1/1/2015
guest Finance.Yahoo.com�
1/1/2015
guest Given that SCTY is a recent IPO, it has limited 200-day-moving-average history. It only spans last two ERs actually.
ER Date Price 200-day-MA %Away %Fall Next Day
3/18/14 77.10 51.20 50 -5.71%
11/6/13 59.65 32.65 82 -16.70%
So you might be right, given that now the stock is literally around the 200-day-ma, it may not fall as much or may even go up on ER.�
1/1/2015
guest I haven't paid much attention to EPS numbers in the past as I thought they are sort of irrelavent. As I take a close look now, the ship has already turned!!
These are the GAAP numbers (including some restatements):
Q4 13 -> 0.280
Q3 13 -> 0.040
Q2 13 -> -0.310
Q1 13 -> -0.410
Q4 12 -> -1.300
Here is the real kicker: analysts are expecting -0.629 eps for Q1 14. LOL!
Now I'm feeling very positive about ER actually.
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I agree with the gist of this. I look at Retained Value and Retained Value/Watt to get a feel for the trends. I don't think of them in absolutes.
Lets say we agree that SCTY's retained value is in reality only half as worth as they say it is. All it means is that it will take an extra year to grow into their number (or any future target number), as they are growing at 100%+ rate. For a long term investor that should not be too much of a big deal.
Another key related point, I don't think we should look at Retained Vale as company's true worth or some sort of proxy for the company's fair value. It's a confusing/messedup metric. I know it takes out tax equity partner's shares but I'm not sure if it takes out monetisation through debt. This is the reason why I like to look at Book Value (with a reasonable multiple) as a better proxy for fair value.
Having said that SCTY assumes 90% renewal rate for the later 10years. Not sure what they assume for the remaining 10% - a complete write off?
Here is a blob from the footnotes in one of the quarterly presentation:
�Retained Value Renewal� represents the forecasted net present value of the payments SolarCity would receive upon Energy Contract renewal through a total term of 30 years, assuming all Energy Contracts are renewed at a rate equal to 90% of the contractual rate in effect at expiration of the initial term. This metric is net of estimated operations and maintenance, insurance, administrative and inverter replacement costs. This metric includes Energy Contracts for solar energy systems deployed and in Backlog.�
1/1/2015
guest HenryF, Retained value will ultimately give way to traditional metrics as they hit break even and begin to self finance... Since this is a business currently expanding at 100% compounded, there needs to be a way to express the end result value to investors while they're getting to this point. The npv is that expressed way. If they didn't show the future value of returns on intensive capital now, they would be just another installer, growth would be severely slowed. The retained value has been extremely helpful in raising billions of dollars for Solarcity.
To me, using my systems engineering brain, it is just like the millions of projects that go on around the world where you finance the construction using simple npv. Analysis/ break even analysis, etc...
update: and if some people out there think Solarcity hasn't done the sensitivity analysis on assumptions such as discount rate, etc... those people are very misinformed and need to pay attention a little more in detail to the management running this thing...
dont forget Elon has been 100% behind this analysis from day one... Check out what he said on IPO day...
Musk: SolarCity IPO Price Sought Wasn't Aggressive�
1/1/2015
guest Anyone have any ideas why TAN is getting hit 6% today and 7% for SCTY? Seems to be a washout I'm hoping. Nasdaq is only down 1% but entire solar sector is getting hit hard and I can't seem to find any news why.�
1/1/2015
guest Weak volume for Solarcity compared to many of the main solars...�
1/1/2015
guest nope- there's no specific Solar news to drive it. 10% down across the Solar board- good buy-op here. It's basically a risk off- US econ data coming this week and Ukraine. IMO a big market miss as usual. I'm currently adding to position�
1/1/2015
guest credit suisse downgraded chinese solar demand, so chinese solar companies are getting pummeled:
Credit Suisse Lowers China Solar Demand And Yingli Green Energy TP - Emerging Markets Daily - Barrons.com�
1/1/2015
guest Next number in that series is 74c.�
1/1/2015
guest SolarCity Announces Date and Conference Call Details for First Quarter 2014 Earnings Report - Yahoo Finance
this could get fun since Tesla's conf call will start a half an hour into solarcity's call!!�
1/1/2015
guest Here is the deal on SCTY's stock price.
Elon Musk bought 214,869 shares and Lyndon Rive bought 107,434 shares at a price of $46.54 per share in Oct 2013, in the secondary offering.
Most definitively, these two guys know of the company's prospects and vision than anyone else on the planet.
Media reports Elon Musk as a Billionaire and thus giving the impression he is very rich. That is all very true. But the other truth of the matter is, he doesn't hold much cash. In fact he has personal loans north of $300 million with Goldman Sachs etc. So any sizeable purchases he makes are all on borrowed money.
I vividly remember during the secondary, Musk basically said "I will invest this amount regardless of the price, just give me whatever shares I can get." I'm unable to find a link at the moment but will post once I have it.
The way I read that is "I can only afford to spend this much at this time. Whatever price you financial nuts come up with in the primary market, that will be way lower than the true potential of this company. So just give me whatever number of shares you think is right."
Elon Musk is a person with the highest business acumen of our times and quite possibly of all time. I often tell my friends that Musk will beat Rockefeller in becoming the richest person world has ever seen. Now we see this man, going on credit and buying the stock without regard to price.
What does all that tell about the price of $46.54?
After ER (or any other time), if stock drops close to $46.54, I will buy the stock like a mad man. I honestly think I would be stupid not to. It can always go lower esp if there is an imminent recession or some abnormal event. But I think the current price or any lower price for this stock is a real bargain.�
1/1/2015
guest HenryF, to add, that purchase was made over six months ago... A lot has changed since then, big milestones achieved, and many more coming soon...
not much company direct news put out since last ER, so to me, pure technicals at play in current stock price. Seems to me players are just shuffling money in and out of the sector and between companies at advantageous times. When big news comes out of tesla and Solarcity, big swings up will occur... These coming months are filled with big news events, just thing what the finalized gigafactory is going to do to things... Add in any slight bit of govt investigation results, or battery storage install news in Cali, etc... Ii do have my pie in the sky high prices, but I do feel that prices won't go too much lower ever again soon. (Barring any truly material breach). They just have the right mix in the right states at the right time with the right future strategy/corporate culture... Everything I want to see in an investment in good times and in bad, in the best of markets and the worst...�
1/1/2015
guest I made a point in one of my posted to state SCTY is recession-proof in my opinion. Everyone needs electricity and needs to save money during a recession. How could a recession possibly hurt this company? During a recession people may not want stocks but they'll buy SCTY ABS at a fixed rate with little risk. The capital should be easy to get in good times and bad. I just don't see how this company can do poorly during a recession. I really don't understand the market volatility either, other than pure manipulation. This is one of those stocks I just wish the shorts would leave alone so long term investors will buy and hold.
Personally, I would love to see Elon buy the dips and sell the highs. He would be doing his stockholders a huge favor. He can calm the stock down a lot by announcing his insider trades. He owns so much of the stock he can really help set the price and keep things more stable.�
1/1/2015
guest I said this before: SCTY will not do well in a recession and the stock will tank even more all the way to the teens if a recession started in the next few months.
You guys are going out of your ways to spin a huge negative into a positive/neutral in regards to SCTY.
First of all, SCTY will not be able to issue ABS easily, if at all, in a recession and a bear market.
Here is an example of what could happen in a recession:
States (not named California who put in net metering rules for 20 years) begin to struggle financially even more than before, so they take away net metering rules (this can happen in a bull market and is happening in some states like Colorado or Arizona).
Without net metering customers are losing money big time on SCTY leases, so they stop paying their bills. SCTY issued ABS's begin to implode and so does the company's stock.
Now, I am not saying that this will happen, but it is a realistic possibility and you wrote "I just don't see how this company can do poorly during a recession."
Another more simple example is that people lose jobs and stop paying for the solar lease, because they don't believe that SCTY will cut them off. Or they can simply play the "wellfare" card to get free/subsidized electricity from the utility instead having to pay SCTY.
There are many things that will go wrong for SCTY in a recession. If the recession is severe, such as in 2008 then you might be seeing SCTY trade below its IPO price. Make no mistake, all other solar stocks will get hit really hard too but SCTY would get hit just as hard if not a lot harder IMO.�
1/1/2015
guest You probably picked the absolute most negative scenario imaginable for SCTY. What you describe would be a depression, not a recession. People buy bonds and secure investments during recessions and the SCTY ABS would be quite attractive at 5% during a low inflation environment. That settles the ABS problem during a recession.
People pay their electricity bills before they pay their mortgages. They also pay their credit card bills/utilities/car loans before making the mortgage. A person is not going to stop paying a lease on electricity just as they don't stop paying the electric bill. Sure, anyone without a job might not pay. You don't need a recession in order to find people without jobs. The number of people not paying due to job loss will be much smaller than the number of people signing up for a lease to save money. Saving money is easier than spending it when you're in a tough spot.
