of Nevada, beware of this fundamental legality.
Also so to make very clear is Nevada utilities(and all public utilities)have no control over net metering as a program. Net metering is not a utiltiy program. It is a legislative mandate on public utilities like NV Energy. So for the past 18 years in Nevada, net metering has been promoted and implemented by the people of Nevada, not the utility. The utility has to abide by this program. As regulators of the utiltiy, the appointed PUC also has to act under the legal provisions of mandate.
Net metering as we know it can not be changed through a rate or a rate case. Has to be in the legislature and a change of law. All short hedge fund managers need to think about this.
this also brings up the legality of creating a seperate rate class for solar users under net metering program since they themselves receive the same service as any other rate payer to receive electricity from NV Energy. Since net metering is seperate from rates or a rate case as well as it not being a utiltiy program, it is not a determinate of energy rate structure to serve solar customers. As such, solar customers are no different from all other rate payers in determining service costs to those customers. Thus, there is legal grounds for descrimitory practices on behalf of the utility being perpetrated on specific rate payers for service. PUC has no legal authority to approve such practices.
lastly, this is a different legal case as the one presented in Arizona against SRP. Both deal with very similar actions on behalf of the utiltiy. One is not public utiltiy and the other is a public utility. Therefore, the legal precedent set in each case covers most if not all legal cases that may come down the line regarding net metering and rooftop solar as it relates to rate making. So, simultaneously, Solarcity et al will involved in legal cases this year that will determine how the rest of the country utilties will legally be able to act. As such, and from what I have tentatively gathered in evaluating the nv energy case here, hedge funds/traders looking at this as a short thesis may need to re evaluate how that will play out.�
1/1/2015
guest State officials say Oregon energy bill would boost rates, wouldn't cut emissions | OregonLive.com
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1/1/2015
guest With regards to the upcoming California PUC decision, I find the California regulations on net metering to be more defined. However, the funadement net metering as defined and directed by law is the same 1:1 mechanism. For every kWh put on the grid, customer generator gets an equal kWh back. Now if they don't consume all of it, and there is an excess put on the grid after a month then retail rates are applied to value that excess. Same goes if the person consumers more grid energy. They have to pay retail. This is calculated on a monthly basis. What happens after that equal exchange of energy consumed/produced within a monthly billing cycle, the tariff rates that the CPUC authorize could be applied.
so, any decision by the PUC in the coming weeks can only apply to the tariff eligible portion at the end of the month bill.
This also brings up a point on charges placed on solar customers. What extra does a utility have to do to deliver energy to a rate payer that has solar? what is the difference to serve a customer without solar that same energy?
if there is no difference in delivering energy, then a California utilty cannot add an additional descrimintory tariff on a rate payer with solar. The Califonia PUC is not authorized to approve that descrimitory tariff.
this also goes to a fundamental legal issue of personal property and being able to reduce your personal energy consumption expense. A energy efficient light bulb is a personal choice, you have the right to install a light. You have the right to put solar panels on your roof to reduce energy you purchase from the utiltiy. All this does nothing to change how a utility delivers energy to all of our homes. Not one thing. If the utility has a revenue problem to serve, they they must raise rates for all rate payers, not discrimate against those that use less of their product.
If they have a problem with revenue, then they must either sell off assets, down size, or ask for government assistance(bailout/subsidization program).
This is not a rate payer problem. This is a utiltiy business problem.
if they have a revenue problem due to government programs like net metering, which promote energy efficiency, the utiltiy must ask the government net metering to be discontinued. They can not legally apply descrimintory rates, nor can PUCs approve such rates.
Secondly, if revenues are cut into, are these revenue losses unreasonable? Meaning, are utilities making less then 10% authorized profit margin? If they are making over the 10% profit margin mandated by law, then there is a strong case net metering revenue loses are not unreasonable and therefore the program is to remain unimcumbered.
ultimately, all legal questions will lead down these roads to these answers whether they will be determined in the PUCs or in the Supreme Court.�
1/1/2015
guest We have had attempts by the power company in Utah to charge solar customers extra fees (in addition to the net metering fee) to pay for "line maintenance." Some proposals have included charging more for a larger solar system, which of course doesn't take into account the needs of the house and what they will pay during the winter when the panels are covered with snow. I don't understand why utility companies don't just separate the line costs from the cost of the electricity. In other words, instead of charging 10 cents per kW, and covering the line maintenance with the profits from that rate, they should charge every house/apartment the same "line fee" of $10 dollars a month (or what ever it needs to be). Then charge 8 cents per kW (for example) for the actual electricity to those that use it.�
1/1/2015
guest Net metering measures energy. So to get around it they charge people for feed-in power.�
1/1/2015
guest they must prove it costs more to deliver energy to your solar home then it does to provide energy to a non solar home. Does it cost more to provide energy to your home?
if the answer is yes, they must prove it to the PUC. If no, then no extra cost for having solar.
this is squarely a revenue problem. The PUCs must assess if revenue loss due to legally mandated net metering programs is unreasonable. If not unreasonable revenue loss, if it doesn't pull the public utility under the 10% profit margin(or whatever it is in Utah),then carry on.
Its really that simple of a legal argument.
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There is no feed in tariff in Nevada. Net metering is the policy. Can't legally get around it.�
1/1/2015
guest My understanding is line charge is not even mentioned much because it is a big ugly hairball to change existing law around utility monopoly, and involves all sorts of implicit subsidizing etc., nobody wants/can go the distance to make the change. I could easily be wrong but that's what my googling around yielded when I was investigating this subject.�
1/1/2015
guest
That is my thought exactly. Instead of rolling it up into a neat little c/kWh for your total energy bill, give every single rate payer an itemized bill separating out the distribution/line maintenance costs from the generation costs. I understand that's not how things are done, and it's hard to change the status quo, but that's the only fair way I can think of to resolve this issue. The utility DOES provide a service to solar and non-solar customers by delivering energy when they need it and maintaining the lines e.g. after a storm, and EVERYBODY should pay for that. Generation is a different matter, and customers should be able to clearly see how much the energy they are using costs to generate by source. Then they can decide for themselves if they want to pay so many cents for coal/nat gas or so many cents for solar/wind. I see this as a necessary step to setting up a marketplace for energy in which solar competes with fossil fuels on a cost basis. "Let the free market decide" like a certain party likes to say all the time.�
1/1/2015
guest SolarCity Slumps on Nevada Rooftop Fees, Plan to Sell Plants - Bloomberg Business
Here's some clarification from SolarCity on the potential to sell assets. Bernstein was obviously twisting this around to spew FUD.
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1/1/2015
guest Germany is about 5 years ahead of the US and working through what you've pointed out here. In 2014, the most forward thinking utility executives tried to get out in front of dwindling supply profits by announcing a splitting off of the production portions of their companies from the grid/renewables portion. This sounded cute and logical as if the purpose was to "focus on renewables", but really the plan was all about shuttering all the unprofitable parts of the one side and walking away from the costs associated with shutdown. The German government put a freeze on those plans and they're just now moving toward a compromised split off.
Between 2008 and 2013, the market value of these top three German utility companies dropped by 75%. Warren Buffett is well aware of this reality on the horizon and knows that it's inevitable in a place as solar-friendly as Nevada. The shift from +$750M in profit to insolvency will happen quite literally at the flip of a switch as soon as the pressure is taken off and solar is allowed to compete in the state. Hence the full on desperate barrage.
The whole nation will slowly move to something like what you've listed above, it's just going to be difficult with utility interests running a lot of states and the masses walking around in a disinformed and politically charged daze.�
1/1/2015
guest Australia 5th in world in small scale rooftop solar PV in 2015 : Renew Economy
For the record, Australians installed 713MW of rooftop solar last year at a price of $2.2B. This works out to an average price of $3.09/W. (I do believe this is in US dollars.)
While the rate of installation has been flat for a while due to intense utility pushback, there is potential for growth to accelerate. The price of solar keeps going down, batteries are becoming more attractive, and utility rates keep going up. If installation are up in 2016, I would take that as a signal that rooftop solar is overcoming utility obstruction in Australia. This would be a positive precedence to show that ultimately technology gains will trump political obstruction. So we'll keep watch to see how this plays out.
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Somehow I don't think that Buffet really understand this. NV Energy has been pushing ahead on a $900M NG peaker plant that is not exactly necessary. In fact, NV Energy pushed away a fairly priced PPA on an existing peaker plant so that they could pursue building out this new plant. If Buffett believed that the power generation business was going to be a money looser within five years, then the obvious choice would have been to renew the PPA and avoid risking new capital on a new plant. So I've got to conclude that Buffett really does believe that a brand new gas peaker plant really is a sound investment. Berkshire Hathaway investors, you've been warned.�
1/1/2015
guest BAU at NV Energy
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1/1/2015
guest Lol�
1/1/2015
guest I refuse to believe Warren Buffett doesn't follow the European utility industry. If he nixes the building of that plant then he's admitting that solar is wildly cheaper and has no rationale for the strategy currently employed. If solar is allowed into the market without resistance, the whole thing goes south so that's simply not an option. Hence, here we are....�
1/1/2015
guest It just does not add up. Did Buffet buy NV Energy so cheap that a few years of profits before going bakrupt would yeild an adequate return? Or are his other businesses profiting off this deal such that Buffet is willing to sacrifice NV Energy for these other profits? Or maybe Berkshire Hathaway is just an elaborate Ponzi scheme so that the short term earnings simply create the illusion of a profitable portfolio. Adding a $900M asset allows NV Energy to boost annual profit by $90M. This can create the illusion of growth for a few years until the whole thing implodes. So is this all just a sham?�
1/1/2015
guest Well they're all intertwined, right? I don't know how deep Warren is into extraction or other pieces of the methane world, but I wouldn't doubt there are plenty of concerns other than just the NV Energy profits. I think it's more likely he just didn't see this coming so fast and being so disruptive.
Due diligence to buy NV Energy was done in 2012, German utilities were still in denial and making a profit at that point, by the end of 2013 it was all over. That's how fast solar went from a future concern to a current nightmare. Warren bought at just the wrong time and likely didn't realize it until mid-2014. Today's desperation is simply the only option left other than giving in and making the best of a rapid downward spiral.
You're talking as if Warren cares about the waste and inefficiency of building another 900M methane plant. If NVE goes broke, who cares if there's another 900M on the books? I think he sees two options and is picking the one that is more profitable even if it means taking a whole bunch of illogical and potentially illegal actions.�
1/1/2015
guest Just logged into my new trading platform and was reading the linked stock analysis for SCTY. Capitalcube says SCTY is "overvalued", that Solar City isn't really earning much, is overextended, is spending a lot on getting new customers, is growing, is getting revenue, and isn't doing as much as others on reducing costs; is "betting big on the future" they said.
The way I see it, SCTY wants to single-handedly manufacture, sell, install, operate and maintain the future of energy, distributed across both rooftops and generation land (i.e., large installations). They're building factories, marketing big to land holders, financing the installations, and doing the operation of these panels that quickly fall in cost to put in new in the future for new installs. This is a real save-the-earth moment, so everything SCTY is doing helps save humanity from pollution and oil wars. However, financially speaking, it might be big gamble; that's where I agree with Capitalcube's analysis. But the gamble is this: in the future, their solar panel factories will still give them more market share, more sales, more revenue, and at the same time, at a certain point, the market will eventually saturate, then SCTY will sit there and just nurse whatever they've installed. My question is this: considering that factory building should be calculated for the eventual output of the factories and the cost basis that brings them in the future, what is their total cost of installation and maintenance (including sales, financing interest, and all that jazz), and their total revenue, after the factories are used up and all the solar panels from the factories are installed and have run their entire useful life and have stopped producing energy at a maintainable viable level?
I keep an open mind, especially since I don't have those numbers, analysis of those numbers, and comparisons to other competitors, in front of me. I do say good for Capitalcube for at least comparing SCTY to their competitors and stating that they did so; at least it's apples to apples (even though I'm the first to remind everyone not all apples are the same --- most the ones they used to sell in stores were awful).
As for the stock price ... overvalued, perhaps, but certainly a better buying price than where it was a month or so ago. I'm too new of an investor to get that feeling right right now.�
1/1/2015
guest Read the last 150 or so pages of this thread and you should have a good base for decision-making.�
1/1/2015
guest This is where PUC, PG&E, et al painting with a broad regulatory brush can really hurt things in my view. Let me explain:
Today in under-developed neighborhoods with insufficient solar panels to power the total net energy of the neighborhood (considering storage inefficiencies, of say, PowerWalls and various distant wind farms and such):
During the day, solar panels produce more energy than the home uses. The energy goes out on the wire to other homes in the neighborhood. This cost isn't zero, but it is not much more than the already-calculated cost of the grid being there in the first place. Today, there's a problem with Power Factor/kvar/power waveform/etc., but if I get my way, all generators (including solar, and especially solar inverters since they can do all sorts of things in software) will solve this. Let's hope. So today, there's a little bit of extra cost dealing with the power factor stuff, but not a lot. On dark days, the power company has to import energy from far away, so this standby power costs money. The grid for that standby costs money. That is similar to nighttime. Let's talk about nighttime. At night, the power from the power company has to come to the home, from whereever it gets it (batteries, windmills, hydroelectric plants, solar panels on the other side of the planet via big superconductors that circumnavigate the planet, geothermal, nuclear, coal, oil, natural gas, etc.. mostly natural gas), across the grid, to the home. Once again, all that costs money. But not some essoteric amount of money; a bunch of small little particular amounts of money derived from the portions of assets they're coming out of. So, once that gets to the customer, it gets used. Let's hypothetically say the home sends out and receives identical amount of energy at their meter, and gets a net metering bill of 0. The way I see it, the system has failed: the specific costs of the grid, of distant fossil fuel plants, etc., are not being disincentivized to the home who, after all, could install MORE solar panels and MORE batteries in their home. What if the home sends out more energy to the grid than it receives, but not much? Ok, they should pay the grid, the generators on the other side of the grid, etc.. How much? I say it should depend on the cost of the grid to THEM, such as how long the wires are. If PG&E strung up wires that take 1,000 miles to reach only 3 miles from generator to home, then the home should pay the 1,000 mile cost, see the big bill, and be incentivized to get more local generation. That's the right way to do it now. Back when PG&E was the generator, PG&E should be penalized for not keeping costs relatively fair across the civilization. But now, since PG&E isn't the generator, the actual costs should be exactly borne by everyone, not communalized, because communalized costs make the market fail. Of course, if the home gets their energy from the grid from the house 3 homes down that has a PowerWall bank double the size they need that they charged up from their double size panel farm, PG&E ought to charge the home for the distance of that energy, which isn't as much as the distance from the 1,000 mile or 10 mile or 50 mile lines (more typical is the 30 to 60 mile range around where I live since I live close to Moss Landing). What if the home ends up selling energy 24-7 to the grid, because of 10x needed solar panels for their own needs and a whole bank of batteries to time-shift that energy and a bunch of good power-factoring inverters? OK, now the rest of the neighborhood should pay PG&E for the grid to get half a mile from that generator home to their own homes for as much of their bills as they get from that generator home, which isn't much for the grid. But the energy should be paid to that home according to that home's cost of energy, too. That is a pretty high cost. I think they should be paid a lot. But: not by PG&E; by the other homes in the neighborhood. What if those homes don't want to pay that cost? Then they can pay the cost of the 40 mile away natural gas plants. If there's any sort of solar incentive, then that has to be somehow calculated. What is the incentive for? Environment? Calculate the environmental cost of the alternatives and add those costs to those alternatives, and alternatively subsidize the price of the cleaner alternatives directly according to each piece of energy produced by the panels. The grid is a cost that should be paid for according to the particular costs of the grid: distance, etc.. The meter costs money too. Even billing is a cost. Is PG&E, PUC, inverter manufacturers ready for this? Whatever the market is doing should push them toward this.