The government may continue the rebates if the economy slows. You seem to forget the Fed is pumping money into the economy and swears to continue in the event of a recession. Financing solar panels is going to be a long term certainty regardless of economic health.�
1/1/2015
guest Thats a thought, but iit seems that when he, and everyone else, accumulates and holds for the long term, all long term investors win. The volatility happens but at the end of the annual production cycle, the stock should a lot higher then at the beginning(barring any material breach of course.)
we should get a good snap shot after the q1 conf call and q2 guidance(and reaffirmation of YE guidance).�
1/1/2015
guest The instability of the stock stops a lot of people from investing in the first place. If it was rising and falling a lot more smoothly then a lot more investors would hold on. People do not like all this crazy volatility. 50% swings is crazy. I can deal with 25% swings easily, as can most "investors". Too many traders in the stock and way too many shorts. He's letting the shorts control the stock more than they ought to.�
1/1/2015
guest I hear you, swings are crazy. I think it will all pan out in the end. Have to remember it was in the teens at the beginning of 2013. At the beginning of 2014 in the fifties. And in my opinion, closing in on the 100's at the beginning of 2015. I feel they will set somewhere in between 900MWs-1GW goal for YE 2015, RV between $3-4bln.
with growth like that, tough to see investors run away...�
1/1/2015
guest
Tesla Power Light | EnergyBiz
this is a recent JB interview on Solarcity/tesla energy storage. Although it could be shorter variation on this article from a few weeks ago... Tesla's Power Play | EnergyBiz
JB STRAUBEL: "Our long-term goal is to invent ways to solve storage problems to facilitate a 100 percent renewable grid. That shouldn�t threaten utilities. It's the logical and future evolution of the grid. Utilities have a key part in this. Our role is to invent and improve the products that make a 100 percent renewable grid possible."
All in all, I think we will see more of the tesla/Solarcity energy storage narrative in the coming weeks and throughout the second half of the year...�
1/1/2015
guest We Are SolarCity - YouTube
Saw this video, I'm wondering if Solarcity is approaching 2 residential installs per day now... Also read a tweet from a Solarcity installer he finished installing a 7kw system by noon... My own little back of the envelop number says Solarcity average system size is about 6.8kws so could be a possibility. Last reported by Bob Kelly in March was an improvement from .4 installs/day to .9/day... So getting to 2/day would be a big milestone in such a short amount of time... I wonder what the competition rate of install is?
Is the zep aquisition paying off? This is a video on how zep mount works...
ZS Comp Overview on Vimeo
Mounting Market Will Grow $1.5 Billion By 2018
solar mounting will grow $1.5bln by 2018...�
1/1/2015
guest Net Energy Metering: Update on Key Distributed Generation Policy
solarcity is hosting a webinar on May 20th about all things net metering... Should be helpful to all for understanding a very important topic to the future of DG...�
1/1/2015
guest Does anyone have any idea how much SCTY would have to charge lease customers up front to become profitable in the first 12 months of the lease?
I think it would be great if SCTY had an option where the client could pay the install/design fee and then get a reduced lease rate. It gives the client a little skin in the game in return for a lower cost of power over 20 years. I wonder how many people would choose that option.�
1/1/2015
guest Chandler adding more solar projects - Chandler - EVTNow
"As with previous solar projects, Chandler will not owe more money if the panels produce more power than the contract guarantees. But SolarCity will reimburse the city if the panels under-perform, Norris said."
South Central Connecticut Regional Water Authority SolarCity Commemorate Major Solar Installation
�This solar photovoltaic system, one of the largest of its kind in Connecticut, will allow the Authority to be more efficient and lower our energy costs. These savings are passed on to our customers in the form of reduced rate increases,� said Larry L. Bingaman, the Regional Water Authority�s President and CEO."
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I personally haven't heard any kind of package deal like this, but if there is a market for it, I'm sure Solarcity would do it. Only thing is the upfront cost that consumer would have to pay... Some people are all or nothing if they have the funds to buy, they buy... However, if it ultimately is cheaper and less risky to do it the way you described, then should be a market for it for sure...�
1/1/2015
guest My thoughts on the hybrid pricing model based on the feedback I've seen on this thread is that some people want to take 100% of the risk (purchase panels/paying installer/future maintenance) vs. those who don't want any risk at all.
I bet there are plenty of people in the middle who are willing to pay for the design and labor for the actual install but do not want to take on risk if the panels/inverter breaks 10 years from now.
I personally would never pre-pay the lease to get a better rate but I'd prefer to pay for someone to install the panels and then lease the electricity off the panels. If the panels fail, I pay nothing and SCTY would need to replace/repair them.
I think it would help the company also be more profitable, faster. SCTY takes on all the risk day 1 of the lease and operates at a loss for what seems a long time. They have to charge a premium KwH rate for that risk.�
1/1/2015
guest Thebanker, they are operating at a loss only because they are scaling. Scaling takes a lot of capital as you know. Scaling will ultimately make the design/install cheaper. If the design,labor, etc, costs come down, Solarcity can keep creating competitive products. This is an industry that varies really on each contract, each company competes for every customer individually. Different utility and government incentives, etc.. So, really have to see the competition on a per contract basis. I'm sure, if you wanted/could, you would get a quote from a few different solar companies to determine what best works for you. And that is the key to Solarcity's success. I feel cliche, but P.F. Drucker was right, the sole purpose of a business is to create a customer. I feel Solarcity does that in any product, lease or buy, they put out there. In the words of Elon, just let them compete for your business and see what happens.�
1/1/2015
guest This depends on the level of maturity of the ABS market at the time of recession. If ABS market evolves enough, there will always be a market. The rates may go higher but that's about it. In a normal recession Markets don't completely seize the way you are imagining. 2008 was an anomaly. Even in the "great recession" of 2008 not all markets seized up.
Something is a miss here. How does helping utilities retain their revenues help the State? Are you saying states "own" utilities?
SolarCity will be best prepared of all solar companies to deal with any paring of net metering. If you want to play solar there is no better choice in this perspective.
Please speak numbers. This statement sounds something like 60% of population will become jobless in a recession.
Unemployment will go up by utmost 5 to 6 points in a recession. Add to that, recessions hit lower income groups harder than higher income groups. Lower income groups have lower home ownership. Put it all together, it would be significantly less than 5% of homeowner population which will have job losses. Now if you properly account for dual-income households, the percentage of families that own homes that can't afford electricity will be minuscule.
Take a look at any of the utilities revenues through past recessions. Duke's revenues were flat even in a catastrophic recession of 2008.
Quite the opposite actually. Many of your negative posts on SolarCity have an alarmist tone and are not grounded in logic or backed up with data. It's a shame that an expert investor/trader like you somehow deliberately tries not to see the positive aspects.
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Ultimately, the stock could fall in a recession but that would be based on sentiment than loss of revenues. Similar to how Apple�s stock fell in 2008 even though its revenues and profits were going up every single quarter throughout the recession. I guess we could argue that growth slowed (than expected) which caused the drop. Even Duke fell during both tech crash and in housing burst. So the stock could fall and it very well might, but that would NOT be due to loss of revenues or profits.
A better way to think about it is, a recession would be a great buying opportunity if you were to have spare cash at that time. Because once it�s over the stock will fly back into it�s proper valuation (and we know the recession won�t have a material impact on the business).�
1/1/2015
guest You guys are consistently ignoring all risks and brushing them aside like they are immaterial, non-existent or require a black swan event and/or great depression in order to materialize. Good luck in your investments, but you guys are making a big mistake by not acknowledging anything that I say.
Maybe you will listen to S&P Credit Rating Agency instead:
SCTY got BBB+ rating and that barely qualifies for investment grade on their scale (BBB- is considered lowest investment grade). Here is their definition of BBB:
�BBB��Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
It doesn't take a genius to figure out that a recession could impact these ABS quite possibly in a significant way (I posted all this stuff before knowing what the credit rating was). But it does take an ignorant person to think that a recession will not have any impact on the ABS issued by SCTY.�
1/1/2015
guest Are you talking about the same agency which rated sub-prime mortgages as AAA? To top it off they lowered US rating from AAA only to see Treasuries take off.
Data is firmly on my side of the argument. Default rates on solar leases are lower than on prime-mortgages. Take a look at:
SolarCity - Events Presentations -> Featured Event -> Page 15.
If a recession were to happen right today, ABS market may not evolve as quickly as hoped. But that's different from a recession happening next year or later. By that time the ABS market would have evolved quite nicely and a recession will have very little impact if any.�
1/1/2015
guest Standard Poors Thinks SolarCity is Investment Worthy, Should You?
"SolarCity (NASDAQ: SCTY ) got the blessing of Standard & Poor's this week. The ratings agency said that SolarCity's recent bonds are reated at a BBB+, an investment grade rating. This should actually come as a surprise for some investors because it got that rating despite not having a long credit history and it got a better rating than some of the other utility giants such as Duke Energy (NYSE: DUK ) and Exelon (NYSE: EXC ) ."
https://www.greentechmedia.com/articles/read/SolarCitys-New-70M-Securitized-Rooftop-Solar-Portfolio
The new offer, 2014-1, comes with a new set of insights into SolarCity's securitization strategy:
- S&P assumes a solar module degradation rate of approximately 1.3 percent per year
- Residential customers need a FICO of 680+ with no bankruptcy in the last five years in order to qualify for a lease or PPA.
- Weighted average PPA price is $0.15 per kilowatt-hour with a 2.07 percent escalator.
- California, Arizona, and Colorado (the top solar states) accounted for approximately 90 percent of SolarCity's total portfolio.
- 2013 vs. 2014: The number of PV systems in the pool jumps from 5,033 to 6,596, and the price-per-kilowatt-hour escalator drops a bit. FICO score expectations and assumed solar module degradation rate are essentially unchanged. The 2014 pool leans toward longer customer agreements with a greater focus on residential rooftops, because the money for this type of company is in long residential leases.
- Net energy metering: S&P's take on the regulatory climate for solar expects "some balancing of utilities' and solar developers' needs, including potential transition periods to modified rates for existing solar customers." S&P sees this trend as mitigating the regulatory headwinds.
- Inverter modeling: S&P anticipates inverter replacement ten years after each solar system is put into service. "The transaction has a reserve built up leading up to this expected expense."
�
1/1/2015
guest Tesla's Power Play | EnergyBiz
STRAUBEL Stationary and mobile storage have a nice synergy involving economies of scale. The more batteries that are manufactured, the lower the unit cost. We help to drive down the cost of batteries for electric vehicles by making more stationary storage, and vice versa.
�
1/1/2015
guest Wow, this is an awesome interview, thanks for posting the link. Everyone should read this, I got inspired by it to load up more SCTY versus profit taking before the stock price gets too close to my cost $29 basis. Load up on the dips and hold for 5...10...15...20 years if you can afford it. In my opinion, as long as the company survives a major downturn, you will be massively rewarded.�
1/1/2015
guest It's a fallacy that solarcity's operations will seize up in a recession due to lack of funds. It's thoroughly rebuked by someone here by directly referring to the official 10K document. Pasting here for convenience.
***
The topic of what will happen to SCTY's financing if there is a recession came up here. So I though this snippet from the 10K document is relevant:
"We finance our operations, including the costs of acquisition and installation of solar energy systems, mainly through a variety offinancing fund arrangements that we have formed with fund investors, credit facilities from banks, preferred stock equity offerings and cash generated from our operations. As described below under�Financing Activities�Financing Fund Commitments, as of December 31, 2013 we had $544.3 million of available commitments from our fund investors, including a $344.0 million financing fund structured as a debt facility, that would be available through our asset monetization strategy.
While we have reported operating losses for the year ended December 31, 2013, we believe that our existing cash and cash equivalents, funds available under a secured credit facility and funds available in our existing financing funds that can be drawn down through our assets monetization strategy will be sufficient to meet our cash requirements for at least the next 12 months."
Another thing to note, Solar City is constantly expanding it's funding choices. The list includes:
- Incoming cash from lease payments
- Tax equity funds
- Syndicate loans (eg: the latest 250Mil financing facility)
- Asset backed securities (example)
- The upcoming crowdsourcing platform
It's worth noting, not all recessions are as bad as 2008/09 recession. Most recessions are moderate lasting about 2 to 3 quarters.
***
�
1/1/2015
guest Riverkeeper's Annual Fishermen's Ball | Riverkeeper
solarcity will receive the Big Fish Award tonight...
Riverkeeper�s Big Fish Award recognizes individuals and organizations that have had a transformative impact on the movement to protect our natural resources. Their innovative problem-solving, bold leadership and dedication inspire all of us to follow in their footsteps and be better citizens and stewards of the earth.�
1/1/2015
guest Mod Note: Enough already with the personal stuff. Yet another post (and that quoting it) got moved to snippiness. This thread is among the worst for having posts moved....I've left warnings before and now have zero tolerance for bad behavior.�
1/1/2015
guest Hopefully he's just buying a house for his mother
Form 4: Update Filing for SolarCity Corp (SCTY)
Apr 30, 2014 (Vickers Stock Research via COMTEX) --
Document Processing Date: April 29, 2014
Stock Name: SolarCity Corp
Stock CUSIP: 83416T100
Filer: RIVE, LYNDON R.
Position: Chief Executive Officer
Stock Symbol: SCTY
Exchange: NASDAQ
Stock Type: COM
Transaction period: April 29, 2014
Trade amount: 160000 shares
Trade type: Automatic Sell
Trade price range: $52.254
Shares still held: 1899812 shares
Own Type: Indirect�
1/1/2015
guest SolarCity - Statement of Changes of Beneficial Ownership
he actually still holds over 2.6millions shares. Sold roughly 6%. Also sold at pretty much the 200 day area before earnings release... I'm thinking it is for personal reasons unrelated to health of the company.
if he sells another 6% this week or after earnings, then I'd be a little concerned...�
1/1/2015
guest I wonder what the "Automatic Sell" represents. I wonder if this was a planned sale. It would be nice to see more details about these transactions. Luckily Elon isn't selling. I don't care what reason Elon would be selling for. If he sells at this price range I'd really be concerned.
Does anyone know Lyndon's salary? Maybe he also has a low salary like Elon so selling stock is his only way to make large payments in his life.�
1/1/2015
guest @thebanker,
SolarCity - Definitive Proxy Statement
He makes 276k.(pg37)
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http://www.innov8energy.com/blog/innov8energy-solarcity-partner-to-provide-solar-energy/
looks like they might be adding more marketing power in the MD/DC area now...�
1/1/2015
guest Senior executives at public companies don't get to trade shares in those companies just whenever they want. They have to have a "trading plan" in place, and in a case like this would have to have committed to selling the shares months in advance.�
1/1/2015
guest +1
i wonder how far out they set their trading dates? Does anyone know 105b-1 stipulations?�
1/1/2015
guest I think you mean 10b5-1. That 'rule' actually just requires that the trading plan is established when the trader (in this case Rive himself) is not in possession of non-public, material information; the concept being that 10b5-1 plans can be used (they are not mandatory) as an affirmative defense for company officers against accusations of insider trading. Normally the plan is established at least 30 days in advance but may be up to a year or more; there's no set time requirement or even recommendation. Plans simply commit the officer/insider to trades specified in advance for certain days. Typical time frame for such plans is for adoption immediately after an earnings release when officers would hopefully have zero material, non-public, information.
Existence of a 10b5-1 plan for any given company officer does not preclude them from making other trades outside of that plan provided they are not trading based on insider information.�
1/1/2015
guest Is an Energy Storage Tsunami About to Hit California? : Greentech Media
More energy storage momentum in California...
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Thanks for the info... It seems like in this case, right now is a bottom, flatline moment for the stock. One might think there is nothing to point to insider trading given the high volatility around ER time. There typically is a run up into the ER, then a drop post ER. To sell right after ER doesn't make sense here, so typical time frame as you mention might not apply. Some may even say he did sell post q4 release but that could be a stretch since q1 release is next week.
who knows right? This has nothing to do with the health of the company,IMO. I think they are going to have a good Q1 ER and put out strong Q2 guidance, so no worries.
update: Board member J. Shulkin just acquired 30000 shares today on behalf of Valor Solar, so insider buying going on now too.
SolarCity - Statement of Changes of Beneficial Ownership�
1/1/2015
guest @futureproof Do you remember how much of the planned 50GWhs from the giga-factory is sort of allocated for stationary storage?�
1/1/2015
guest Those are options, not common stock acquisition.
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Just FTR: although I summarized 10b5-1 plans in general, there's no indicator I have seen suggesting that Rive's stock sale was part of a 10b5-1 plan or not. I'm guessing it was a predetermined trade though due to the timing (after Q1 but pre-earnings means he must be in possession of insider info right now).�
1/1/2015
guest Rive's sale was in accordance with the 10b5-1 plan. SolarCity - Statement of Changes of Beneficial Ownership
The options exercise price is $52.90, so I think they hope to see the current stock price go a lot higher in the future... I'm sure they're not going into this hoping it goes down... So, I'm going to go out on a limb and say they're pretty optimistic about Solarcity's future with these 30k today...�
1/1/2015
guest Ha, I wish I knew that. I'm guessing, if all things go well, they will try to have enough to meet Solarcity demand at a minimum. So, if solarcity achieves 1mln customers by mid2018, then they will forecast from that number... My best guesstimation right now...