Now, let's look at a new case: a neighborhood that produces more energy than it uses, net, all year. So, during times when the neighborhood is producing more energy than it uses, the grid is sending energy long distance to other parts to sell that energy someplace. The cost of that grid should be paid for, according to how far it is being sent. But should it be paid for by the generators? No, I say: it should be paid for by the users of the energy, as I said above. Then, during times when the neighborhood is producing less energy than it uses, it is the buyer of grid energy, so the homes of the neighborhood should be paying their respective costs for each using the grid and the amount of energy from wherever they're getting the energy from.
Problems:
* What if a home doesn't accept the price of Joe's nighttime battery juice that he charged up on his solar panels he installed back when panels were expensive, which is just across the street from it, but prefers the natural gas from Moss Landing, about 50 miles away by wire? If he doesn't buy Joe's energy, and Joe doesn't get paid for his energy, then Joe shouldn't put his battery juice into the inverters into the grid, because no one bought it. During the day, same thing: if a home doesn't want to buy Joe's expensive solar panel energy, Joe just stores it in his batteries, or drops it on the floor if no one buys it and his batteries are "full" (at which point his cost goes down and someone undoubtedly will want to buy it at that point, unless Joe now lives 50 miles from his nearest neighbor and grid is an expensive component due to distance, but let's return to the neighborhood view). But what if Joe does find a buyer for his energy across town and the across the street neighbor is using 50 mile away natural gas, and both want to use the same grid in their neighborhood? Joe puts his energy for the cross-town buyer on the grid, and the neighbor orders the natural gas energy across the grid from Moss Landing or whereever, and then what actually happens is some of the natural gas grid energy goes to the cross town guy who paid for solar energy and the across the street neighbor is using solar energy who paid for natural gas energy. If the cross town guy is closer to the natural gas generator than Joe's neighbor, then this is a net win for both the grid operator and the environment, but if the cross town guy is further from everything than Joe's neighbor, then it kind of washes out since either way it's about a similar amount of energy. At some point, the cross town guy will stop trying to go out of his way to buy Joe's cleaner energy and just get cheaper more local to him cleaner energy, and a certain amount of balancing will happen as people trust in the system to work itself out more and more, and trades will happen according to cheapest energy.
I didn't really find a problem in my list of problems.
The only problem I perceive is if the costs are, as I said, communalized, generalized, and made non-specific, non-per-use, non-representative.
These are things that create value:
+ Booting up clean energy for efficiencies of scale. An equation of cost can be applied to that rather than the gross blunt hammer of regulation.
+ Figuring out the incremental actual costs of pollution and applying them appropriately to the various generators via tax or mandatory payments to those affected (I prefer the latter: get a NOAA map of where the pollution made landfall and give those people healthcare money directly from the polluting generators, for every particle of dust, according to each particle's effect on health, as close as possible without making accounting cost too much). These taxes and/or direct payments can either be against the polluting generators, or some sort of communal tax credit (problem: who pays the taxes???! that's crazy unfair) to those who get less and non-polluting forms of generation (remember: where is the cost of pollution paid for the pollution made making the panels? In my plan of paying downwind residents pollution costs, the solar factories already paid for the solar panel manufacturing pollution, and that question is solved, and no more taxes or tax credits are necessary, and the market is clean).
+ The energy from the solar panels.
+ The grid.
+ The equipment that makes everything work. (I think equipment should be charged for at the cost of the equipment like everything else, per-portion of use. If it was over-built, the per-portion cost would skyrocket, and users would divert around that equipment more and more, and less over-built equipment would be put in.)
+ Old polluting generation and junk. Yes, it still has (diminishing but existent) value.
+ Old cleaner generation. (Hetch Hetchy, nuclear, etc.). Each according to their cost!
So, what I'm describing above is a combination of relatively permanent free market principles (for trading energy and transmission at cost plus profit margin), and relatively permanent regulatory principles (for paying people for the exact cost of pollution, not essoteric penalties and fines like EPA and other local government agencies do today which are totally totally bogus and hurt everything in a market), and temporary diminishing market-starting economies-of-scale-causing tax credits (communal based) to spur innovation and manufacturing of clean energy (solar panels). That's the right way to do it.
Your final question prompted my answer. There are real costs, but your question even demonstrates a lot of the problems we currently face: your question itself, and the common answers to it, are usually blunt hammers to the heads of anybody with the correct answer, which I attempted to describe as best I can, which is a lot better than the way it is now, but not as good as it should be since I'm just an armchair engineer.�
1/1/2015
guest Part 2 of the Riverbend Factory story.
SolarCity Hiring Underway As Plant Rises Toward Completion
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1/1/2015
guest Ok, thanks.
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OMG! 11 degrees Fahrenheit right now where that article is published! And same forecast for the whole week. Now THAT's not a California PUC regulatory environment that I would want to deal with (see my rambling post above for why). If I were paid for my ramblings (say, in interpreting them into software for secure inverter energy trading platforms that work with grids and electricity generators and users, written in inbeded software and control systems), THEN I'd want to go the extra distance to figure out how to deal with that kind of heat demand in an energy marketplace that works well in civilization. As it is, here in California, that's less of an issue. It's pretty hard to use northern hemisphere close-to-polar solar panels when the sun is over the southern hemisphere to heat-pump geothermal nets of ground warmth into 16" exterior rigid foam board insulated homes if the homeowner is actually a homeless welfare recipient. It's almost as if the homeless person needs welfare to put them in a home with the energy paid for by the home welfare institution, such as a homeless shelter, or alternatively, the homeless person who gets welfare gets energy vouchers they can trade in for tickets to Florida. Sending welfare recipients to Florida is not a bad idea: lots of alligators. Either they'll kill the alligators, or the alligators will.�
1/1/2015
guest From today's Reno Gazette Journal:
Jon Ralston�
1/1/2015
guest Ok, that make more sense. If Buffett did not anticipate back in 2012 how quickly solar would disrupt utilities, that is a fair point. Any of us can find ourselves in investment that go differently that we expected. The question is how we respond to such changes. The only way to respond to technological change is to catch up, and at a minimum to reduce exposure technologies most at risk to that disruption. So it is deeply problematic that, if NV Energy knows that a $900M investment would most likely destroy capital, it would commit that capital anyway. This very well could be a fraud against lenders and bond investors. NV Energy should give consideration to alternative investments they are otherwise giving up. Consider for a moment what NV Energy could do with $900M. For example, they could deploy battery storage across their service area to minimize their transmission and distribution cost while providing for peak capacity and optimizing the value of distributed solar provided through NEM. Such a project would reduce systemwide costs including whatever costs they perceive as stemming from NEM. Reducing systemwide costs would enable NV Energy to cut or hold down rates for all ratepayers. Now if this is not enough to avoid bankruptcy, so be it. At least for bond investors financing batteries, those assets are largely redeployable. Batteries can be sold into other markets, but a brand new gas peaker is very costly to move into another market that needs it. So NV Energy could have renewed the PPA for that existing peaker, and then moved to make that capacity unnecessary by integrating distributed solar with batteries. This would have put the risk of disruption on the independent power producers, while minimizing the total exposure of capital to a generator capacity glut. If Buffett is uncomfortable investing in technologies that he does not understand, then he really needs to get out the utility business now.�
1/1/2015
guest This is what happens when you send engineers to do interviews, it leaves you open to the most rudimentary of attacks. Send Radford Small the SVP of Business Development and Investor Relations next time.�
1/1/2015
guest Bwa, just a few points.
Net Energy Metering is a mechanism that allow customers with surplus solar power to time shift the consumption of the energy they produce. That is, they generate the most power when power is in in high demand with high wholesale prices and high congestion in the distribution network. So solar customers first offset demand at peak demand and may feed in surplus. Then they receive back their energy contribution generally when demand is lower. This exchange is beneficial for keeping down costs for all ratepayers. It is a bit like an air traveler who travels on standby. They yeild their seat when demand is high and take a seat when demand is low.
Next we can see how undermining NEM is actually counterproductive for all ratepayers. If the utility attempt to force the solar owner to sell at a low price and buy at a substantially higher price, this induces solar owner to consume more other surplus power or to store it in a battery. Both actions contribute to increasing net demand when power is in high demand and decreasing net demand when power is in oversupply. This drives up costs for all ratepayers.
The final point I would make is that total capacity required is based on the maximum net demand throughout the year. In most areas this peak net demand occur on the hottest days in the summer, a time when solar production is also at its peak. Thus, distributed solar reduces the peak annual net demand.
It is pure utility propaganda that solar does not pay its fair share for the grid. Solar reduces the peak demand requirement for the grid both for peak generation capacity and peak transmission and distribution capacity. So solar allows demand for power to grow without having to expand capacity to support that growth. The problem for the utility's however is that demand for power is not growing. So they utilities, under street from declining revenue, are seeking to extract more revenue from solar owners. A more adaptive response for utilities would be to find ways to cut cost in the face of a revenue shortfall. Smart use of batteries is actually a very good way for utilities to derive more value from distributed solar while cutting network costs. So their are many ways utilities can put the best interest of ratepayers first and create value working with solar owners. However, when they go down the path of trying to put costs onto solar owners, it easily becomes counterproductive compounding costs for all ratepayers.�
1/1/2015
guest SCTY investor here, recently dove back in during the big fall recently because of Nevada after a nice trade in $55 range. The fall the other day to 30's was overdone IMHO. I thought I would just leave this article here to show people that solar and oil seem to be decoupling from each other:
Solar and Wind Just Did the Unthinkable - Bloomberg Business�
1/1/2015
guest Sigh....
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900M methane plant also means jobs, taxes, and thus political favors. Hard to ignore a 900M single asset dropping in your lap.
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I'm not sure how much he understands the engineering, but I'm sure he understands the economics of a 900M single asset, and how to leverage it. Witness his "donation" to Bank of America at the height of the recession. He was backing the company with his money, and his good name. And came out with a pretty sweet deal for himself/Berkshire.�
1/1/2015
guest �
1/1/2015
guest Ok, so a $900M plant means pushing about $90M annually onto 700,000 ratepayers. This is a cost shift of about $11/month onto every ratepayer. It's so nice of NV Energy shift this cost just so they can get political favors.
What Buffett does not understand is the sort of technology that SolarCity, Tesla, Google and many others are bring to market that will render his gas peaker plant obsolete. If he failed to see the rapid advances rooftop solar has brought to Nevada in the last three years, he really is out of his league to anticipate what the next five years will bring. That's why he should get out of the utility business.�
1/1/2015
guest Now you have to remember that this is only my cynical interpretation. And yes, I will be helping to pay for an obsolete plant for a long time. And yes, PUC ("after much debate"), decided for NV energy and against solar. Even retroactively against solar. I wasn't really sure why Berkshire bought NV Energy when they did, but I just knew I had a bad feeling about it. When smart people buy energy companies they will try to do "smart" things with it (for themselves). Wasn't Enron run by really smart people? Sigh...
Maybe more appropriately, not smart people, smart investors...�
1/1/2015
guest Ah, sorry, I did not pick up on the sarcasm.
Yeah, Enron used to strut about as if they were the smartest guys in the room. It was just a rouse. In reality they were fraudulent market manipulators who could only "win" by cheating and could only report an "income" by engineering accounting deceptions with the help of Arthur Anderson. They were so smart that they annihilated both Enron and Anderson with fabrications.
NV Energy is not that kind of smart. They just think they are entitled to make a profit on the backs of captive ratepayers. And they believe the government will always protect them from competition. That's pretty dumb. Nevada voters are too smart to put up with that.�
1/1/2015
guest SolarCity looking to lease land for solar panel farm - Story
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1/1/2015
guest Tesla Motors Inc Refutes IER's Claim Of 38-year Powerwall Payback Period
It's curious to see a Kock political proxy organization attack Powerwall. Apparently, the Koch brothers find this threatening. It is true, of course, that a flat retail rate plan with NEM obviates most of the need for home batteries. But if utilities what to push complex rate plans to curtail rooftop solar, then Powerwalls limits the options to a solar resistant utility. Batteries defeat TOU pricing, demand charges, low feed in tariffs, and high fixed rates (that push solar customer off grid). This is the real problem for Koch minions. Powerwalls remain as a policy hedge. Koch knows this.�
1/1/2015
guest SolarCity Inevitable Downward Spiral Has Begun
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1/1/2015
guest City of Las Vegas fights back against PUC/NV energy decision with a strong reaction... Welcome to city ordinances for rooftop solar.
3000 installs happen in 2015 (out of 5k total since 2009)in Las Vegas which only represents 2% of all rooftops in the city. Mayor pro tem says a lot more room to grow...
Restoring The Viability Of Residential Solar Projects In The City Of Las Vegas on Livestream
It's also interesting that not one person on the PUC or staff has rooftop solar.�
1/1/2015
guest 1. Voters have to register and actually vote, right?
2. In order to vote non-dumb, voters need adequate and accurate information. Where from - FOX?
3. Most people will also need an easily understood, brief and plausible explanation how things are connected, and why the Koch dog whistle instead leads them to slaughter.
Good luck & happy hunting. (I mean that!)�
1/1/2015
guest What's going on?
I'd love it if Las Vegas were to establish their own municipal power company. I'm sure certain LV strip businesses would like that too. I'm sure that LV ratepayers pay well more than their fair share for the grid. Urban areas have alway cross subsidized the grid for rural areas. So if LV broke free from NV Energy, the utility would be in serious trouble.�
1/1/2015
guest Tables turning, eh?�
1/1/2015
guest Struggling to understand this massive dip. Even with the PUC actions in Nevada, it really makes no sense. I might even sell all my TSLA and go into SCTY. This is just crazy.�
1/1/2015
guest GTM report today said out of over 500 energy industry professionals regulators, solar companies, policy makers, etc... Over 70% believe retail or value of solar is the right valuation of rooftop solar. A supermajority of actual brain trust basically have said what Nevada is doing is completely unfounded and confounding.