Update: I've read some residential storage systems are currently about 10-11kwh, so maybe 1/6-1/8 of total battery pack production(based on 60,85kwh auto packs). So, maybe 568k-650k storage units at 10-11kwh each. Again, more guess work.�
1/1/2015
guest There you go, in the notes it states his plan was in effect on 8/30/2013. IOW, the sale was fixed 8 months ago.
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The options are priced at the time of the gift, they were most likely a gift to the director in return for board participation or the result of an earlier agreement. Pricing options below market creates a taxable event for options; those options may go down so it almost never happens that they are priced lower.�
1/1/2015
guest That would really suck if that gift turned out to be a turd, right? Gift or not, still think it's a vote of confidence in the company. The way the notes read, it seems more as a retainer or performance bonus as long he sticks to be "issuer's service provider"...1/48th Vest each month after March 2015...�
1/1/2015
guest You are over-analyzing this.
He simply got granted 30,000 stock options with a strike price equal to Monday's closing price. Probably gets these every year.
If some random director gets 30,000 then I would watch out and keep an eye out for dilution when you add up all employee stock and option grants. I have the same concerns with TSLA.�
1/1/2015
guest you know what, this is probably it. Simple enough. And I think it's the same for the all the "insider selling." Nothing more then planned events that would've happened regardless of current stock price.�
1/1/2015
guest Selling happens all the time, so I wouldn't worry about. I was laughing my ass off last year when a SPWR executive sold all of his stock at $10, while I was buying more.
Insider selling doesn't mean that they don't think that the stock will go up. Some people do not like having too much exposure to the company they work for, so they cash out stock any chance they get, since they will get more next year.�
1/1/2015
guest in addition to sleepy's comments; Even Execs who do know the stock potential future sell at regular intervals to fund other investments- don't forget what they are also receiving many more future options to replace those for future performance etc. It's a virtual non-issue you guys are discussing.�
1/1/2015
guest Solar Energy Takes Over Professional Sports | EnergySage
might we one day see the NFL/MLB/NBA games in Solarcity Stadium, Solarcity Field, or Solarcity Center?
FYI, also read some tweet that Solarcity will make an announcement on knpr tomorrow about "new solar jobs." Not sure if this anything significant, still thought it something to share away...�
1/1/2015
guest SolarCity Launches First-of-its-Kind Solar Service in Nevada
hopefully, this won't tip the hat toward Nevada for the gigafactory too soon... Maybe New Mexico is next for Solarcity to do the same as it just has done in Nevada... Hint to New Mexico and others on energy incentives
Solarcity has now expanded its market to 15 states. It will also add 400 new jobs for a total of 800. Since New York has 180 Solarcity employees for 19.3mln population, curious why Nevada with pop of 2.7mln gets over 4x more work force... Hmmm....�
1/1/2015
guest How big is launching SCTY in NV? Any idea how many homes could potentially have panels installed in NV?
I'm surprised the stock is only up 1.5% today.
I saw something yesterday mentioning 2 possible gigafactories in the future to reduce risk. It was an interview with Elon. News out of SCTY lately has been very thin lately. I wonder if this is a strategy to hold back info until after earnings next week.�
1/1/2015
guest q4 conf call they hinted at reduced commercial projects and it sounded intentional. This could be interpreted as making room for gigafactory capacity building, but could be a stretch. They will now have 800 employees in Nevada, again expanding capacity what seems disproportionate to current population. Nevada is restarting its
SolarGenerations Program in August so this seems curious timing. As far as gigafactory in two places... Pure negotiation tactics to expedite permits as well as to receive other incentives... Make the states commit resources with minimal time delay if competition is set all the way to ground breaking... There will only be one gigafactory at the end of the process. Nevada looking very promising still with this latest development.�
1/1/2015
guest So you think the 800 employees hired over the next year will be doing more than just solar installations on homes?�
1/1/2015
guest Sounds a bit overkill, doesn't it? I could be underestimating the current rooftop market in NV. Maybe you need 400 more employees to cover it. In that case, NV is a good addition to Solarcity and bodes well for accelerating the achievement of 1mln customers by mid 2018...�
1/1/2015
guest 15 states still seems pretty low. I'm surprised they haven't tried to break into even more states. Whatever it takes to stay on their path to 1m by 2018 would be nice. SCTY definitely doesn't need to be missing any targets anytime soon.
I see such a huge cycle of growth for them I just can't see them missing their target of 1m by 2018. I'd love to see them add an add-on service to the systems they sell and do not lease. If buying a system becomes more popular it would be nice to see some retained value there from services sold to people who do take the risk and buy the system outright. I know if I bought a system from SCTY in the future, I'd like to buy an insurance policy from them that would repair the system if it broke and the monitoring service that would help me manage my usage.�
1/1/2015
guest 80% of all residential installs in the US are done in 5 states. California accounts for 52% of that... Solarcity appears to be where they need to be in that regard...�
1/1/2015
guest Solarcity has a central operations office in Vegas where a lot of the design, monitoring, scheduling etc takes place. That's why there are already employees there. There are videos on there Vimeo with more info, but I'm on. Phone at the moment.�
1/1/2015
guest SolarCity Launches First-of-its-Kind Solar Service in Nevada
" SolarCity can allow Nevada homeowners to go solar for as little as $30 per month, with design, installation, financing, insurance, monitoring and a performance guarantee included."
$30/month? Wonder how the competition stacks up?
By the looks of the photos on twitter, looks like local politicians are patting themselves on the back for bring Solarcity to Nevada.
Also, look at the "careers" page, and you'll see Elon as the star interview for the Company... For those that still think Elon doesn't have a big impact on Solarcity should really think about their position for a while. As energy storage starts to ramp up in the second half of this year, the tesla as supplier to Solarcity relationship will become a big news event. I talked directly with Solarcity management and they see energy storage as just another piece of the means of which they will deliver clean, cheap energy. I have yet to hear any other solar company think in such a way...�
1/1/2015
guest Arizona May Impose Unusual New Tax On Customers Who Lease Solar Panels
http://thinkprogress.org/climate/2014/04/30/3432172/arizona-solar-property-tax/
I really don't see how / why TSLA gigafactory should be considering either AZ or TX.�
1/1/2015
guest well, let's see what happens to this "interpretation" as the gigafactory negotiations wind down in the coming weeks... 6500 new jobs and $5bln wins the day every time... I think it's just a matter of Tesla keeping that carrot alive in everyone outside of Nevada... Also, keep Nevada on edge so they will be even more accommodating in expediting permits and instituting great incentives... Again, 6500 jobs and $5bln in new tech manufacturing will change a state overnight and everyone knows it regardless of what part of the political spectrum you stand on...
think about it this way, the benefits/incentives given to Tesla/SolarCity, will be by far dwarfed in comparison to the economic benefits brought by 6500 new tax paying residents working at a new tech manufacturing factory building product that will funnel billions of dollars annually to your state that would've never happened if tesla didn't set up shop there. This is about decades of prosperity and growth. Partisan politics tend to crumble away in the 11th hour in these type of situations.�
1/1/2015
guest Wow, not sure if this is social media wide, but if you type "Solarcity" or "Scty" in twitter, a Solarcity generated post pops up. You refresh the feed, and another Solarcity generated post pops up until someone tweets, then another Solarcity generated post pops up again, repeat... Used to always see a natural gas ad every time I refreshed now they are gone...
I have a feeling may 1st kicked off a new stage in solarcity's marketing campaign. Definitely feels that way...
Update: holy crap, it's the same thing for tesla,Elon musk, spacex, etc... This is an Elon enterprises wide thing, they are all working together... Things are ratcheting up, man, Elon is a fierce competitor... I like it�
1/1/2015
guest Cramer appears to be pumping up the mo-mo stocks again on CNBC in the video section. Maybe the selloff is over and it's time for all the smart money to pile back into high-growth stocks. I would not want to be a SCTY or TSLA short right now going into ER next Wed.�
1/1/2015
guest For those who don't know, Arizona is also trying to repeal net metering.
Also, Arizona just passed a law that allows utilities to charge you and extra fee for having solar; $5/month.
Arizona is the second biggest solar state in the US.
Strike 1 - $60 annual fee for using solar
Strike 2 - Avg. $152 annual increase in property taxes
Strike 3?
Strike 3 is if net metering goes away. If that happens then you bet that people will be breaking lease contracts because solar is losing them money every month, and a lot of it. Without net metering, rooftop solar is not economical.
Battery storage would be great if it was free, but it is expensive. So if you have to pay another $40/month or more for battery storage on top of those fees then solar is not economical at all, unless you go completely off the grid; but then you need a bigger battery.