JHM, to get to buffet and $900 nat gas plant... He absolutely has to pay no capital outlay to get that plant developed and running. That's the whole point of a regulated public utiltiy... they go to the commission and ask for rate increases to cover it! Then, they also get a higher profit return for investors in return because of the garanteed 10% rate of return!
its even more of an incentive to have a very sympathetic PUC & PUC staff on your side. Take for example this:
NV Energy hasn't paid IRS since 2000; kept millions intended for taxes - Friday, May 29, 2015 | 8:12 a.m. - Las Vegas Sun Mobile
The same PUC staffer, Anne-Marie cuneo, that came up with the new rooftop rate plan is also the same person who said it was okay for NV Energy to not pay taxes owed to the government and then not disclose where that tax money went. Odd thing is they started paying taxes after someone asked a few questions.
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My only thought is there might be speculation the recent ABS might be held up because of Nevada Anti grandfathering. Again, this is my only possible thought, but we'll have to see. So much propaganda coming out of political groups it's clearly war with some extreme political idealogs and big utiltiy/fossil fuel vested interests.
this came to light yesterday where California utiltiy is putting out false info "leaflets" to customers about net metering just before PUC is to decide on new rate design:
http://www.stellarsolar.net/CALSEIA-flyer.pdf�
1/1/2015
guest Look at MBLY, similar price action. Folks are de-risking me thinks.�
1/1/2015
guest This tax issue is really interesting. The PUC lets NV Energy make a 12%, not 10%, profit off of ratepayers. Then they collect these taxes from private project and pocket that too. So they are getting away with more than 12% rate of return.
It seems that it may be beneficial for the IRS to step in and actually audit utilities on this. If the utilities have not actually documented the benefits to ratepayers that for the basis of non-payment of taxes, then the IRS should sue for tax evasion. It seems that the IRS may be giving the utilities too much benefit of the doubt because of PUC oversight. But obviously the PUCs are not too concerned about tax evasion.
I would love to see the Obama administration take this up. If utilities are taking advantage of weak tax law enforcement, this is a corruption and it is corrupting. This sort of thing only serves to make the playing field very uneven, which works against the advance of renewable energy through economic competition.
It is becoming clear to me that NV Energy is very hypocritical about cost shifting. To them rooftop solar allegedly shifting $1.20/month per ratepayer is an offense worthy of punitive rate action, but they are eager to shift $12.87/month to ratepayers for $900M gas peaker on which they get a 12% annual return. It boogies the mind. I bet they look with luat at those SolarCity solar systems, thinking they should be making 12% per year on those assets. It must really burn them that someone is cutting into their racket.
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Las Vegas rooftop solar financing plan proposed despite PUC decision | Las Vegas Review-Journal
It's good to watch the video to get a sense of how concerned the City of Las Vegas is about recent policies coming out of the PUC. Right now the city is able to help with financing through Special Investment Districts for solar and batteries. But the city will be looking at other options. I would recommend they look into removing Las Vegas from the service area of NV Energy and allowing mulple entities provide electricity within the city. No more monopoly.�
1/1/2015
guest SolarCity CEO: Governor Sandoval's PUC Owes Nevadans the Truth about Decision to Kill Rooftop Solar
On CNN! Nice headline: SolarCity CEO: Governor Sandoval's PUC Owes Nevadans the Truth about Decision to Kill Rooftop Solar�
1/1/2015
guest
I wouldn't be surprised if an IRS audit by the federal government on NV Energy might come soon. This would be simultaneous to federal anti-trust probes of NV Energy and possibly explore Nevada federal funds being frozen if the state doesn't take action to curb interstate commerce violations.
A lot of things could be pursued here and Lyndon's warning in your posted article signals he will explore all of them in the coming days...�
1/1/2015
guest Indeed. It's good to put that $11k figure out there. This is how much the rate action will add to a solar customer's power bills over the next 20 years.
So in the name of fairness, NV Energy will gouge $11,000 on 17,000 solar customers to avoid spreading the alleged cost of $1.11/month over all ratepayers, even though all ratepayers will benefit from cleaner air and lower utility rate inflation over the next 30 years.
What conclusion Rive did not draw out, however, is that NV Energy will never collect the full $11,000 from these solar owner, and what is not collected is just pushed back onto all remaining ratepayers. Why? For $11k, most solar owners can and likely will go off grid. $11k can easily buy you one or two Powerwalls for daily use and a generator for deep backup. So off the grid they good. Those who get left behind will may more than an additional $1.11 per month. Why? Because these solar customers brought about 85 MW to the grid mostly at peak hours. This is about 127GWh per year with about 31 GWh of exported to neighbors. To replace this requires an additional 100 MW gas peaker which, my friends, will cost ratepayers an extra $12.86 per month. This is in addition to the $1.11 per month that pushing solar off grid was supposed to cover. So this is now a $13.97 increase to ratepayers.
So let's put this together. NV Energy tries to heap $11,000 on solar customers over the next 20 year. This backfires, as solar customers go off grid. Consequently, remaining ratepayers have an extra $3350 added to their power bills over 20 years. All this is in the name of fairness to avoid an alleged cost shift of $267 over 20 years. In this lovely mess all ratepayers pay more, and NV Energy couldn't be happier.�
1/1/2015
guest Maybe a dumb question but here goes: if I have solar and battery, is there anything on the books that will require me to even let the utility know I got all that? Also, if I don't let them know and I'm not planning to sell back to the grid, my battery is full and it's noon, what are the ways to burn the excess off?�
1/1/2015
guest That is a good question. I've heard that some installers are offering batteries that are on a separate electrical system to prevent feedback from battery back into the grid. This is to avoid ridulous utility rules that forbid buying power from the grid and selling it back. I've heard of other situations where people have two grid connections so that they can access different rateplans, like a fixed plan for net metering solar and a TOU plan for charging an EV at night for cheap. So folks will do all sorts of things to work around whatever the utility is dishing out.
I do not know what is specifically legal in Nevada, but I would expect some solar owners to install without grid connection. Essentially, the high solar fees with trivial export rate makes connecting your solar to the grid more of a liability than asset. If this is specifically illegal, then SolarCity is too big of a target to do it. But I suspect one could find small installers who won't give a ****. There are some folks who will be more attracted to solar if you tell them NV Energy won't let you do it. When time comes to bug out in the desert, your going to need your panels.�
1/1/2015
guest Yeah, I got a lot of SCTY. Thinking about buying more. Thought the same last week. Point I am getting at - target buy points. Looks like at the very least we are going to hit 52 week low. Thoughts?
BTW, I am sticking to my thesis that part of the explanation for this fossil fuel swoon is that status quo perfectly happy with the idea that this might annihilate the alternative energy industry. Lot of factors at play here, but they might be successful.�
1/1/2015
guest My 2017 leaps are currently worthless�
1/1/2015
guest Gonna buy some 2018 options. Anyone have insights into this dip other than oil and Nevada?
Worried about 2017 leaps? Why? What's changed? All this Nevada/oil dip will do is hopefully build up a higher percentage of short interest.�
1/1/2015
guest Outside of Nevada, Massechusets is set to determine net metering policy soon. The governor there has made some disparaging statements on net metering so I expect some negative influence in whatever that legislature decides. Also, Claifornia PUC decides on net metering next week, so might add to the uncertainty in the stock as well.
I think the Nevada raised he big question mark, fear, uncertainty, around grandfathering with the Nevada PUC decision. I think this has put a wait and see attitude toward ABS mayhe until the smoke has cleared... Again, just my speculation, but CFO said (at q3 conf call) three more ABS were likely in Q1 with over $600mln ready to be securitized and we haven't seen one yet half way through the quarter.
in my opinion, investors will once again yo yo this back up when the results of solar+storage integrated into the California grid start coming out soon. Solarcity is already working on the interoperability standard that will apply to all inverters, solar installs, storage, and all smart home devices.... And if you don't think having 1/3 of the entire market where this standard would be applied to all future installs regardless if they are Solarcity or not, is a huge deal for company value, then think again. Just watch what comes out of California soon and we'll see where Solarcity stock goes.
Also, Solarcity is doing really really well in all their other markets outside of Nevada, especially Claifornia, Arizona(APS territory), and New York. I wouldn't be surprised at install guidance beats and continued big growth on installs for q2 guidance.
esoecially in California and New York, grandfathered is secured. With the net metering caps in both states closing out by the end of this year, a rush to obtain solar before the change will accelerate very soon. California utiltiy territories could start to hit one by one this summer/fall.
bottomline, the complete opposite sentiment of the stock right now is happening in reality in Solarcity national install and booking numbers... Yo yo will come back up soon enough.�
1/1/2015
guest Same :\�
1/1/2015
guest I still feel very confused about batteries and its impact on SCTY.
In my simplistic mind batteries represent revenue to Tesla but cost to SolarCity.
If SolarCity is going to package batteries into their systems, the question is who will pay for it and why?
I understand it as a policy hedge but nevertheless batteries make the system more expensive. Thus it will make it even harder to compete with the grid (at reasonable profitability).
The other source of revenue for batteries can be grid-services. But I think that will be an extremely crowded market. From Musk's own world there will be many things competing for the same revenue - powerpacks sold to others, superchargers (with their in-built batteries), tesla cars. Moreover, what about all the batteries that will be sold by others? And what happens to all those who are currently offering such solutions? All in all I think the market to provide grid-services will be so overcrowded that the prices will drop to nearly nothing.
Keep in mind for SolarCity to make money off batteries they not only need to cover the costs but more than that through third party revenues. I find that as a tall order.
What am I missing?�
1/1/2015
guest The competition is basically Peaker power plants, nobody has the scale scty does and the system in place to have so many systems linked/controlled together. There is also great synergy with a solar system and added benefits even if there was not this giant revenue source "in the wings"
So right now there is added cost but also added benefit and in some markets like Hawaii it may actually reduce costs. In the future when SolarCity has contracts in place to have the distributed network act like a peaker plant it is conceivable that while the upfront cost will be higher your payments over the life of the system would be much lower as you receive payments for the use of your system
I think you're also missing that residents will pay for backup power and for the ability to use their solar panel in the grid goes down to assume that a third party has to cover the entire cost plus any profit on a Powerwall is wrong in my opinion�
1/1/2015
guest Amazing rally going on right now. -11% to +2% in three hours!�
1/1/2015
guest Buy SCTY at 11am EST for $27.50, then sell at 3:30pm EST for $34 for a 20% gain, haha I wish I had more funds as it was tempting at $27 this morning.�
1/1/2015
guest Amazing price action today. Up 11% after being down almost 10% earlier today.�
1/1/2015
guest So what on earth happened here?? I don't see any substantive news.�
1/1/2015
guest No idea. I am curious as hell!�
1/1/2015
guest Maybe Elon did another big stock purchase???�
1/1/2015
guest Nevada PUC to reconsider grandfathering on Monday.
Its all about the grandfathering. If it is retained in the most hostile utiltiy environment of Nevada, then it sure as hec will be maintained nationwide.
Strong relief on rating ABS as such.�
1/1/2015
guest Foghat, very interesting update. do you have a source to back that up?�
1/1/2015
guest A quick Google search found this:
http://www.reviewjournal.com/business/regulators-consider-bids-rehear-rooftop-solar-rates�
1/1/2015
guest there are many values to adding storage(and total energy control software) that Solarcity solar+storage brings. They also can control the air conditioner(nest thermo), which a utility has never ever been able to do. In addition, Solarcity can aggregate 1000's of energy systems and sell services to the grid at much cheaper/reliably then building out new peaker capacity, transformers, substations, etc... They already have a 50/50 profit share with customers which also translates into further lower energy costs then if they just had solar system in their roof. Also, Solarcity gives customers immediate feedback on energy consumption where, when, and what is using energy in their house. They then can suggest additional products to further reduce energy consumption. Again, this transforms and unlocks many different avenues of value that never existed before.
Tesla Powerwall batteries draw WA homeowners as Mandurah leads solar charge - ABC News (Australian Broadcasting Corporation)
some more evidence that peak demand drops significantly as rooftop solar is deployed.... Makes sense thst nv energy doesn't want that to happen if they are proposing a $900mln nat gas peaker plant soon in a rate case...�
1/1/2015
guest Am I a great contra indicator or what? Was trying to buy today... and failed.
Off to the races is fine by me. I got plenty already.�
1/1/2015
guest Rebates for LED lights, energy efficient equipment in jeopardy - VEGAS INC
Ok, folks, help me figure this one out. NV Energy is pushing energy efficiencies programs that the PUC does not think are warranted. These programs subsidize the cost of LED lights, refrigerators and pool pumps. Incandescent lights are already off the market, so going with LED over CF lights is no big deal. So why is NV Energy pushing this? Here are a few theories.
1) NV Energy is trying to bolster it's environmental image in the wake of screwing over solar customers.
2) NV Energy is trying to raise it's efficiency budget so it can increase fixed rates to scare off potential solar customers.
3) NV Energy needs to find legitimate places to put those taxes they never sent to the IRS.
4) NV Energy is getting kickbacks from Home Depot, pool contractors and other businesses that benefit from these subsidies.
5) NV Energy likes to induce customers to cut power consumption, then stick them with extra rates because otherwise the user of an LED is just cost shifting to everybody else.
So what is it? I'm quite suspicious.�
1/1/2015
guest What are the odds that they will rule in grandfathering? Pretty low, no? Given how much of pricks they have been so far�
1/1/2015
guest It depends. They may conclude it is a small price to pay in order to keep the rules in place for everybody else. They are getting a lot of heat because of the grandfathering issue, including a lawsuit. They'd probably like to get rid of that one, if only to stop keeping the issue in the news.�
1/1/2015
guest At least this news together with trend reversal proves one thing- the downturn from mid 50s to now has largely been because of NV. So like I have been saying all along NV issue is much bigger than losses in NV itself. This is 2% poisoning the whole of 100% pot. Essentially causing the entire SCTY business model to fail (bond yields are now past 16%). My suspicion has always been that this is a coordinated attack against solar everywhere. I'm quite honestly worried about gigafactory and tesla. What if inviting into NV with incentives and all is one big scam? Will gigafactory be held hostage to NV Energy? These questions bother me now.�
1/1/2015
guest I'm thinking the solar issue alone is becoming a thorn for the governor. If they cause trouble for Tesla and the Gigafactory, I think with a bit of publicity, popular approval for the governor will go so low that there will be a political backlash in Nevada.�
1/1/2015
guest $329 Billion Invested in Clean Energy in 2015 | OilPrice.com
So conventional energy investors are starting to contemplate what $329B of renewables can buy. The invested is up 6% y/y, but GW installed is up 30%.
So let's do the math on this $329B investment into renewable energy. This included 64 GW of wind and 57 GW of solar. New wind offers about 8 capacity hour per day and solar about 4. So together they produce about 740 GWh/day. This competes with fossil fuels used in production of electricity, offsetting about 10.33 MMBtu energy input per MWh of electricity output. Thus, these renewable offset demand for 7,644,200 MMBtu/d or 1.32 million Barrels of Oil Equivalent (MBoe) per day.
Given that the oil glut is about 1.2 MBoe/d, it should not be dismissed that wind and solar added 1.32 MBoe/d to the global energy supply.
Oil and gas investors have had to nix $380B in projects chasing 27 billion Boe over the life of the investments. That is an investment rate of $14/Boe. By comparison, the wind and solar investment has an average useful life of about 20 year. So this represents a reserve value of about 9.6 billion Boe. This is an investment rate of $34/Boe. To compare this to the $14/Boe investment rate for oil and gas, on must recognize that the renewable investment requires very little operating cost to produce final form energy, but the oil and gas investment is just the exploration and drilling costs. There are substantially more investments and operation costs to actually extracting the oil and gas, transporting to refiners/distributors, refining, and finally generating power. The cost per barrel of oil is just the cost of getting oil to maket and that marginal cost for new oil projects is around $60/Boe, whence $14/Boe investments are nixed because the expected price of oil is below $60/b or whatever critical threshold.
So renewables are clear providing a more economical way to add to energy reserves than the oil and gas projects which have been cancelled. This is why renewables are winning. The marginal investment to keep growing the supply of oil and gas is not pencilling out due to the low price of oil, while renewables bring final form energy to market at a lower cost. Moreover, the present oil glut of 1.2mb/d may in fact be a consequence of the failure of energy investors to comprehend that a $329B investment in renewable energy brings 1.32 MBoe/d of supply to market. Until oil and gas investors figure this out, the tendency will be to over invest in fossils. This miscalibration alone is sufficient to perpetuate the glut.
But wait, there's more... renewables are growing about 30% per year. So 2016 very well could see renewables pour on 1.7 MBoe/d of supply, and another 2.2 MBoe/d in 2017. This is the freight train that oil investors ignore to their peril.
In five years, by 2021, all fossil consumption enters irreversible decline. This is the end of the age of oil.�
1/1/2015
guest Jhm, you make me engage in irrational exuberance which manifests in my sudden desire to dance a little jig. Thank you. Now if the rest of the market can figure it out we will all make bank on our solar investments.
You our know what, I do not care if I lose every dime as long as what you write comes true.�
1/1/2015
guest Ha. I'm listen to Pet Shop Boys right now. Feels good.
Dancing aside, I think the Saudis see this coming. They need to unload Aramco on the stock market to make their exit. The industry as a whole needs a plan to wind down. If producers keep over investing, they will chase a glut all the way into oblivion. So I think industry leaders know this, but they are not ready to go public and watch market caps tumble. So you won't hear this in the financial press either. I wish I knew when the market will figure this. You can't install 122 GW of renewables without it offsetting some amount of fuels. So it's curious that no one is doing the math. So suppose renewables grow by another 30% in 2016 and the fossil glut only worsens. Will investors get it then? Right now, the industry is scapegoating China for declining demand, which raises the spectre of some sort of global recession. But China is the biggest installer of solar and a big producer of electric vehicles, meanwhile it is dialing back its coal industry and coal imports. China is beginning its energy transformation, and they will be harnessing their manufacturing prowess to pull it off. Making these investments today will pay off dividends for decades. Perhaps this does not drive its economy the way heavy exporting does, but it will kick in and sharply reduce energy imports. So is soft demand for energy in China really the state of its general economy or is it that China has set out to manufacture it's own renewable energy supply chain? So weak demand in Asia is just the cover story to avoid recognizing the impact of of renewable energy.
This is critical for solar investors to understand. The fossil industry has all sorts of denial mechanisms to systematically underestimate solar energy. Solar Stocks will be subject to all sorts of negative sentiment and rabid shorting. Not also that withing the renewables sector, distributed solar is the fastest growing component. Distributed solar has the ability to grow like bunny rabbits across the Outback. This disrupts the utilities which are very much part of the fossil fuel industry. So all this is especially worrisome to the fossil elites. They can't control distributed solar as they can utility solar or wind. So as an investor I simply take heart in this larger perspective. So long as solar and batteries keep getting cheaper, renewable energy is inevitable. We just wring our hands about the timing. It's important for SolarCity to have a diversity of markets that it grows. Any one of them, like Nevada, can get derailed, but there is opportunity to grow in many other places. So just do it. Right now I see commercial solar as SolarCity's biggest growth opportunity. To wit, SolarCity is going to do the world's largest solar roof in Nevada. But in many other places, SolarCity is getting major contracts and has the efficient installing practice and demand charge defeating Powerpacks to do it right. Utilities are going to get their demand charges served to them. When SolarCity gets enough penetration into the commercial segment, the utilities are going to have to rewrite their commercial rate plans. It's going to be much harder for utilities to push around commercial ratepayers the way they do with residential. Industrial ratepayers are even harder to push around, which is the average rate for industrial is like 6 c/kWh, but 11 and 13 c/kWh for commercial and residential. Industrial ratepayers get power a quite close to wholesale prices because industrial business have a lot of options and can build out their own power system if they're not getting a favorable deal from the utility. So solar plus Powerpacks is putting comparable tools in the hands of commercial ratepayers. They will be able to play the same sort of options as industrial companies and so will command lower rates. This is also true of residential ratepayers armed with solar and Powerwalls. But still scale advantages go to commercial over residential. So in the broader strategy, SolarCity can press harder with commercial and soften up the utilities. Thinks like aggregated batteries may well fly in commercial space before utilities are ready to venture it in residential. I believe the technology will scale, but getting through policy barriers may prove more direct with commercial.
I digress, but my point is that renewables will find a way. Technology will keep knocking down barriers and prices will keep coming down. So I'm not going to worry about the obstructionists. They are simply getting further behind with every delay they ompose. Rather I want to keep my focus on where growth can happen right now and keep pushing to grow renewables faster than 30%. Five more years of just doing that, and the edifices of the fossil industries start coming down.�
1/1/2015
guest
I wouldn't go quite that far, but I mostly agree. JHM, I think you need to do a TED style video presentation of your ideas with lots of charts and graphs and numbers. :biggrin:�
1/1/2015
guest Recently saw an RFP response for residential rooftop solar in southeast PA come in at $2.75/$2.85 per Watt. It's game over for sure now and only a matter of 9-24 months until we trim another $.50 in soft costs. 2016 is gonna be a great year.
Started a Saudi Aramco selloff thread in the energy forum and was a bit surprised people didn't see that as an event on par with some of the major turns in world history. Biggest writing on the wall since........�
1/1/2015
guest TheTalkingMule, Is that a SolarCity offer or from local installers?�
1/1/2015
guest Local super high quality installer for LG or Sunrun panels as part of a negotiated group rate. Probably clearing minimal profit, these guys want marketshare and more importantly are focused on just getting solar up and running in PA. We're about 4 years behind even New Jersey. Wide open market.
New Governor announced "ambitious climate plan" yesterday, but haven't read it yet to see if there's funding for a state rebate. On the beach one more day then headed back to the snowpacalypse, I'll read it while stuck in the house.�
1/1/2015
guest Thanks. What you posted is big bad negative for SCTY actually. Per jhm's credible math, SolarCity prices their systems at about $4.26/watt or thereabouts. With the kind of pricing/competition you are talking about from local installers, SolarCity can't even dare to put a foot in the market.
SolarCity's cost of capital, even the asset-backed ones, is more expensive than a typical homeowner taking a home-equity loan or folding into the existing mortgage through refinancing... It gets lots worse when we look at SolarCity cost of capital with non-asset-backed financing is involved(hopefully the need for this will go away once they get to cash-flow-neutral state).
In any case, homeowners are lot better off buying their systems outright from local installers, at least to the extent that you are seeing.�
1/1/2015
guest Minnesota approves Solarcity's 100MW community solar project.
Minnesota regulators approve states largest solar project | Midwest Energy News
Also, I've been tracking Solarcity winning about 20MW of commercial/utility level installs in New York in the last 2 weeks alone...�
1/1/2015
guest All of the small scale utility that SolarCity has been winning recently is very encouraging. I wonder if it has anything to do with Riverbend scaling up or if it is unrelated. I wish I had better insight on where the panels from Riverbend will be allocated. I believe that on rooftops they are mounted in an east-west fashion to take full advantage of there by facial nature. I'm curious if it will be used in these larger projects order cost savings will truly shine with limited rooftop space.�
1/1/2015
guest nice article to go along with jhm's calculations: As Oil Prices Gyrate, Underlying Trends Are Shifting To Oil's Disadvantage�
1/1/2015
guest I wish. SolarCity quoted me different systems all at $5.10/W. I'm in the Bay Area though, so things are generally more expensive.�
1/1/2015
guest I think this new Solarcity ad campaign is interesting. Pits fossil fuel tech vs. solar tech in consumer choice for energy. Kind of a simplified logic test. Might have a wider impact on getting broader consumer interest/clicks on website/calls into call centers. Curiosity is the number one hook for leads in any business as they say....
Ad of the Day: These Lovely Solar Ads Trace the Long and Winding Road of Fossil Fuels | Adweek�
1/1/2015
guest RIP ra, these are much better than ra in my opinion. .. they probably talk to fast for a large percentage of the population but I like them�
1/1/2015
guest Has anyone else read this yet? It backs up what's been talked about in here on the storage situation and timeline.
How Much Does Storage Really Cost? Lazard Weighs In.
�
1/1/2015
guest Bizarre movement today. Only logical reason I can think of is investors are spooked overall and bots were in control today. When Oil spiked, bots sold solar stocks to buy oil stocks? If it re-tests $28, I'm planning to triple my position. Options traders, big oil, and MM are playing games with Solar stocks.
The comment from Axiom about SolarCity barely makes sense. There is a 0% chance Califrnia would allow a decision anything like the BS in Nevada. Also, Nevada will be legally forced to undo the idiotic decision. Didn't Elon meet with the FTC yesterday?�
1/1/2015
guest Could be as simple it readjusting to the bollinger band.�
1/1/2015
guest I think you're partially right. If you are right, a huge move to the upside is right around he corner. Volatility (Standard Deviations) work both ways.
Either Nevada PUC will redo the math and make the right decision or political pressure will force them to. The situation in Nevada kind of reminds me of the way the market afted when states tried to prevent Tesla from selling vehicles directly. Public uproar forced some states to change their minds.
In a way, pissing off 15,000 solar customers is a great way for the utility to get the media to yell at individuals and states opposed to solar, resulting in more demand for Solar in other states. Also, if be surprised if many of those people leave Nevada due to this.�
1/1/2015
guest I've always said this about Tesla as well, but, Solarcity is doing the cutting edge studies/research themselves. The Lazard study comes short of critical answers because they can't do the business modeling like Solarcity can. They are doing it right now in California. They are also doing it in New York. They are in he midst of pilot programs that will prove out the "stacks" of value storage brings.We'll find out soon this year all about it. Aggregation is happening as I write this. And Solarcity is right in the middle setting the standard for interoperability as well.�
1/1/2015
guest Silicon Valley Investors Warn Nevada Over Solar Power Fees | Nevada Public Radio
�
1/1/2015
guest Excellent audio. You might make some comments at the end of the article just in case Nevada PUC is reading.
Also:
SAN MATEO, Calif., Jan. 21, 2016 /PRNewswire/ -- SolarCity Corp. (NASDAQ: SCTY) completed its first securitization of distributed solar loan assets earlier today; the company's fifth securitization transaction to date. SolarCity completed a private placement in the amount of $185 million�$2.89 per watt of generation capacity in the portfolio�with a blended coupon interest rate of 5.17 percent and a blended yield rate of 5.81 percent. The anticipated repayment date is March 2022.
The Class A Notes for SolarCity's pool of solar loan contracts received an investment grade rating of BBB from Standard & Poor's and Kroll Bond Rating Agency. The rating reflects the predictability and quality of the cash flows and the minimal operation and production risk of solar assets. With this transaction, solar loan assets were able to achieve an investment grade rating in the asset-backed securities markets for the first time.
Credit Suisse acted as sole structuring agent and sole bookrunner for the transaction.�
1/1/2015
guest Lazard has a bias against solar. They put up levelized cost estimates that are well above existing PPAs and other actual offers solar. This simply proves that they are making different assumptions than those who actually build and market these systems. So I would not trust them to get battery assumptions right either.
The key to batteries is to integrate them into other energy systems for maximal effect. Free standing batteries is a dumb idea. Batteries are more about adding capacity, flexibility and reliability than delivering kWh. So the concept of a levelized cost of storage per kWh is too limited to capture the full value. For example, the value of shaving peak demand charges has little to do with the cost per kWh. It's the savings per kW reduction in demand charges. Whether that peak kW shaved required just 1 kWh in a month or 60 kWh in a month makes little difference. In either case, a power Powerwall at a cost of $30/month could help you avoid about 2 kW or $40/month here in GA. So the net benefit is $10/month. The levelized cost of storage is pretty much irrelevant to this net benefit, and yet that same battery could also be storing surplus solar with a 2c/kWh feed in tariff, and using it to offset buying power at 12 c/kWh . The net 10c/kWh maybe adds another $10/month in net benefits after peak shaving pays for the battery. Even here the idea of levelized cost misses the point. The total monthly benefit is about $50 and cost $30.
Another key point is that a battery need not be a fixed cost. It really may be best to lease a battery for short periods of time. Suppose you put up a 8kW solar system and are unsure if one or two Powerwalls would be optimal for your specific situation. Suppose you have a battery lease that let's you cancel at anytime for a small fee. So you put up 2 Powerwalls and monitor performance. Suppose after a year you found that the level of use and benefit was sufficient to keep one but not two. So you have SolarCity take the second one. They put it reinstall it somewhere else where it could create more value than at your home. The small removal fee just covers the cost of removal for SolarCity. So SolarCity loses no value in this exchange, and it has two customers who are happily optimizing their net benefits. This sort of flexibility is particularly helpful for dealing with rate plan changes. For example, if you began with high demand charges, and the utility reduces the rate on demand charges, you may not need so much battery any more. There really is no need to sit on an underutilized battery. And this redeployability is fairly unique among energy assets.�
1/1/2015
guest This gravitates my thoughts about solarcity, local installers are so much more cost efficient, in my country the federal government solar roof subsidy is based upon KW capacity, not install cost. The end result was that local installer were far better value than national branded installers, for example (numbers plucked from ass, not real)
government rebate of $5,000 for a system of X kW.
local installer was $6,500 gross - $5,000 (grant) = $1,500 for end buyer
branded national installer was $10,000 gross - $5,000(grant) = $5,000 for end buyer
so instead of being 30% cheaper, it was 300% cheaper.
while the figures are arbitrary, the result was in my case a 3 year payback for my PV array:smile:
back to solarcity, I think JHM is missing the forest by looking at the trees.