My average size solar system at 7.68kW produced 46kWh's today and 30 of those were sent to the grid. So those 8kW batteries that SCTY is offering/testing right now for ~$10 - $20 per month are worthless for me, and for most other people as well. I would need at least a 20-30kW battery, but then it starts getting expensive.
If this new tax gets implemented on solar leases after imposing a new $5 fee and net metering does go away in Arizona, then I am fairly certain that at least a few (if not a lot) of people will be cancelling or re-negotiating (doubtful) their contracts with SCTY. And that is another risk for ABS holders, which are only triple B rated for a reason.
Once again, I am not short SCTY. I think that the company will be very successful. Just playing devil's advocate in this thread, because I know that a lot of people appreciate hearing the other side of the story too.�
1/1/2015
guest Wow this is BS. I'm a shareholder now of some scty, but really I'm going "this is bs" because it's such a regressive move.�
1/1/2015
guest Can you elaborate on what is bs? The stock is down and it was taken down with all the other momentum stocks that have no positive earnings. Earnings come out Wed the 7th. Assuming those come out as expected or better, SCTY should trend higher again soon. Even Cramer now admits the bloodbath against the momentum stocks is likely over. The jobs report today was strong and prior months were revised stronger. This all should be positive news for stocks in general.
Cross your fingers SCTY doesn't do something goofy like delay or botch the earnings release as they did last time. Now that would be BS!�
1/1/2015
guest @Thebanker, the volume is low across the board for a while now... It's about the guidance, if great, should see a lot of people jump in at that time... Feels like people are waiting for some kind of number to be leaked or pre-announced. There is a lot news coming out this summer, so it might not be as extreme of a price fade as it was last year... That spring run up was in tandem with Tesla first quarter smash so much different dynamics this year. Feel energy storage might start to be a bigger story (gigafactory too) going into fall... And of course, and regulatory success if that pops up as well.�
1/1/2015
guest Not enough is mentioned about short interest helping move the stock price. I think any positive news next week that shines a light on continued long term growth is going to send the shorts running. They are holding the stock down, not the lack of buyers. When 25% of a stock is sold short and 70% is held by insiders, you can see how the shorts are really holding the stock hostage. They only have the upper hand for the moment since all the profit-taking sent the stock down so they have a chip on their shoulder believing they might win this time. They see the stupid lawsuit news almost daily and think that might keep buyers away. Both TSLA and SCTY have been news-deprived lately as far as company releases go. Yesterday's news about NV was nice to see cause it sent the stock up 7% while the stock market was flat. That might prove my case a bit showing that the shorts will cover on new long term growth moves by the company.
Playing devil's advocate - the shorts could smell the blood when the accounting "errors" or delay of earnings report hit us. I have to admit, that was a dumb move on the companies part and I hope they don't repeat that again anytime soon. When you do that as the stock is making all-time highs you send a lot of people running that may never invest again. It's already hard enough to place a value on this company - screwing up the earnings release is just a horrible thing to do. I'd much rather seem them offer low/conservative guidance and hit the numbers 100% of the time vs. shoot for the moon and then delay an ER report! Let's hope they learned their lesson and don't repeat it.
As far as statistics about the company go, I'd love to see more updates out of them. I'd love to see the waiting list and "sale to install" backlog on a monthly basis. As far as I'm concerned, the backlog and the sale-to-install delay are key numbers. It shows me the supply/demand for the product. If the delay to install is dropping and the backlog is growing, that's something to be very excited about. If you're thinking about selling this stock short and you can see a backlog a mile long you'll think twice.
As the saying goes, not one wants to eat at an empty restaurant. I think displaying the backlog would be a great marketing move for the company. It would be a good point to add to their sales pitch as well. "We have so many people wanting solar leases that it's going to take us 4 months to install it and 1000 people are on a waiting list!"
The backlog for delivery of TSLA model S is impressive to me. If that backlog ever shrinks to the point you get your vehicle in 1-2 weeks that would worry me. I'll never short TSLA but having no backlog would stop me from adding to my position as it goes higher.
I intend to add to my SCTY position as it rises again.�
1/1/2015
guest @thebanker, the accounting error wasn't related to performance, it was an overhead allocation equation error. If it was material, the stock would've plummeted the instant it hit the wire. It actually stayed in the 80's for a few days after...
I have to disagree on backlog. The less the better.�
1/1/2015
guest The accounting error may have been just a minor error but it also delayed the release of the full earnings report and that spooks a lot of investors. You and I know it didn't mean anything substantial but we do not make up the market of average investors.
A large backlog shows high demand for the product. It may be a negative for customer service since everyone wants their panels installed tomorrow, but for growth seeing the backlog is good news. You don't want the installation crews working at 90%, you want them working at 100%. The backlog helps keep the crews swamped with installations. It improves their efficiency by having one job after another lined up ready to keep them busy. I'm sure it helps them install multiple systems in the same area on the same day too.
Maybe it's just me, but I love knowing their product is in such high demand it takes months to get it installed (SCTY)/delivered (TSLA).�
1/1/2015
guest Apples and oranges. Tesla has a unique product with no real competition, a backlog there indicates potential and creating a market; Solar City is residential PV and there's literally hundreds of competitors already, they do their job very well but investors would not be happy seeing any significant backlog of unfilled demand as they would see SCTY as slipping on fulfillment.�
1/1/2015
guest @thebanker, the way I see Solarcity backlog is people don't want to wait for install, so customer satisfaction problems if backlog. However, I see what you're saying. What's hot, people want. But since the untapped market is so big, I think demand is huge now. So the more customers you can service, meaning the higher volume you can handle, the better. Solar PV tends to be a long time purchase, so the market could shrink precipitously as saturation occurs. Not like the iphone, which people seem to buy every 1-3 years...
@nigelm, you are missing one key point that makes Solarcity exactly the same as Tesla... Energy storage. No other solar company has or will have a PV+storage product that can compete. Solarcity is years ahead of the game here. They are already planning for a networked DG grid with utilities, specifically PG&E, so I'd have to disagree with you there.
again, I ask anyone out there to post here a company that will be able to compete with Solarcity on PV+storage. No one seems to be able to come up with one and that should scare you relating to the competitors you support/invest in right now...
solarcity is looking to the absolute future of energy, not just the PV install business. Networked storage takes the power out the utilities hands and puts it squarely in the consumer's. Net metering will change into a energy market. Each roof is a power plant producing that energy the utility(and other producers/consumers) will buy and sell at a market price. Solarcity will most likely be a major player in the market exchange. There are already PV energy "bitcoin-like" currencies popping up out there. This is big picture stuff that Elon and crew have been working on for years. Have to start opening up about what Solarcity is preparing to do here... Cleaner, cheaper energy...�
1/1/2015
guest SunPower/Total�
1/1/2015
guest The story is compelling but let's not get ahead of the game here. Solar City themselves say:
The definition of "nationwide" is highly questionable, I think they probably mean "in the states we operate".
Also the storage looks expensive which is why it's only back-up for critical functions like refrigerators etc. For most people outside of earthquake and hurricane zones partial storage makes little sense; now if they got larger storage at a reasonable price there's a whole market of folks who'd happily go off grid.�
1/1/2015
guest "Our battery systems are currently offered in selected California markets. We hope to offer the service nationwide by the end of the year."
That demandlogic product just helps businesses offset demand charges. No reason it couldn't be offered nationwide. Does it rely on any kind of subsidies?�
1/1/2015
guest What's their product? Can you elaborate on where they are currently implementing this product in commercial or residential DG?
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NigelM, you can go off grid. Just have to forgo selling your excess energy or buying when you need it.�
1/1/2015
guest I'm sure SCTY can set you up with a battery before long. As TSLA engineers better batteries those are available to SCTY I'm sure. Anyone looking at just a 12 month future for SCTY is really missing the big picture. They are going to gain market share, become more efficient, keep pricing down to keep competition at bay, roll out new technology other companies won't have, etc etc. This is like a CA mudslide that just keeps coming at you. Even when moving slow a mudslide will bury you and I imagine SCTY is going to be responsible for burying much of the competition. Living off the grid is becoming more and more popular. Not to bring up conspiracy stuff here, but the government is becoming more and more invasive in our lives and the trend to get away from the cities will be back in full force when you have a combo of efficient solar panels, battery storage and $35k electric vehicles that people actually love to drive. Now you can go live in a low property tax area that generally has lower cost of living as well. So let's not just think about the lower electricity costs solar provides but let's focus on the ability for the average person to build a decent home off the grid and actually live a cheaper life in general with more privacy. I predict that is going to be something that's more popular down the road. People are getting sick of the government, nosey neighbors, etc. I can't wait to get off the grid. The next thing we need for solar to really take people off the grid is national high speed wi-fi so people can live off the grid and work from home.