Utility solar farms tend to be both much cheaper, and tracked
2 results,
a) higher % of grid PV is possible with tracked solar, as it continues production much later into the afternoon than fixed solar, it is both less reliant on batteries yet more compatible with batteries than fixed solar.
b) every dollar spent on Feed in Tariff is a dollar not spent on utility solar, in Nevada's case, each kWh on feed in tariff was removing a future deployment of 2.7 kWh of Utility solar. This may be an artifact of Nevada's pre-existing laws, but it is the reality feeding into the Nevada decision.
Nevada utilities can now buy solar at 3.87c /kWH http://pucweb1.state.nv.us/PDF/AxImages/DOCKETS_2015_THRU_PRESENT/2015-7/3615.pdf
which really sets the current market price for solar in Nevada. This will continue to decrease, why burn the general publics electricity rates with expensive feed in tariffs, when utility solar farms do the same for about 1/3 the price? (or conversely get 3 x times more energy for the same cost)
build enough utility solar and the midday electricity becomes the new off off peak, similar to how Texas wind results in negative tariff sometimes at night.
build enough roof mount solar and the midday electricity becomes the new off off peak
what happens then?�
1/1/2015
guest No. The value proposition of SCTY is about ease of integration. Yes, you and I would likely never buy a SCTY PPA, but we are not all people. More than half the marketplace will never want to deal with tax credits, roof leaks, brand selection, maintenance, warranty issues, monitoring, install design,etc... Most people will find the idea of a simply signing up and paying less than the grid appealing. They don't want to be involved like we do and see the premium of an SCTY PPA as a bargain.
The prices I quoted above are a good $.60 lower than a quote I got last spring from the very same installer. Things are changing rapidly and SCTY is staying out in front of it. Once they trim their sales costs their installs cost will drop from $1.92 to something like $1.50. At that point they'll be unstoppable. And there's no reason they can't also just leverage their premium brand to move more towards 50% straight cash installs, charge a 10-20% premium and make a killing. These guys are Apple, not LG.�
1/1/2015
guest Oh...I guess I read that all wrong then. Thanks for the clarification.�
1/1/2015
guest Tracked solar has an added cost of maintenance. Moving parts break. Solarcity can make more revenue using tracked solar on houses, but they realized the cost of maintenance outweighs the advantages, at least in a distributed scenario. Perhaps a tracked solar farm is less expensive to maintain than distributed?�
1/1/2015
guest where do I start here...
Utility scale solar is wholesale. Rooftop solar is retail. Utility scale has to use the transmission and distribution system to get to an end user, the retail customer. Roof top solar does not. It is local at the place of need. Utility solar is centralized. If a power outage goes out, the utility solar is worthless. Just this past week, NV Energy has had over 5 power outages. Thousands of people were out of power for many hours at a time. Utility solar was not providing energy to anyone. Nor was any other centralized fossil fuel plants either. Distributed energy resources such as solar (and soon powerwall) changes this fundamental problem almost instantly. The savings from having this increased reliability in Nevada is significant. Just this alone. there are many many other values as many of us on this thread have discussed so please refer to the history of this thread.
The bottomline is distributed energy resources have far far more value(as well as future value) for retail customers and the grid at large. It's not to say we don't need utility level solar, just at the end of the day, a distributed centric grid is far better for energy infrastructure and all energy users.
Just look at what is happening with New York's entire grid right now and you'll understand the reality a little better. It's almost the exact opposite of is going on in Nevada right now.�
1/1/2015
guest While by no means an expert, I would like to add, I remember reading a while back (probably in this thread) about the importance of distributed solar/energy in terms of national security, which is an angle I am sure the federal government has thought lots about.�
1/1/2015
guest Solar Cell With Interdigitated Back Contact (Solarcity)
Solar City has a new patent that had to do with cell production. It's over my head but glad to see the r n d paying off. Would love to hear of a new cell/module record soon�
1/1/2015
guest Another thing here is that local contractors will change their bid based on how busy they are. This installer is robably much hungrier for work in January than they were in the spring. Same thing happens if you are trying to get you house painted. Consequently, there will be plenty of anecdotes of local installers offering low bids. The competitiveness comes down to how little the installer is willing to make when they are desparate for work and how willing they are to use the cheapest components.
A solar service provider is not going to install the cheapest component. When they offer a PPA, that system needs to perform very well for 30 years or the PPA provider eats the loss due to faulty equipment or faulty installation. On the other hand, there is an economic argument for going with the cheapest system you can get even if it craps out in under 20 years. You can roll the dice will lower quality and trust that when you do need to repair or upgrade, that new systems will be much cheaper. A cheap system at $2.5/W that is only good for 12 years may actually be better than a system at $4/W that is good for 30 years. But I think the deeper issue here is trust. If you really trust your local installer to do a great job, to not damage your roof or cause other damage, and to fully stand behind their work, then that can be a great way to go.
I honestly think there is plenty of room in this market for all sorts of installers. SolarCity has about 35% of the residential market, and small installers have about 50% of the market. Moreover, the rooftop market is growing faster than utility solar and wind. So obviously small installers are doing something right and making lots of homeowners happy. There is not one business model that must dominate the whole industry.�
1/1/2015
guest Hadley signs agreement with SolarCity, company building Hampshire College solar array | masslive.com
SolarCity gets another commercial deal. I do get the impression that the commercial segment is picking up pace.
Renim, you may want to consider that commercial installations like this have comparable scale efficiencies as utility solar. In this case there are 18 acres of ground mount, but also with large flatroofs SolarCity is obtaining efficiencies close to utility scale. All distributed solar minimize demands placed on the transmission and distribution networks and fundamentally change the relationship of customers with utilities. So over the next 20 years this customer will be able to save $500k, while the utilty will avoid costs to upgrade distribution infrastructure and generation capacity. While this may make the utility less profitable, it does hold down costs for all ratepayers.
I have no complaint with utility solar. My complaint is with a very expensive grid that is primarily designed to flow one way from producers to consumers. It is much more efficient to have a multiway grid that only has to move surplus power. For example, when most consumers generator the majority of their energy and many people have a home battery, then a much lighterweight grid will suffice. Only a fraction of power will need to be distributed, and because batteries are everywhere the power just moves when it is cheapest to do so. There is virtually no need for peak power generation, as baseload plants can replenish batteries when aggregate stored energy runs too low. Currently, the average retail rate is about 13c per kWh. Of this 6c is generation, 3c transmission and 4c distribution. The lightweight grid I envision coud cut transmission to 1c and distribution to 3c. Moreover, since most of the energy is redistributed surplus not needing peakers, generation falls to 3c. This is how retail goes from 13c/kWh to 7c/kWh. Meanwhile, the cost of residential solar + storage also falls to about 6c/kWh. Naturally, in this scenario the utilies lose alot of revenue, unless they also figure out how to tap new markets like transportation via electric vehicle charging. My frustration with the utilities is that they put way more energy into trying to protect bau profits than into the innovation to deliver power at 7c/kWh to residential ratepayers. This, by the way, is the average rate for industrial ratepayers so it is entirely plausible. But it is not possible to do through cheap centralized generation alone. This is the fallacy of the utility solar is cheaper than residential solar meme. The network costs of the existing grid are already at 7c/kWh. So you've absolutely got to cut network costs, unless you've got magic for zero cost generation. Moreover, the key to generation cost as low as 3c/kWh is mostly trading in surplus power. Fossil fuel and nuclear power plants cant go this low and remain profitable. Surplus power is not burdened with having to be profitable. Distributed energy owners generate power firstly for self-consumption. If they have a surplus, they simply want to offset some of the cost of their energy systems. So this is brutally cheap, but there is no problem with negative prices because there is sufficient charging fleet of distributed batteries and vehicles to soak up power as spot prices fall. So if utilities were to embrace competition and set aside monopoly status, thks js where they could go. They could keep pace with residential solar offering rates that are within 1c/kWh of what rooftop solar can offer. But to do this, they have to cut their network costs and the cost of providing peak power. If they want to justify a 10% profit margin, they need to cut costs at least 6% every year, and they need to leverage distributed power and storage to do that.�
1/1/2015
guest Wow. This is the best interview I've heard yet on the Nevada situation.
audioBoom: 1/11 Hour 1 Bryan Miller, Senior VP of Public Policy Power Markets for Sunrun about the solar decision from PUC
I really really hope Bryan Miller (sunrun guy interviewed) gets as much air time as he can. He's a fantastic speaker and very sharp legal mind. All I can say is Nevada PUC/Sandavol are in for some tremendous hurt if this goes to court.�
1/1/2015
guest Solar For Homeowners - YouTube
Ha, this is a net metering video made by NV Energy in July 2015 that is going to fry NV Energy in court. They promoted net metering, no mention of net metering changes and even suggest a payback period of 13 years for a $20k system. They also recommend talking to solar contractors(like Solarcity) for actual savings and costs.
bait and switch case is hard to deny.
Like I said before the intent is not to win, but to delay...�
1/1/2015
guest Miller is indeed very eloquent. I'd like to see Ralston interview him. He didn't hesitate for a second to call the whole mess the result of political corruption. He called out the PUC, the governor, and the unholy influence of Berkshire. Lyndon Rive didn't want to go there, probably because he didn't want to be seen as having a political agenda.
I don't see how the current mess could stand. I think the incumbents and their political allies overplayed their hand with the ridiculous feed-in price and especially by not grandfathering existing customers. It's almost like they couldn't restrain themselves and wanted to slap the hippies hard to teach them a lesson. This thing is now becoming a bit too hot to not have any political consequences.�
1/1/2015
guest This video is very incriminating of NV Energy. I hope they don't remove it from their youtube channel. Is there a way to copy it before it vanishes?
I just forwarded this video to a good contact at Solarcity and to Brain Miller of Sunrun. Just in case these guys have not noticed the video yet.�
1/1/2015
guest There is (this is a link).�
1/1/2015
guest If you don't have time to watch the entire video, at least watch from 22:10 to 23:00 where the speaker waxes eloquently on how NV Energy will pay you cold, hard cash (actually a check payable to you or the installer) if you install a solar system. And the bigger the system you install the bigger the check NVE will write! I would guess that grandfathering will be reinstated toot-sweet. And there's no way that NVE's rate case request wasn't already in the works when this video was uploaded.
Keepvid-dot-com (I'm too new to post links here) downloaded it to my desktop with no software installation in just a couple of minutes.�
1/1/2015
guest Yes. People need to change their perception of solar as some kind of niche operator. Somewhere between a few and all of your neighbors will be interacting very deeply with solar installers over the next 10 years, the idea that one solution or one product will be best for all is just silly.
I've mentioned before that I used to HATE the SolarCity model. The idea that you would do anything other than buy cheap quality panels under warranty and get them installed cheaply was against my entire being. In trying to convince some friends to go solar it become pretty obvious that a streamlined solution was the only way that most of them would ever go solar. Even if I offered to buy the panels, climb up on their roof, and call the electrician.....they weren't interested.
I don't see any way SCTY doesn't have half the upper middle class+ folks market 2-5 years from now. They have all the things those folks MUST have in order to sign. The idea that a local installer is going to move the majority of these guys to install(at least outside CA in the short term)......it's just not happening. How do you get people paying 9 cents a kWh in methane Pennsylvania to switch? Make it beyond easy. Cost is secondary to these people in the first place and SolarCity is offering a product that requires just a signature and will save you money. Candidly....if one of the kids or the wife is pressuring you on solar, which option is the easiest solution? That sounds a bit crude, but it's the conversations I've been seeing.
There's a product for everyone.�
1/1/2015
guest
I hope you addressed it to the brain spelled Bryan ... seems to be his name. :wink:
I dl'd the video thanks to the tip from FLT; thanks again!
The publisher's comment on Youtube reads (also saved for posterity's sake) from where I'm sitting:
�
1/1/2015
guest Thank you for pointing out my misspelling, I will resend it.�
1/1/2015
guest Maybe Nevada is doing this as a precursor to help Tesla sell Powerwalls and ensure the success of the gigafactory. It seems to me that this situation makes the Powerwall even more of a no brainer in NV.�
1/1/2015
guest SolarCity (and to an extent, even Tesla) have a lot to learn from Uber when it comes to throwing down with the establishment via grassroots campaigning and expert political warfare. I dislike many aspects of what they do as a company, but I have to admit they are really effective.
Uber pulled off a spectacular political coup and hardly anyone noticed�
1/1/2015
guest Thanks for the link! Well spoken and I didn't realize that Nevada had only had the net metering rules in effect for only 1 year prior to this new law. WOW, talk about bait-n-switch.
Wisconsin, as mentioned in the interview, went through something similar in late 2014.
On utilities and solar, Wisconsin goes its own way | Midwest Energy News
Reversal in Wisconsin makes it even more interesting since they cited the lack of an independent study which is exactly what Nevada had and completely ignored.
Independent Nevada study: http://puc.nv.gov/uploadedFiles/pucnvgov/Content/About/Media_Outreach/Announcements/Announcements/E3%20PUCN%20NEM%20Report%202014.pdf?pdf=Net-Metering-Study
Findings exerpt: New Nevada Study Shows Huge Upside to Installing Solar | SEIA
�
1/1/2015
guest I feel it has nothing to do with lobbying efforts as much as alignment with what NV Energy/Berkshire Hathaway wants to happen in the state. It's weird how it circles back to nv energy and Berkshire, but it does.
Uber CEO To Tesla: Sell Me Half A Million Autonomous Electric Cars In 2020
Uber is going to push into autonomous electric vehicles in a big way, which the traditional taxi cab is not. With tesla and faraday making electric vehicles/batteries in the state as well, NV Energy sees a big demand for their centralized energy products because of it. Again, more electric cars means more electric charging ststions(which NV Energy will develop) and a significant need for more energy to charge these uber vehicles.
Also, when NV Energy goes into the next rate case, they can make an arguement for developing new nat gas plant(at gov't mandated 10.5% profit margin) to meet this forecasted demand, especially for what uber intends to bring to Las Vegas after the new casino policy of charging for parking. On demand uber car that is cheaper then driving your own car and paying the parking fee.
bottomline, uber fits the direction nv energy wants to go in Nevada. Complete control of all energy needs for the state. Centralized utiltiy for the 21st century Nevada, which does not included rooftop solar competition for that rate payer dollar. so, no matter what lobbying efforts rooftop makes, it's never going to fit this vision. Uber does.
- - - Updated - - -
I also feel Hawaii fits in this legal debate. Just as Wisconsin didn't consider the benefits along with the costs of net metering, neither did Hawaii when it ceased net metering. Even more so of a legal case in Hawaii because it was mandated by legislation and prior PUC decisions to do so. Hawaii is far from decided as well.