Imagine the freedom you can have with panels, batteries, electric car, long range wi-fi and a small greenhouse. There are plenty of people that want to move in this direction and it's going to be available soon. That's what I'm excited about when I see the potential of SCTY/TSLA working together.�
1/1/2015
guest Interview: SunPower CEO Tom Werner on solar, storage (r)evolution : Renew Economy�
1/1/2015
guest @thebanker, see, regardless of lifestyle or political views, Elon and crew are creating a future that's better for all of us. I believe Solarcity with Tesla energy storage will get you to that off grid reality sooner then anyone else. That's why I say, you can go off grid, but you'll have to forgo the ability to buy and sell energy when you need to. In your case, you don't give a rip, so no worries there...
The current utility grid will ultimately become just a series of wires that connect other DG(industrial, commercial, residential)energy producers/consumers...
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So, you're saying no, Sunpower doesn't have a product that can compete with Solarcity. Thanks for showing your support for my point here.�
1/1/2015
guest If you live off the grid you probably want to add a small vertical wind generator or two for the winter and cloudy days. If you supplement with wind then the battery storage becomes less of an issue. Why spend all that extra money on storage when you can add some wind power to the mix? Off the grid I'd be heating with wood as much as possible to help keep energy needs lower. Battery technology will continue to improve so over time we'll all have more freedom to get rid of the grid. If you like living on the grid then pray netmetering stays in place. As corrupt as our politicians are in this country, I don't expect that netmetering will last forever. They don't want you to be truly free so they might talk a good game now about letting everyone move to solar but as soon as their pockets stop getting full of your cash they'll figure out new ways to tax that money out of your pockets. Living off the grid isn't 100% foolproof to get them out of your life but it sure makes it a lot harder for them to bother you when you're living off the beaten path. I imagine millions of people want to live off the grid but feel they are stuck. Maybe I'm just wishful thinking but I really think technology is going to help people sprawl out to areas where they truly want to spend their time.�
1/1/2015
guest Originally Posted by futureproof
"No other solar company has or will have a PV+storage product that can compete."
Guess I'm saying I don't know, and I suspect neither do you. But I'm not the one making the claim in the face of other possibilities. I guess @futureproof, only the future-is-proof�
1/1/2015
guest @thebanker, like I've said before, net metering will evolve. Utilities will buy and sell your energy from DG sources. The major complaint from utilities with DG is they have no way to aggregate it. If they had a way to aggregate it they would love to go full tilt into it. Economic, scaled storage(that you can network) is the answer. The only company that is preparing to scale in the millions is Tesla Motors and Solarcity. No one else has the capability to scale to this level and that's the moat Solarcity is building with Tesla. Economies of scale coupled with brand recognition equals real trouble for the rest of the competition.
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Economies of scale is a very big indicator of competitive edge. Even CEO Tom Werner acknowledged that in the article you posted. If economies of scale is a significant competitive edge, and no one other then Tesla/Solarcity has or is developing these economies of scale, then it is logical to conclude they are ahead of the competition. I've checked everyone else that offers energy storage, no one even comes close.
Solarcity started its pilot program over three years ago. They deployed a commercial $0 lease storage product in US in December. They have a direct supplier relationship with Tesla which is on track to produce between 2.1-3GW of ENERGY STORAGE(60kwh-85kwh packs) this year alone. Solarcity has expectations to expand its residential storage into the thousands of US customers through the second half of this year.
Sunpower is planning to start a pilot program... in Australia... at some point this year...
You starting to see the difference now?�
1/1/2015
guest I agree with the economies of scale beating the competition. But having the right partner like TSLA is what makes the difference regardless of size. Let's not forget the unknowns that are still growing inside Elon's head. This guy might think of something in the future that really blows out the competition. Who's to say he won't reinvent the solar panel??? We really don't know what he's capable of engineering but we do know that tons of engineers would love to go work for him. So not only do we have the genius of Elon working for us but his fame is going to attract other engineers to help him do amazing things in the future. I do not know if he's an easy man to work for or if he inspires others to succeed or not. I hope he is both. He's definitely young enough that he will be around a long time to help see his creations unfold.
I do not know enough about the networking to comment but I do know as a former IT guy that networking in general provides efficiency in the workplace. If there is a way to network an entire neighborhood to allow sharing among the homes that would be great. My first question that comes to mind is if a person is using solar and they have excess capacity (sun is shining) to feed back into the network, I imagine everyone else with panels will have excess capacity too. So the network would have to be combined with huge batteries in a central location to tap into. Transmitting power along the lines loses power. So if the power comes off my panels, goes into the grid and into storage there is loss of power due to conversion. I guess it's more efficient than power traveling 10-20 miles from the main source.
In an already established neighborhood with no space remaining for a battery location I don't see how this would work. If there are any links to a presentation on networking power I'd take a peek.
I don't see networking power as such a great thing if the utilities are still controlling it. I don't trust them at all. I'd love to see the economics on any project where Elon would hope to make some money other than just selling batteries.�
1/1/2015
guest Mythbuster alert:
I have a PV system and I'm evaluating 3 alternatives for going off grid. SCTY is not present in my state. All I want to say is that SCTY doesn't have a patent on the idea; they may have an advantage in being able to offer a package but it's something that can be duplicated. IOW, if I can duplicate with two phone calls what SCTY is offering then that's not sustainable advantage.
The SCTY/Tesla battery configuration is only back-up for certain limited house functions; it isn't whole house storage (yet!). To go off-grid the homeowner needs to have enough stored power for a fully functioning house through the night and, depending on geographic location, enough stored power to last for 2-3 days. Wind power as back-up is nonsense unless uou can guarantee it will be windy on the days it isn't sunny.
The current TSLA battery back-up is too expensive to cover whole house needs right now. I'm hopeful that the cost will come down considerably in the next couple of years and make it more feasible. SCTY's advantage may come in an exclusive deal with the new battery gigafactory.�
1/1/2015
guest Does Apple have a patent/copyright on iOS? Does Goggle have a patent/copyright on Android?
Might Solarcity have protection on its energy management systems??? I know they own plenty of patents on mounting systems thanks to Zep...
Again, I think everyone can go off grid soon as energy storage tech costs come down with scale... it's just a matter of being able to buy and sell. If you don't care about that, then it doesn't matter. Can't discount convenience to the mass market. Have to remember, there was a reason the current utility structure developed the way it did in the first place...�
1/1/2015
guest Irrelevant IMO to the point that SCTY offers storage with PV; there are other storage (and back-up!) options out there right now.
Can SCTY come up with a better option? I don't know for certain, but I think they might.�
1/1/2015
guest I think any battery back-up is too expensive to cover whole house needs right now, if you're going to go off grid and expect high reliability. In round numbers, you should have no less than 3 days' energy use in storage; in a typical American home, that means about 90 kWh, roughly the same as the larger Model S battery pack. With power electronics, housing, etc. you're looking at something north of $25,000. Such a figure can only be rationalized (on economics alone) if grid interconnection isn't an option. The more logical solution, to my way of thinking, is some lesser amount of batteries (for normal use) plus a conventional backup generator to handle longer outages--preferably one that uses natural gas/LP. A good generator costs <$4,000, far less than the equivalent in batteries.�
1/1/2015
guest I'd have to disagree with you... management system/operating system is what makes the entire PV+storage work. Even in the article @kenliles posted above, Sunpower CEO relates the current Pv business to the landline/mobile phone transformation... in fact, Mr. Werner sounded like he was reading from SolarCity's investors brief(slide 5) (http://files.shareholder.com/downloads/AMDA-14LQRE/2751889977x0x664578/add6218d-90ec-4089-9094-4259533d473e/SCTY_Investor_Presentation.pdf) on the entire subject to be honest...
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Makes sense.�
1/1/2015
guest I would imagine SCTY might have patents covering their solution from Tesla. I don't think that or the scale will afford a stand-alone market position. The scale of the market for this solution is several years away. The scale of the GF will also scale other battery manufacturing pricing (common sub components). I think other solutions are in the works with this in mind. SCTY will have some of the best customer acquisition scaling. SPWR may be better vertically integrated (similar to a Tesla for its markets) producing a better or matched cost leverage, including patents that include higher efficiency solutions. I don't think an investment in SCTY with assumption of monopolistic control of PVC-storage is wise and so I won't partake on that assumption.
I am long SPWR, JASO, SCTY, CSIQ, JKS currently�
1/1/2015
guest I think solarcity is module brand agnostic, so panel efficiencies are probably welcomed. If less panels have to be put on roofs, labor costs/time to complete will go down as well. Would be interesting to know what the ratio of panel efficiency to install costs is? If there is a strong and proportional/disproportional correlation....
I've also inferred some potential for solarcity/tesla to possibly get into the inverter business (JB Straubel talks late last year) Inverter innovation is important to both Solarcity and Tesla, so this might not be too much of a stretch. Again, only issue is scaling, so might not be something they want to do by themselves... I guess we'll see. Zep acquisition did create a manufacturing arm of Solarcity so anything is possible...�
1/1/2015
guest And you are completely ignoring that SPWR has the backing of Total who happens to own several battery companies in its portfolio.