The good thing about all these legal matters around net metering is that rooftop solar is building a legal prescedent history that they can take into future legal battles. As this legal history accumulates, less and less future cases will be brought forward. The deterrent for future utiltiy actions becomes much greater as these cases are decided.
another big case that will add to this soon will be the anti-trust lawsuit against SRP in Arizona. Interested to see where this will go.�
1/1/2015
guest I agree with everything you've said re: Uber in Nevada.
However, I wasn't thinking of lobbying as much as grassroots. Uber won concessions in many other US jurisdictions where various big interest groups are not necessarily aligned identically to those in Nevada. They are also using the same playbook in foreign countries with considerable success, despite the enormous resistance put up by the local taxi providers, who sometimes also deploy the anti-big-American-corporate-bully defense. It's true that in some jurisdictions Uber didn't get their way, at least not yet, but the general point is worth making, which is that sustained political pressure applied from a broad base from the bottom up can be very effective if you can pull it off. They know how to pull it off, and that's what I hope SolarCity learns how to do better (as well as Tesla, in support of their direct-sales model).�
1/1/2015
guest Video: Ralston Live:Anne-Marie Cuneo 1-14-16 | Watch Ralston Live Online | KNPB Channel 5 Video
Anne-Marie cuneo, the one that pushed through the new net metering scheme, stated that they've been discussing the new net metering scheme since July in the PUC staff. The funny thing is that is exactly when buffet signed the history breaking 3.8c/kWh ppa with first solar. She said this 100MW ppa changed everything since they can get solar now for 3.8c. It is funny since 100MW capacity is a fraction of the capacity thst makes up NV energy. This doesn't even register on the retail cost for delivering retail energy to rate payers, but yet it determines the price for rooftop solar net metering rates and cost shift? Not to mention, the contract is less then 6 months old and she has made this an essential input to determine a cost shift... Which she was already determining the moment the 100MW was signed.... Interesting. However, the best part is that the PUC was considering these net metering changes "as they would all rate reviews" while NV does a seminar promoting net metering at retail rates and even suggesting a payback on investment of 13 years or less on a $20k system.... This is very interesting as it indicated they had foreknowledge of massive net metering changes that would dramatically change payback on the same $20k investment.
Cuneo explicitly says says in the Jon ralston interview that it was all on the solar companies telling consumers they would have net metering, not nv energy or the PUC... Very interesting once you watch the nv energy net metering video and compare it to her statements... She is clearly demonstrating bias in her "independent" formulations of rate schemes... What she has stated is blatantly misleading the public on this state wide broadcasted PBS program.
This is is all public record and sure to be entered into a long list of evidence.
It can be argued that this 100mw contract was part of a greater coordinated strategy to set up a net metering scheme already predetermined, and also to attempt to discredit the 2014 independent net metering study that all parties(utiltiies, rooftop solar, and regulators) signed off on as legitimate. Since it is the only legal study on net metering to date, it is prudent business to discredit it before PUC makes a dramatic change.
This is just getting better every minute.
it is also of critical note to mention that even the PUC staff admits in public statements made at the hearing it didn't follow the directives of SB374 to come to its final decision on net metering, which is a clear and concise violation of the law they were supposed to enact.
add:
First Solar 4TH ST8
ha, the first solar deal isn't 3.8c/kWh... It has an escalator of 3% a year which makes the deal averages 5.2c/kWh over 20 years... and they are going for 2.6c/for rooftop solar wholesale rate?? This is utterly insanity on behalf of the puc... (And extremely deceptive marketing of the deal to the public) it won't even be in operation until 2017! Solarcity installs 100MWs in about 8 weeks now, so...
"NV Energy agreed to pay 3.87 cents a kilowatt-hour for power from First Solar�s Playa Solar 2 with a 3 percent a year escalating charge � which pencils out to about 5.2 cents over 20 years."
"
In their first year of operation in 2017, the facilities would result in about $25 million in costs to ratepayers. But they would also replace $18 million worth of natural gas that the utility would have to buy if they were not built, resulting in a net cost to customers of $7 million.�
1/1/2015
guest BTW I really do like RMI very much. I think they do some of the smartest thinking in this space. My earlier reaction was to Lazard, which I don't trust. But the whole key to batteries is how you use them to create multiple value streams.
Stacked use understood as simultaneous may not be absolutely essential. You could also do serial stacking. For example, when you repurpose an EV battery for bulk utility storage, you can get solid lifetime value. In the car, you value high density for optimal range and acceleration, but you might not cycle frequently enough to get full value out of the battery. In utility storage, a battery with 20% less energy density is not a problem, and you can work it several cycles per day using up the cycle life more completely. For example, I only do two 50% charging cycles per week. So that could last more than 20 years. If I want to upgrade to a much better battery (twice the density) in 10 years, then there is still a lot of life in my original battery.
But more generally for stacking we can ask several question about a battery in a particular situation:
1 How does this battery create value when it charges?
2 How does this battery create value when it usually discharges?
3 How does this battery create value by providing available kW capacity?
4 How does the battery add reliability to other system?
These questions tap into different value stream and avoid single use thinking. For example, let's consider a Powerwall integrated with solar.
1 The battery usually charges when there is surplus solar. If the utility pays below the cost of the solar power, then charging with surplus avoids being under paid by the utility.
2 Discharging when there is deficit solar power, avoids paying the utility to import power from the grid.
3 In potential aggregation to provide peak power to the grid, the utility may pay for available kW with an option to discharge the battery at times of peak power. Under this kind of deal, the utility may pay a certain amount per kW per month and a special tariff for peak draws per kWh.
4 The battery provides back up to the solar system so that it can be used during disruption of utility service. This backup value is roughly worth having a back up generator for storms.
When you put all this value streams together, you may be able to arrive at a compelling total benefit that exceeds the cost.
Questions 1 and 2 may seem like overkill on time shift value, but there really is more too it. Apply these questions to an EV battery. People usually ignore question one just thinking of charging purely as a cost. But their are opportunities to use EV charging to create value. For example, utilities have explored dispatchable charging solutions. Suppose you plug your car in and simply need 10 kWh sometime over the next 10 hours. The utility can send charging signals that vary the rate of charge depending on the net load on the gird. In this way the utility can combine baseload generation with aggregated EV charging to eliminate the need for peakers. This will come as EVS penetrate the car market. Currently EVS are under utilized by the grid. We really can get rid of peakers.�
1/1/2015
guest
It's also interesting that when he asked her about solar Company moving out of the state she replies that the commercial and utility rates for net metering have not changed so they can still service all of those customers. In a state that will decide on a whim to retroactivly change all of these PPA's it does not make any sense to install any solar for any customer.�
1/1/2015
guest Really wonderful. I particularly like how Miller frames this for politically conservative talk radio listeners. "State sponsored monopoly." "Anti-competition." "Solar Tax." "Government corruption." Etc.�
1/1/2015
guest This is very interesting.
First, the video was clear that net energy metering was based on kWh not $ (as you have explained) and that one would only pay for KWHNet. The rates do not apply separately to KWHRecieved or KWHDelivered. So NV Energy has clearly changed this.
Second, NV Energy offered an incentive of $245/kW installed. This was offered so that NV Energy could could this solar system as part of it renewable portfolio and receive production credits for it. The consumer has no idea how much this is worth to NV Energy, but is happy to receive the incentive money to surrender this production credit. Do we know how this works? Might a jilted customer get this production credit back? Is their any way to nullify this credit? For example, could the federal government step in and require a certain standard of treatment for solar customers in order to continue to qualify for this production credit? Rescending NEM should should disqualify. This is bait and switch with the federal government.
Third, the presentation seems to cover all the cover all the impact this is supposed to have on your power bill from NV Energy, but it fails to mention a monthly solar fee. Do we know if there was one in effect at the time of this video? I suspect there was one that was about $16. If so, this is clearly a hidden cost from NV Energy. On your 4.5kW system, you got an $1102.50 incentive, but in 69 months you'll pay that back to NV Energy and keep paying it until the end of time. This is very deceptive.
Thanks for digging into this stuff, Foghat.�
1/1/2015
guest @jhm, are you saying that NV Energy is getting Renewable Energy Credits from NEM customers that they could sell?�
1/1/2015
guest I'm not sure exactly. Just picking this off from the video. It is in regards to the Renewable Portfolio Standard. Nevada has a requirement of 25% of power from nonhydro renewables.
For basic info, Renewable portfolio standard - Wikipedia, the free encyclopedia
We should probably investigate this. NV Energy's study ignored the benefits of distributed solar. So it is possible that they even ignored RPS compliance benefits.
It seemed clear in the video that the reason why NV Energy wanted customers to consider solar and sign up for interconnection was so they could get the regulatory benefit.
They are also pushing their energy efficiency incentives for LED lights and pool pumps against the good sense of the PUC. It may be that they are trying to secure other regulatory benefits with that, especially in light of driving out solar as a source of regulatory benefits. That is, I suspect that solar was providing additional compliance benefits possibly distinct from RPS that they have to make up even with the ridiculousness of subsidizing LED lights which people just buy anyway.
Let's keep digging.�
1/1/2015
guest "utilities either generate the renewable energy themselves or purchase RECs equal to the percentage of their energy sales needed to meet their state�s standard."
I think Nevada could be in violation of RPS for overinflating RECs. If they are claiming retail price for the rooftop solar RECs under previous net metering rules, but now are actually paying less in energy sales due to the new metering scheme, they are essentially cooking the books and now the federal government can step in to correct that.�
1/1/2015
guest This is looking lIke a stronger fraud case. To get the NV Energy incentive the solar customer signs a document transferring the credits to the utility. They were sold for a mere $245/kW installed. So this sounds like a contract to me, but I am not a lawyer. So if this was transacted under agreed upon assumptions regarding NEM and no hidden fees, this is all the utility is entitled to regardless of what the PUC says. No one in their right mind would sign a contract transferring assets for $1100 but giving the counter party to recover unspecified monthly payments over the next 20 months. This is essentially a blank check. So this goes to the question of whether the utility offered the incentive in good faith.
Do we know how close NV Energy is to their 25% renewable target without net metering? This is important to know, because the bigger the gap, the more leverage NEM customers have. Is it possible to deprive NVE RECs by deploying batteries? If so, then aside from legal arguments, there is an opportunity to negotiate better rates. So we need.to know what those RECs are worth to NVE. Perhaps the answer is simply the cost of utility solar. But still, NVE could be taking credit for distributed solar which allows them to generate three times as much fossil energy. So removing distributed solar does shift the mix of fossils in generation.�
1/1/2015
guest Huh? Utilities spur power savings, see profits
�
1/1/2015
guest This is good. The utilities should be competing on price. But I find the following disingenuous.
The utilities get the same ITC and REC incentives that distributed solar does, plus they get a ton more in other areas. So this definitely pot calling the kettle.
It's all well for utilities to offer energy efficiency incentives, but this alone is not sufficient to be price competitive. I wonder if there are hidden conditions in these incentives that are aimed to block doing business with solar installers.�
1/1/2015
guest BREAKING: Supreme Court upholds FERC Order 745 | Utility Dive
This is a massive win for Solarcity and its developing aggregation efforts. The groundwork is solidified for its evolution to solar+storage product integration with the grid through wholesale markets.
Like I've said before, eventually all net metering past and present will migrate toward this aggregation market and Solarcity will be right at the center with its interoperability standard as "the standard" for all systems connected to the grid as such.�
1/1/2015
guest I'm trying to understand the "net metering" debate.
My understanding is that most solar customers are still connected to their utility grid.
During the day, when the solar panels are most active, the panels may generate more energy than the customer uses, resulting in energy being fed back into the grid. At night, the customer draws energy from the grid. So if a customer's house used 80 units of energy during the day, and the solar panels generated 100 units of energy, 20 units are put into the grid. If the customer uses 50 units of energy at night, their "net" use for the total 24 hour period is only 30 units.
The issue is how utilities should compensate customers for the energy they put back into the grid (the 20 units in the above example).
Some utilities argue that they should not have to rebate to the customer the full retail rate of the energy put back into the grid, because the utility has to pay for infrastructure costs like transmission lines and transformers.
Solar companies and some other utilities raise the argument that distributed solar actually benefits the utilities, because the utilities do not have to build out heftier transmission infrastructure in order to meet increasing demand. Solar putting energy into the grid also lessens strain on the grid during high use scenarios, like a heat wave.
Will the whole debate be moot if stationary storage becomes commonplace with solar systems? In this case, spare energy is put into a battery rather than back out into the grid. The net metering calculation would therefore no longer be necessary.�
1/1/2015
guest
Yes, net metering evolves as the solar tech evolves. However, the only way to get to innovation of our energy system is to enable competition to occur. American energy is mostly regional/national monopoly where barriers to new entrants are extremely high. As a result, our energy infrastructure has minimally innovated over the past 80-100 years. By enabling new entrants to access the grid and consumers(rooftop solar), a new market has emerged ushering unheard of innovation and drastic cost compression momentum within the system. Naturally, to break the monopoly strong hold on this system does not make affected utiltiies happy and fight such market enabling policies such as the ITC and net metering.
However, the results are clear, such market enabling policies allow for a better consumer product and experience for all "rate payers." As I've said before, net metering gives a valuation to delivered solar which would never have been allowed under monopoly barrier to entry established over past century. Now, as we learn and develop valuation models of distributed energy resources such as rooftop solar+batteries, that value is actually increasing and net metering begins to give way to better value mechanisms such as solar+battery system for ancillary grid services... As with any healthy market, when a better product arrives to compete with inferior iterations, the consumer migrates to that better product. If allowed to naturally run its course, net metering customers will migrate to that next iteration (solar+battery-ancillary grid services model) because it just makes compelling economic sense.