Tesla is using lithium ion batteries and those are far from the best solution in household energy storage. There are a lot more promising technologies in household battery storage, such as flow batteries, that will be significantly cheaper than what Tesla uses (but they couldn't use those other technologies in cars).�
1/1/2015
guest I think that's part of the point I am making. SPWR makes the best panels (and not for sale to SCTY), includes the profit of using its own panels where SCTY must profitize that component, controls it's own converters and management system, and via Total has access to many more battery solutions, and via Total has access to scaling and financial capital SCTY does not. It may not produce the better solution, but it foolish to argue those facts don't constitute one potential competitor. I think you are trying to convince yourself of your own conclusions, which carry valid points but don't necessarily conclude to the same futureproof.
The fact you recognize Werner statements as taken from SCTY play book shows promise. Suggest further looks might shed light that SCTY has not been the only one working on that shared vision, but may only be the most vocal about the work they are doing.�
1/1/2015
guest Mod Note: a number of posts got quarantined; and yes I've taken to using a chainsaw instead of a scalpel. A number of folks also received negative reputation points for wasting moderator time.
Last warning, if you all want to go onto auto-moderation keep going like this.�
1/1/2015
guest You're free to disagree but the truth is that I had battery back-up on a previous system almost 5 years ago. It's not complicated and back then they were lead acid boat batteries. Lithium Gel batteries are quite common already but as has been mentioned many times the battery cost/life is the issue. Management and switching/operating is pretty simple.
I have a full house (LP) generator as back-up (as Robert.Boston referred to up-thread) but I don't want to go off grid with that so right now I'm net metering; but, I'm also evaluating custom battery production, Lithium Gel batteries and hydrogen fuel cell to take me off-grid. Operating system is the easy part. I'm also wondering if I hang out long enough whether Tesla batteries will become a better option for me.
The SPWR CEO isn't referring to back-up in that interview you quoted.�
1/1/2015
guest First off, don't know what made you think I was referring to your system, but in the system Solarcity and what Sunpower is looking to do, does most certainly rely on software in the function/management of their PV+storage systems.
Not sure what quote I made you are referring to, but here's a couple anyway:
"RE: Last time I talked to you was about home energy management systems, do you still see a prospect of that? TW: We are doing a pilot in Australia, we are not quite ready to go into the specifics. It is primarily a storage pilot, but it makes a whole lot of sense here."
And here's one from the link on "home energy management systems" the interviewer provided in his question:
"SunPower also believes is it inevitable that storage and other home management systems will be included, possibly even extending to electric vehicles. How that all fits together remains to be seen, and will likely vary between regions and markets, depending on local policies, incentives, market design and solar resources. �What we are not saying is here is the model, you have a house , solar, and storage, and home energy management and we�ve solved it,� Werner says. �What we are saying is that those are things that we likely to offer in combinations that are not defined yet.�
update: that first quote is directly from the CEO interview @kenliles posted. The second quote is from an embedded article within the CEO interview @kenliles posted. So, you're not correct in your statement. That's the truth. That is fact.
�
1/1/2015
guest HECO pursues energy storage system so it can take more PV - Hawaii News - Honolulu Star-Advertiser
"Energy Storage is one of the key missing elements in integrating high levels of renewable energy from variable sources like solar and wind," said Colton Ching, HECO vice president for electricity delivery.
not sure if Solarcity/tesla would put in a bid for such a large system, but hey you never know... To add maybe this is an opportunity to move into Hawaii with residential storage.�
1/1/2015
guest If you recall (you can check up-thread) the discussion was about claiming SCTY had a competitive advantage by offering storage with residential systems. That's why I quoted you in my post:
My point was that storage in it's current offering is not a competitive advantage, so I wrote:
I also noted that you referred in that quote on the same subject to the landline/mobile phone reference. If you read that article then you'll see that comment was not made in connection with energy storage.
It's the one embedded in my post and re-embedded in this one a few lines back but I'm happy to re-post it for the sake of clarity [my bold]:
Now you referred to a different quote entirely and said:
So you see I was correct. Please don't imply I wasn't being truthful when your own quotes are there in black and white and clearly embedded in my reply to you.�
1/1/2015
guest Wow, where do I start... I guess I'll start by saying this is the last bit I will post on this particular debate and move on to keep the conversation moving forward...
so, this whole thing started when I said Solarcity has a competitive advantage over competitors in the Solar business because of their long standing relationship with tesla(economies of scale)as well as early start in moving to market with products which no on else is doing. Energy storage is an inevitable addition to the PV system product, so clearly Solarcity is creating the moat. Second, you said it doesn't have anything a competitor can just copy and do they same. I said they have copyright on software/operating system(my reference to iOS and Android). You said that's not relevant (the phone software/operating system comparison) and I said yes it is and referenced Werner using using wireless/landline reference of here is the direct quote from the article:
"TW: � so if you think about smart phones, or the i-phone, the shift in 2007, those product life cycles ar so fast, the conversion from land line to wireless to smart phones, the incumbents never thought that this is a good idea, so you get a little of that both here and in America."
as far as you saying that "back up" wasn't in the article I quoted, I took that as back up wasn't mentioned in the article. I had said earlier post that sunpower was behind in energy storage development compared to Solarcity reference mr. Werners comments in the article @kenliles posted. So might have been crossed intentions here...
I'm going to finish up by saying when you say "feel free to disagree but the truth is..." It comes of as implying I wasn't being truthful as well. I think it is best to leave the one-ups-man -ship alone and keep to bringing good debate and information to this forum. Only makes for a positive environment regardless if you like Solarcity or not...�
1/1/2015
guest Uh, no. This is what you said:
Tip: If you click on the little blue/white arrow after the name on a quote you'll find it's a hyperlink to the original post so that you can actually see what was written.
In any case, I'm going to stop posting in this thread completely; it gets out of hand waaaay too often so I'm limiting my participation to that of moderator for the time being.�
1/1/2015
guest I agree with Nigel. This is a very interesting topic but it seems like the conversation is dominated by very few posters with a narrow mindset. If we could just self moderate ourselves a little that would be awesome.
Also, a number of the frequent posters on here have extremely similar opinions and writing styles. Would it be unreasonable to ask them to post a picture of themselves holding a piece of paper with their username and maybe a drawing of their favorite solar setup so that we could verify we are not being trolled by someone with multiple accounts?�
1/1/2015
guest Yes, we prefer to give the benefit of the doubt.
And that's an awesome suggestion! Thank you.
�
1/1/2015
guest Mod Note: one post went to snippiness.�
1/1/2015
guest This is a (great) SunPower article on the fool, but posted it here in the SCTY section, because it confirms what I have been saying about using retained value as a metric to value SCTY:
What SunPower Is Really Worth? The Answer Might Surprise You
SolarCity (NASDAQ: SCTY ) has addressed this problem by publishing what it calls retained value. This is the present value of all future cash flows from contracted projects, discounted into today's dollars at a 6% discount rate. At the end of 2013, SolarCity said it had $1.05 billion in retained value, so if the company's assumptions are correct, it could close down its operations and still generate that much value over 20-plus years.
SunPower chooses not to disclose the same numbers, in part because management feels that SolarCity's assumptions are aggressive. But it does hold assets on its balance sheet just like SolarCity does so there's value that's not shown in the $1.88 in non-GAAP earnings delivered over the past year. As its HoldCo/YieldCo strategy unfolds, even more assets will be held on the balance sheet, further complicating valuation.�
1/1/2015
guest Thanks Sleepy, excellent article.�
1/1/2015
guest Bgarret actually found the article, and it is a good one.
Edit: using retained value, the author comes up with a SPWR valuation between $50 and $150 in about 2 years. Retained value is therefore not a good metric to use to value a company as evidenced by his huge price target range.�
1/1/2015
guest Retained value is very much real for SCTY. You and 1000's of people may disagree with what retained value should be, but I'm sure the US gov/IRS has approved SCTY's method of calculating retained value. We also have no clue what products SCTY will roll out in the future to sell to these same clients. We assume this is the only agreement SCTY will enter with their clients. How do we know they won't sign another 10-15yr lease at a reduced rate most people would be crazy to pass up? We just do not know. I doubt SCTY is going to be taking down perfectly good panels from homes when they can lease them again at the appropriate price that 90% would agree to. It's going to be supply/demand for that last 10-15yrs of life on the panels. The customer will be in control of that price. If not enough customers want the panels kept on the roof then the price will come down to the point where most renew lease or buy the panels. Everyone keeps forgetting the company does have the ability to sell the panels to the client at the end of the lease. They will not be worthless which is why retained value makes sense.�
1/1/2015
guest IIRC, neither the US gov nor the IRS has a pre-determined definition for calculating retained value. I think you might be confusing the term with retained earnings or residual value which are covered by GAAP. Investors may agree or disagree with the numbers but don't rely on the government to have "approved" anything.�
1/1/2015
guest Hmmm... Or are you going to quit posting because it's simply a waste of time and you have better things to do? Sleepyhead felt the same way but he comes back in the room once in a while. I hope you'll do the same. :smile:�
1/1/2015
guest So if so-called retained value is not the best way to value these two companies, then what is? From reading the article the author basically uses the sum of future cash flows, or present value of projects, to come up with a valuation. This is what everybody's calling "retained value." Sure, the valuation has a broad range depending on a number of assumptions. Nonetheless he basically decides it's the best method and uses it to calculate a value. I can't see what SCTY should do differently in that regard. That's why I asked up-thread if the discount rate was reasonable. Nobody really knows if it's reasonable, but they have to pick a number.