Now as these technologies and markets mature, government incentives retract. The truly amazing thing is that as we transitional to this new energy infrastructure of minimized incentives, so to do we reduce the in perpetuity fossil fuel subsidies that have been imbedded within our tax code for decades. Our country saves billions annually and trillions over decades. A massive massive tax burden lifted off of the American tax payer and injected into the economy through new consumer spending power...�
1/1/2015
guest SolarCity backing effort to take solar rate fight to voters -
And it looks like SolarCity is trying to get a grassroots effort to gather enough signatures to change the law through legislation instead of the PC�
1/1/2015
guest Now NV Energy says 20 year grandfathering is okay, wants PUC to change that order to be fair to all rate payers... Am I going crazy here or is that "fairness" the exact reason the PUC instated non grandfathering in the first place? Flip flop is not even close to a way of describing this bumbling hypocrisy of a situation.This thing is a complete mess for Nevada, a complete embarrassment for the state. I wonder what Anne Marie cuneo thinks of going on record on a PBS show now? She emphatically stated her engineers and economists thoroughly vet the NV Energy numbers and in her independent opinion, concluded grandfathering is unreasonable and unfair to nv energy rate payers... Wow.... And now NV Energy itself is saying grandfathering is fair based on the same numbers... If the Feds or the Nevada attorney general don't get involved in this I would be thoroughly shocked.
im also curious to how much interaction the PUC and elected representatives had with hedge fund managers in the months leading up to this decision? It was a distinct revelation that Jim chanos specifically named Solarcity as a prime short in the early fall on the basis Solarcity was a "subprime lender" that will see rampant "defaults" on their leases/ppas. Huh, why all the sudden would you put a big bet on this premise when knowing the average fico score was 750 and over 99% of all payments have been received by the company since its inception a decade ago? I am extremely curious as to who what when the PUC commision /anyone in the Nevada government(including Berkshire &Nv energy) with decision making power had any contact or business with anything chanos. It would be something if anyone involved in this Nevada situation had a short position over the past 3-4 months...�
1/1/2015
guest This is just what they want. Giving in on grandfathering while still screwing over all solar customers with 3 cent net metering still keeps all new solar out.�
1/1/2015
guest Yes, exactly.�
1/1/2015
guest Mississippi electric co-ops ask regulators for rehearing on net metering | Utility Dive
This utility arguement is literally word for word the same exact arguement the Anne Marie cuneo, the author of the new Nevada net metering scheme, stated on the PBS show last week as justification for 2.6c/kWh payment to rooftop solar customers.
This just gets crazier by the second. I love how the more and more information comes out, the more and more Nevada regulators are influenced and working in the interest of nv energy. It is so much so, that even nv energy is trying temper their enthusiasm to keep the con acceptable.
Literally, watch the ralston show with Marie cuneo on then read this article... Literally word for word like an actor memorized a script...�
1/1/2015
guest NV Energy Announces Net Metering Grandfathering Proposal -- LAS VEGAS, Jan. 25, 2016 /PRNewswire/ --
NV Energy gives into grandfathering. This is a pretty big victory for SolarCity.
This should help with sales and financing elsewhere as expectation of grandfathering is proven to be sound.
Stock price didn't react in a big way though. I'm puzzled. Maybe we will see some action tomorrow in regular trading hours?�
1/1/2015
guest New York City Proposes First-Ever Mandatory Solar Deployment for City Worcester LLP
NYC to make mandatory that 4,000 municipal buildings go rooftop solar. Looks like we should see a big commercial order come into Solarcity from this.
New York state as a whole has just enacted orders for large distributed solar deployment across the state... Just makes what is happening in Nevada look even worse for NV Energy and Sandavol.
Today's price action is more focused on the big California decision on Thursday. If California PUC final decision goes with recommendation, then he combination of FERC Supreme Court decision along with the grandfathering momentum(which implies national grandfathering nationwide secure by prescedent) will have a positive tailwind on stock price.
Clearly, the momentum is shifting(once again) and will really be moving after this week and most likely continue after feb. 8th when Nevada PUC changed course on grandfathering due to NV Energy influence. (However Nevada net metering decision will face massive legal challenges on every front for the remainder of the year, far from over...)
add:
Here's a thought... What happens if Mark Ruffalo wins an Academy Award next month? In front of hundreds of millions of viewers globally, what do you think he might say in an acceptance speech about renewable energy and rooftop solar of the people?? If he wins, it will be very interesting what global headlines he'll make with what he could say...�
1/1/2015
guest If I understand this correctly, the debate is:
Utilities: "You solar people are getting a free ride on the electricity distribution network if we pay full retail for your excess generation"
Home Solar operators: "Utilities are getting a lot of benefits from our home solar in the form of avoided costs: less transmission waste, less stress on existing transmission infrastructure, less need for increased buildout as demand increases, less regulatory burden on pollution mitigation requirements."
I am fairly new to this debate, but through the links I did find one consulting report prepared for the Mississippi PSC that found Net Metering to be a net economic benefit to the state:
http://www.synapse-energy.com/sites/default/files/Net%20Metering%20in%20Mississippi.pdf
I haven't gotten to read the entire report, but it does show the other side of the story that wasn't reflected in the interview with Ms. Cuneo in Nevada.�
1/1/2015
guest yeah, Nevada PUC commissioned an independent NEM study, signed off on by utiltiies, solar, and regulators as the legitimate study of record on net metering in Nevada, stated net metering is a benefit to all rate payers as is... This is the only official study on record for which to evaluate NEM and this current PUC didn't even use it. They plugged in unvetted assumptions that were not apart of the independent report analysis and rather used the NV Energy's point as opposed to the only legal study on NEM to determine the current net metering scheme. And I reiterate, this study was signed off on and accepted by NV Energy and previous PUC commission.
The Nevada PUC actions completely disregarded the only official record on the subject and went with a something completely "off grid."
It's mind boggling thst they thought they could get away with it. NV Energy's action with respect to grandfathering are an attempt to placate and distract from the actual core issue of additional charges and degradation of 1:1 net metering (to below current whole sale rates) that the actual independent study says is a net benefit to all rate payers in Nevada.�
1/1/2015
guest Looks to me net metering is framing the debate in a way that is confusing and far from optimal. It's a very crude way to express power production and delivery economically. It's great that battles over this are getting won but I'd love to also see a push into developing a system that has more refined ways to optimize via market mechanisms.
In other news, ENOC is up 70% on the Supreme Court decision.�
1/1/2015
guest I would not say that batteries make net metering moot, it simply increases the number of responses to changes in net metering. Defensively, batteries gives solar customers an option to unfairly low feed-in tariffs. If my utility only pays 2c, then I'm going to retain my energy in batteries. Progressively, batteries open up energy aggregation opportunities to create even more value for solar customer, non-solar ratepayers and the utility. There are triple wins that can be even better than net energy metering. So let's be clear, the gutting of net metering is a loss for both solar and non-solar ratepayers. It is only a wind for the utility that adds costs to all ratepayers.
The societal problem with inducing solar customers to retain power to avoid low feed-in tariffs is the absurdity of charging batteries at a time when energy demand is highest. Thus, when my neighbor most needs my surplus power, I am financially incentivized to hoard this power. This deprives all ratepayers a significant benefit when need is greatest. So NV Energy has effectively gutted the social benefit of distributed solar. So non-solar ratepayers are made to pay even more for power by this bad policy.
The way ahead is to recognize that the value of surplus power to all ratepayers varies through out the day. Now that SCOTUS has upheld FERC Order 745, we need to push for feed-in tariffs and DR mechanisms applying to batteries are in fact tied to real time wholesale prices. That is DR programs are now allowed to apply wholesale prices when they are high to retail customers. Demand response should be inclusive of feed-in tariffs from both solar and batteries. This would properly reward solar and battery owners for delivering power when it is most needed. So would drive down wholesale prices for all ratepayer and utilities. This is the triple win. Specifically the extraordinary of cost of peak power generation will be driven down. Not only is this a savings for all ratepayers and utilities (so long as their business model is not premised on profiting from peak generation), but there is likely a GHG abatement benefit for the planet. Offsetting use of gas and oil peakers with solar and batteries is definitely a win for the environment. So it's a quadruple win. I believe such a system can be superior to NEM if well constructed.
So in the present climate, utilities attack NEM out of fear. They simply want to halt the advance of rooftop solar. This leads to bad policy. When stakeholders are ready to work out solutions that leverage new technologies that create triple and quadruple wins, then we can set aside NEM. This is what NEM 2.0 should be about, but we've got to get past protectionism.�
1/1/2015
guest Grandfathering just means that existing customers (who are already committed and in a sense paid) don't change. The stock price reflects the future, not the past.�
1/1/2015
guest Without grandfathering, Solar City's business faces much greater risk. Investors will have now more certainty in future, particularly those purchasing Asset Backed Securities meaning that Solar City's bond interest rates can continue to be reasonable, whereas they would need to be far higher if a precedent for no grandfathering were to be set and upheld.�
1/1/2015
guest http://www.streetinsider.com/dr/news.php?id=11245624
Solar city closes new loan. If someone finds an article with more details let me know please�
1/1/2015
guest NV Energy gives up grandfathering so they wouldn't have an ongoing political battle with thousands of furious, probably high income, voters. It's a cheap give for them.�
1/1/2015
guest This I believe is the related SEC filing
SolarCity - Current Report�
1/1/2015
guest They gave up grandfathering so that they could keep their wildly unfair net metering rates which are essentially a tax on solar that will make it far less attractive to potential rooftop solar customers. As has been mentioned a bunch of times, this is a delaying ploy to set solar back a year or so and let NV Energy get their new natural gas plant online while they can still somewhat justify it's existence.
Why on Earth the people of Nevada would want to sink $1B into a new natural gas peaker plant when they could just install nearly a half gigawatt of rooftop solar capacity for the same cost is beyond me. They just don't understand the costs and prices of everything I guess.�
1/1/2015
guest Thanks, looks like it's 3.5 percent + libor, seems like a pretty good rate. How does this compare to other corporate debt�
1/1/2015
guest This is all asset-backed and short term debt, which is somewhat ok. From what I understand the ABS deals with the longer maturities of underlying cashflows. The ABS pricing went somewhat bad in the recent issue (the yield is a bit higher, the maturity a bit lower), I will look up the details. But this stuff is hard to compare as prospectus are not released to public on these. So the deals can be materially different.
The real issue is with the non-asset-backed corporate debt. AFAIK, SolarCity issued two bonds ever. One is announced in Oct 13 with a maturity date of Nov 18. That has an indicative yield of 14% now. The other is announced in Sep 14 with a maturity date of Nov 19. That has an indicative yield of high 15% now. Note, both of these have convertible options. I believe if you subtract the option value, the yields are even higher.
So my read is that SolarCity is effectively locked out of capital markets for non-asset-backed financing.
If you track the Cash position over past several quarters, company spends about $75mln or so per quarter in addition to asset-backed-debt. They would have to reverse this very quickly one way or other. Reduce costs drastically (even at the expense of lower growth) or borrow even more against assets or sell them outright. They seem to be trying to do everything.
My suspicion is if they show they can sustain the business (and decent growth) at a cash-flow neutral state, the stock will be more positively received.
Stock price substantially lower than $50 is really pricing-in the risk they will not be able to make it. In other words, the $30 stock price is unsustainable. It will either be well over 50 and stay there or it will go to 0 (or taken out private somewhere along the way to save the embarrassment). 2016 H1 is make or break I think...�
1/1/2015
guest The other dimension is valuation. I have a very hard time reconciling that with what I posted above.
SCTY has never been an easy stock to understand. But in light of all the recent info (rv resets, growth rate reset) and the price action, it has become a prohibitively complex beast for me.
Curious to see what all comes out in Q4 announcement.�
1/1/2015
guest In my mind it's clearly a make only with almost zero chance of a break. They're planning on cash flow positive by the end of the year so planning on cash burn at previous rates is not believing in management (which I know you feel has been deceptive at times).
While they may be "locked out" of traditional capital markets they have plenty of assets to back them so it doesn't really make sense to use the traditional markets either.
I'll be excited to see how their earnings call goes. What their sales costs are and what they guide for the year. They have been radio silent about the ITC extension and I'm curious if they are still planning on cash flow positive at the end of the year or if they are transitioning back into hyper growth. I have a feeling it will still shoot for cash flow positive so they can prepare for a capital raise to finance 5 gig factory
I think we can all agree that if they were building a stock pile of cash investors would understand the business model a lot better
Missed your second post, valuation is definitely a tricky beast with scty !�
1/1/2015
guest Their plan is to grow as fast as is humanly possibly while simultaneously financing the defense of an entire industry under attack nationwide, of course they're going to be on the debt precipice continually. If they could borrow more at a reasonable price to expand faster, I hope they would.
If you have faith in the product this company is peddling, your concerns should pivot off of the survival of the solar industry as a whole. Is anyone really concerned about solar being somehow being mothballed or surpassed as an energy technology?�
1/1/2015
guest I'm curious about something. If the sentiment is about being pro-solar, is there a reason SCTY specifically is chosen over an ETF like TAN? Do participants here believe that it represents a better growth or value play relative to the other players in the PV business? I don't have enough information or research to know, but it's interesting to me.�
1/1/2015
guest If you were to buy an "internal combustion vehicle" ETF at the turn of the century, you wouldn't have made a lot of money. There were thousands of car companies in the US before the industry shook out and "the big [insert number]" took off as the top dogs.
My feeling is that folks who manufacture and install will have a tough time battling each other to the price floor while SCTY can remain at the top as the only major nationwide player offering a PPA, premium installs and other future "energy services". Essentially, they're the only one I see that's differentiated significantly enough to be the "Apple" of the marketplace.�
1/1/2015
guest Very hypothetically speaking, if SolarCity were to die (or get hidden behind a private takeover), it's death will not be death of Solar by any means. It will only mean the failure of a particular business model and nothing else.
Solar and other renewables can very well survive in many other forms and business models.
It is incorrect to equate SCTY to be the one and only one way to achieve higher penetration of renewables in a global space.
SCTY merely represents one innovative business model, which is not yet proven if it will stand test of time (and all the craziness that shows up over time).
PS: In any case, I don't want to leave the wrong impression that I am predicting SolarCity's death. All I am saying is that the stock seems to be priced in such a way that the potential outcomes are polar opposites. I just don't know which way it will go when all is set and done. 2016 will be decisive I believe.�
1/1/2015
guest You've definitely nailed that. This $30 level post-ITC extension is laughable just considering the amount of retained value, therefore it's a death or rocketship-to-the-moon scenario. When the ITC was extended, I got a bit worried that the run-up to $50+ would scare off the shorts(and it did to a degree), but the feeling I'm getting now is that they must be flooding back in. Hopefully.
You see a company that cannot borrow another dime, I see a company whose goals will never have them in any position other than that. That might sound scary to some, but it's the Musk way. All in, every time.
Solar is so cheap that nothing can stop it, not Koch/Buffett/utility obstruction, not WWIII, not anything. I certainly never meant to imply that. SCTY is currently the only player I see that is differentiated enough to definitely be one of the big boys that makes it through. Picture their cost structure 3-5 years from now if they get another sweet deal on the next 10GW of domestic production. No one will be able to touch that.�
1/1/2015
guest i think we have to look at the forest instead of the trees on valuation. Solarcity is cutting costs on average 12%y/y right now, with projected costs within 12 month down to 2.30/watt... and this is before full production costs savings from the riverbend factory. This reflects scale and management effectiveness to improve company productivity. this is extremely valuable in a growth company whose primary evaluation as a stock on its ability to scale and improve productivity.
Now the next piece is an differentiating innovative product. Does Solarcity have this? They have innovated in every facet of its business from financing to marketing, and mounting hardware to solar panels... But most significantly, and what I harp on also every post, is they have brought a whole new dimension to solar+energy storage by developing and now implementing aggregation capabilities of all its distributed assets in a new wholesale market thst never existed before which instantly maximizes all "stacks" of values possible in distributed energy resources. As we have not yet seen this in practice, it is easy to not include these "stacks" in our assessment of Solarcity stock value potential. However, it is fundamental to investing in Solarcity because thst is exactly where it is heading and the whole point of being an investor in a growth technology/energy company.... Where is this company going and how big is the market is that?
Now, exact financial calculations are not really possible and I understand people get caught up on this and that's fine, But, to really invest in this company you have to be willing to connect the dots and make a few projections on your own. Give it a little time to work its way there, and then reap the rewards. If you are stuck on day to day movements, then you're right... Valuation is a mystery. You have better chances throwing dice against the wall, then predicting what numbers come up on the stock ticker with scty. But if you really believe Solarcity is inevitable, then a more forest from the trees approach really makes it clear this company is extremely undervalued and a massive buy at this point in its growth trajectory.
I think we also have a little more clarity on numbers as well: The ITC will run through 2022-2024(completion has to be complete within two years of commence work). So we know that will continue to help costs dropping, tax equity growing, and give stability over the next 6+ years.
We are now seeing that grandfathering is becoming codified within any net metering changes moving forward. The two most draconian actions on grandfathering were with Nv energy in Nevada and SRP in Arizona. Both have back down from not grandfathering and both have policies of extending it for 20 years. Now as thst has become stand and prescedent with regard to net metering customers, the market can find stability securitization and rates can continue to fall and offerings can continue to grow massively as a result. As well as Solarcity can sell more systems, all a reinforcing cycle that will reflect in stsble growth projects with respect to consumer confidence in return on investment.
secondly, California this week will decide on future net metering rates thst will last over the next 3-4 years, approximately 2020. California is the single most important market in the country for stable growth for Solarcity. If all goes well Thursday, we can expect multi year projections from Solarcity in the near future, maybe not at the q4 conferenc call, but within the year. Those growth projections will have a shocking effect on the stock, which you can't expect another downturn like we've experienced over the past year. You either have to be in at this time or accept a much higher entry point because it's not going back. New York is a massive market that will establish the value of solar by 2017, that should develop a benchmark for the transition to the next faze solar+storage aggregation. Just on California and New York alone Solarcity could sustain current growth the next 3-4 years between rates cases alone. Again, adds further stability for investor value projections.
lastly, California and New York are developing the solar+storage aggregation model at an accelerated rate right now. Solarcity is proving out the model this year, and I expect we'll start seeing demand response contracts with utiltiies starting sometime within 2017-2020 timeframe. We don't have numbers yet, but it's not a far stretch to see the massive massive value this will add to Solarcity and how massive the market will be as the price for solar+storage product drops within that same time frame. The Gigafactory will be ramping toward full production by 2020 and as new net metering discussions begin happening Solarcity will already be in full transition to include ancillary grid services model as it will provide greater returns to consumers then just net metering alone. At this point I also feel many more markets within many more states will open up and solarcity's addressable US market should fastly approach 90-100mln buildings/home rooftops(in addition to micro grid/utiltiy opportunities). As it stands right now, Solarcity has projected it will maintain a 40% growth rate, so just projecting to 2020, we can estimate installs at 1.75Gw(2017), 2.45gw(2018), 3.43gw(2019), 4.8(2020). So we can project based on these numbers that Solarcity may achieve 8x current installed capacity in just 4 years time... That'd absolutely mind boggling at current stock price.... Let's all remember this is a growth stock and scty is currently at $30 with this incredible future ahead of them.
just an add, we also can see that a 5 gigawatt expansion is a necessity by 2020. In fact we could deduce that they could start building it out Piece by piece starting in 2018 and ramp steady through 2020-2021. I can also see that they may move right to 10GW factory if the solar+storage prices drop as planned by 2020. Remember the Rive brothers both projected Solarcity will over solar+storage as standard package by 2020, so I wouldn't be surprised if they don't announce a tesla Gigafactory sized factory development scaled over a 5 year period of construction much like what is happening in Nevada right now. Elon might even label it Gigafactory 2...
bottomline, valuing the company in exact numbers is difficult during these times of policy transition, but valuing the company as a whole over the next 4 years(and beyond) is very clear in my mind.
It's wildly undervalued right now and accumulate when capable. Invest long, don't expect a trade to ever work.�
1/1/2015
guest Forgot to add, with grandfathering, solar leases/ppa become wildly more valuable then those people that purchased because ppa/leases can be transferred to new home owners in a home sale. That includes the net metering rate under which that lease/ppa was signed.
a person that purchases, does not get that same "grandfathering" upon sale of their house.
A lease holder can in effect have more buyer interest as a result over someone that has a purchased system since now that house with the purchased system goes under the current Nevada net metering scheme and receive dramatically less credit for energy put on the grid.
So, if this same action holds for California and other states, Solarcity may gain further demand of its lease/ppa product if more net metering changes occur in other markets. Even the smallest changes will boost demand since it gives greater home value to lease/ppa home owners under previous net metering schemes.
bottomline, Solarcity may see increased residential ppa/lease demand as a result of net metering changes in the coming year in its primary markets.
With the average American selling their home within 7-9 years of initial purchase, grandfathering is a significant lease/ppa selling point and now has just become more so with the developments in Nevada. It also incentivizes ppa/lease holder to make monthly payments on time and in full even if home market crash because it will be a significant selling point compared to other homes. Want to be in good standing with Solarcity no matter what happens as a result (in addition to cheaper monthly energy costs as well). So default risk dramatically drops in Nevada as a result of grandfathering going through.
This is also has a positive effect on Solarcity building its network of aggregated systems since they will have complete control over all those systems in the 50/50 whole sale demand response compensation sharing with the customer. As the rive's have said before, it is already written into customer contracts for Solar+storage systems currently in he field.�
1/1/2015
guest Interesting. So the idea is that SolarCity could be marketed to homeowners as having somewhat less regulatory risk when it comes to resale. I don't know how to evaluate that benefit numerically (probably not very much at all), but it's an interesting observation.�
1/1/2015
guest Foghat, I see that you are basically evangelical at this point. Answer some very basic things if you would:
If stacks of grid services are that infinitely valuable:
a) Grid exists today and it works quite very well. So what is the value proposition of these stacks? lower electricity bills? more renewables in the grid? That was the promise brought on by solar to begin with. What's new then? Or is there new money to be made somehow? If so who will pay and why?
b) Who is providing these services today? Once again, Grid exists today and it works quite very well. So somebody must be making all these gobs of money already. Who is it? and how and why will they disappear?
c) What happens to everyone else with batteries? Like you know the big boy cousin Musk with his PowerPacks? Why would powerwalls be more efficient at squeezing out greater value out of the grid than the powerpacks? Powerpacks will be installed everywhere, not just to compliment renewables but also with non-renewables. So why should grid call out to DG for these stacks of value?
d) Remember that JB seminar where he wanted to make money off of Tesla car batteries as they are hooked into the grid? It's 10s or 100s of cumulative GWs that will be using the grid and can provide these services as almost a secondary side effect.
All this stacks-of-value and gobs-of-money are vapourware which nobody knows how it will all turn out to be.
You want to make a bet four years out on some ultra speculative model based on some pilot projects where nobody knows how the revenues and cashflows shake out. It's you money and your wish. But please don't preach as though this is some sort of done deal, just waiting for money to pour in.
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Oh lest I forget, supercharger stations have gobs of batteries that are idle for most part of the year (heavy consumption is only over weekends and holidays). They too can and will provide these stacks-of-value to the grid.�
1/1/2015
guest This is actually immediately effective in California since net metering will be mildly degraded if expected decision comes on Thursday. If passed, the rates don't go into effect until the net metering caps are met in each utility territory. So, for the next 2 or 3 quarters, Solarcity may see nice residential demand pressure as we get closer to reaching the caps and switching over to the new rates.
and as a result of lease/ppa being transferable over the 20 years under grandfathering to new home owners (where onwership is not), we would see lease/ppa sales have increased demand as well.
again this should reflect in bookings over the next few quarters as net metering caps get closer to closing out and the new NEM scheme kicks in.
im not sure if Solarcity would bump up guidance to greater then 40% compounded, but I'm sure the mix of expected bookings will skew as toward California more so than usual this year specifically.
In effect, i don't think we investors will have to worry about 2016 demand as a result.�
1/1/2015
guest For context, Randy Carlson who is one of the best experts in understanding Tesla and the eco system has been long preaching grid-services as a market that Tesla will exploit tremendously. I see very very limited space for SolarCity in this.
Sort of like ZEV credits, the credit looses value exponentially as more EVs are built.
No, don't hold your breath on this nonsense.
SolarCity needs to pay for the batteries in the first place. It's not somehow free. Tesla is *guaranteed* to make money on every powerwall solarcity sells. But solarcity, not so much. No one knows.�
1/1/2015
guest This really belongs to the gigafactory thread but one should really read through this to get a firm grasp of Tesla's positioning in the grid (before counting in some sort of big win for solarcity).
Tesla, Best Positioned For Coming Disruptions - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha�
1/1/2015
guest Admittedly not knowing a ton about it, what storage seems to do for SolarCity is provide them a lot more insulation against NEM regulation. Not so much an increase in per installation revenue. Is that a fair statement?�
1/1/2015
guest Who is going to design, implement, maintain and monitor all these micro-grids? The battery company or the primary energy provider?
What is the difference between a gigafactory battery and a straight Panasonic battery?�
1/1/2015
guest Are you suggesting that SolarCity will manage
- Tesla's superchargers
- Tesla Cars that are plugged into the grid around the world
- Powerpacks installed everywhere
- Myriad other battery makers and their installers/consumers
and make money off of all of them?
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Yes, that is correct - and that comes with a price.
The debate here is that some folks believe SolarCity will make gobs of additional money through some esoteric "grid services" where there is zero competition now and ever will be. I am just calling all of that vapourware because nobody knows any of it. Let alone make a big claim that SolarCity will be infinitely more valuable because of it.�
1/1/2015
guest I think Elon would agree we're more likely to see Tesla sold to another automaker than to go into the micro-grid business. SCTY is aiming to be the largest power provider in the nation(or was it world?). It's much easier for TSLA to outsource their supercharger solar arrays and storage monitoring to SCTY.
It's the electrician that ties your power sources together not the battery manufacturer. SCTY will take whatever batteries you like and tie them into a micro-grid along with your solar array. They're doing the tests as we speak.
Both entities have clear missions and no interest in competing with each other that I can see.�
1/1/2015
guest SolarCity doesn't even operate much of the places that Tesla exists (superchargers, cars or powerpacks), let alone other battery players.
I am not sure what you mean by micro-grids.
The micro-grids that I know of are independent grids that exist in islands or isolated campuses. Building micro-grids is entirely different from making money by providing stacks of services to the Grid itself (see the capital in Grid). The discussion is about the latter.�
1/1/2015
guest �
1/1/2015
guest http://www.consciouscompanymagazine.com/blogs/press/84129473-solarcity-a-conversation-with-co-founder-lyndon-rive?utm_content=buffer930c0&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
lyndon rive: Solarcity will have two customers. The utiltiy and the home/commerical solar customer. Sell energy to home user and sell services to the utiltiy. Both at the same time through solar+storage+smart inverter.
solar+storage changes the game with respect to NEM since now Solarcity can control when surplus goes on the grid. Having his control is very very valuable, because the grid at large can ask for that energy whenever it needs to, specifically when peak demand is happening. At the same time, solar customers can flip to battery mode to offset high energy demand internally outside of any grid peaks that may occur.
My feeling is NEM wiont be as compelling as the solar+storage grid services in addition to internal energy flexibility for cost savings solar+storage product offers. As such market forces, as much as a market materialize, will motivate people to go solar+storage, which will effectively migrate net metering to a new business relationship with Solarcity and the utiltiy.
so, yes, NEM risk hedged, but more importantly, NEM may likely just fade away as the consumer migrates to the more valuable solar+storage product.
This also goes to the renewal argument they pops up every so often. If Solarcity offers a compelling Solarcity+storage product at the end of traditional solar customer contract, will thst customer purchase thst product or just end using solar. If that product is complelling, renewable will not only happen, but I feel they will sign another long term contract under solar+storage services scheme.
add:
Supreme Court ruled FERC has oversight of demand response wholesale markets. This demand response wholesale market is what Solarcity will tap into through aggregation of all its systems. FERC also noted that NEM is not a wholesale market.
in order to value Solarcity demand response, we must look at what prices those demand response services are going for right now in Solarcity markets, say California and New York. For example, Right now, Adnanced Microgrid has a contract with allow a utility to tap into 10MWhs of distrubuted powerpacks installed at various consumer sided buildings off the 405 in SoCal for its instantaneous demand response capabilities. Also, Solarcity is currently developing interoperability stsndards (which may become the standard protocol for all solar+storage installs regardless of company) under an on going 50 customer solar+storage poliot program also in SoCal. Initial results are to come this year and continue into 2017. Bottomline, this is happening in current time and is a matter on when not a matter of if...�
1/1/2015
guest I have been in SCTY since near IPO. Sorry, you didn't catch or address anything I wrote. Let me try to explain myself better in a later post.
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This is - The Grid
http://www.geni.org/globalenergy/library/national_energy_grid/united-states-of-america/americannationalelectricitygrid.shtml
Each nation gets one of it's own.
Topic-1
So SolarCity could in theory make money providing services to this beast. But no one knows how much. It's all at very experimental stages. Whatever services it is, the protocol will be uniform such that anyone with the right battery and the interface will be able to provide those services. SolarCity has no authority on this grid to dictate complete dominance (no less with Tesla batteries). Period. It's available for everyone whenever it opens up. All batteries will compete - superchargers, tesla cars, powerwalls and all other batteries from myriad other folks, they will all compete.
Topic-2
The discussion of building independent micro-grids from ground up is a separate topic. That is applicable for developing world where grid doesn't exist (well). Here too we don't know anything yet. AFAIK SolarCity hasn't built a single micro-grid for anyone yet, except maybe as part of the non-profit work they do on a limited basis. I know few others already doing it in India etc. So SolarCity not only needs to master building these but also expand globally and compete with the local folks - in the developing world.
Topic-3
Now in theory the big beast above could completely be disintegrated into a million micro-grids within each developed nation. SolarCity would argue that is better in terms of reliability, cost of maintenance and so forth. But that is one massive dream to transition from the beast we have to the atomic structure that SolarCity would fantasize. I, or anyone for that matter, have no idea if or when it will ever happen. What's the roadmap. Who will be the agent of change and why?
Question
So when you are saying that SolarCity will get monumentally big through "grid services". Can you please clarify which one of these three you are talking about?
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Side note: We will all do lot better if we don't take management's word for it's face value. True personal story.�
1/1/2015
guest Is today's little run up a problem? You seem stressed.
Don't make money decisions while stressed.�
1/1/2015
guest I predicted today's run up yesterday�
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