I guess what I'm asking is, what's unreasonable about the way SCTY is calculating their revenue and balance sheet? If there's a better method, why didn't the author use it in his valuation of Sunpower? I'm not trying to argue, just trying to clarify...�
1/1/2015
guest Considering Elon is a lot smarter than all of us, I'm going to use his retained value vs. my own. Until someone comes up with something more reliable then I imagine SCTY has put a lot of energy into developing it's retained value and is probably more accurate than our models would be. I'd love to see a better model developed by someone who is not selling systems or heavily invested in selling vs. leasing. Obviously their opinion would be very biased. The fact that everyone seems to want to lease these panels would suggest they'll also want to renew their leases if the price is right at the end of the lease.�
1/1/2015
guest FSLR earnings appear strong and stock is up nice after-hours. SCTY seems to be up too on the news. I hope SCTY beats tomorrow as well.�
1/1/2015
guest FSLR seems to be settling barely above the days high, SCTY closed $3 down on the day, $4 down on the days high and only regained $1 after hours. Neither is cause for breaking out the champagne IMO.
- - - Updated - - -
Just noting that Elon is a non-executive Chairman so his main task is leading board meetings. Yup he's much smarter than me, but you might want to consider a Chairman's actual duties before assuming that he came up with the retained value calculation personally.
Also note that a metric only has comparative value if other entities use the same calculation method.�
1/1/2015
guest The market was down quite a bit today so I wouldn't expect FSLR to jump above the high of the day but it obviously surprised to the upside which was my point. It took the sector higher in after-hours. It's a hell of a lot better than a miss or just matching expectations.
I never said Elon came up with the retained value model but obviously as chairman he's standing by the math behind the calculation. As an engineer and an even greater businessman, I'm going to go with his model over someone else's. At least until I see a much better one that makes any sense. Moaning about 7% vs. 5% is just semantics at this point. I bought the stock last August so to tell you the truth, if there was no retained value at all I would have still bought the stock at much lower levels and profited even more over the next 20 years if I hold that long. The retained value calculation could end up being conservative if oil/gas prices rise at a 5% clip going forward, which is definitely possible. We have no idea what the spread between the lease price in 20 years vs. the utility rates. 6% may end up being a high number when 20 years roll by.
I wish everyone who is negative on this stock would go ahead and short it or stay quiet. It's so easy to bad mouth a company and their models when you have zero money on the line.�
1/1/2015
guest We have shorted and bought puts on SCTY, probably for more money than most people would risk on this stock. We got lucky with timing (~$80) and took profits when the stock hit ~$52. We're still negative on the stock. We list all our trades on our site. We take real positions in crowdsourced investment opportunities where investors who publish a thesis can actually make money when we invest in their ideas.
Retained Value is smoke and mirrors. If you look at how much money the company raised in debt and equity and how little 'Retained Value' they generated it becomes exceedingly clear that SCTY won't be around 10 years from now. It may have a decent next 2 years as consumers rush to get into solar before most benefits expire in 2017. It's so obvious that I very much question the bull case that keeps getting promoted on this board as very naive at best. Some of the things that were said by Elon this year made me question his integrity as well. Elon has created a great company with TSLA and there is no need for him to pump the price of TSLA into the stratosphere. Unfortunately, I have a feeling that tomorrow will be a massive sell-off in TSLA and SCTY.�
1/1/2015
guest Then you're in the wrong place; we encourage all points of view on this forum. Informed investment decisions are much more likely to succeed.
- - - Updated - - -
Mod Note: one post got moved to snippiness.�
1/1/2015
guest Perhaps TSLA is rising rapidly for some reasons. I failed to see EM pumping the stock, but I have seen him doing the opposite, tempering its rise with his comments.�
1/1/2015
guest You're correct Auzie. Elon said on tv that the stock was fairly priced if not a little overprice. I've never seen or read anything where he hyped up the stock price of SCTY or TSLA stating it was undervalued.
It's ok to bash a stock here and have it posted but the moment you come to defend the stock your posts end up in the trash.�
1/1/2015
guest Insulting posts end up in the trash.�
1/1/2015
guest This is ridiculous! Elon even says to reason from first principles, whereas you are reasoning by analogy. If you are going to invest based on a specific measure, learn and understand it, and test the information with your own model. If not that's fine, but don't flout something you don't understand on a public forum.
And don't you dare call me a "hater". I have a SCTY holding, just prefer informed discussion.�
1/1/2015
guest Come out with a model for retained value and educate us all. You must have not read my entire post. Until someone comes out with a better one I'm sticking with the companies model, which I completely understand and agree with.
I think they have been conservative with their numbers and I believe they will easily hit 1 million customers by EOY 2018. A forecast of 70% compound growth should not be a problem in this market that has barely been penetrated and I'm sure they will expand into more states by 2018 as well.�
1/1/2015
guest I don't understand the ambiguity in your statement. If you completely understand the companies model than why would all of us need to be educated? Further, can't you do the same task which you suggested I do, which I admittedly don't have the education to do? Add value to this discussion, not propaganda.�
1/1/2015
guest I agree with their model so I'm not about to try to improve it. There are a ton of people who disagree with the retained value model but I think I've only seen one revised model of what they felt was better and it didn't have many numbers supporting it. It's amazing how people feel retained value is smoke and mirrors yet they don't have a model of their own to share.�
1/1/2015
guest Ok, so can you make an annotated copy of the retained value calculations they use to help educate people on the topic. That would be very informative for everyone on the board. Your word can't be trusted with no numbers backing it up.
Edit:I should also say you shouldn't trust my word, or anyones word for the matter, if they don't have evidence.�
1/1/2015
guest Mod Note: robust discussion fine, but let's not get personal please.�
1/1/2015
guest I am not here to recreate SCTY's retained value model. I was asking for someone else who thought they had a better one to show it to everyone. I agree with the way SCTY is calculating their retained value as well as the cost of capital figures they use. Until we are farther into the future no one knows exactly what will happen 20 years from now. All I see is people doubting SCTY's model yet they produce no new model of their own. I've seen one contributor on yahoo who thought they were designing a new model but it had a lot of very negative assumptions about energy prices actually falling, not rising, which is nuts. They were also great disbelievers in the leasing model which we've pretty much summed up that some will buy and some will lease so the leasing model will likely never die. It may be modified to make it more competitive but as prices fall for panels the logical assumption is the leasing price will fall as well.
I already own a lot of SCTY so I'm not too concerned if people short it or not. As the company keeps coming in at/above their targets, the stock will rise and shorts will cover. Selling short a rising stock just briefly slows down the momentum. Earnings and growth of this company will not be changed by the stock price unless they plan to do a lot of secondary offering, which doesn't seem likely with ABS being so robust at the moment. The bonds are as good as mortgages so I don't see ABS drying up.�
1/1/2015
guest Without commenting on the rest of this topic, I will interject here that there are reasonable scenarios where electricity prices fall, at least in some areas of the country. There is a credible case that we are less than ten years out from some major technological breakthroughs in generation, power storage, and systems controls that collectively will drop the market price of electricity. Remember that wholesale energy prices are set by the operating cost of the marginal generator. Renewable generators have a zero or near-zero operating cost, so as more renewable power goes onto the system, the price of wholesale power falls. The capital cost of renewable generation shows up in retail prices through a different charge (a "capacity charge" or similar), but that may or may not be a value that SCTY can capture (depending on regulatory decisions about whether such capacity charges can be bypassed).
In any case, while I wouldn't use a falling electricity price as my base case, it is a relevant scenario for stress-testing SCTY's value.�
1/1/2015
guest New to this thread. Is there any news on the SCTY debt program they announced this past winter? I think they were going to allow normal investors to purchase it's debt. Here's a link to the story from January - http://money.cnn.com/2014/01/15/investing/solarcity-debt/index.html?iid=HP_LN�
1/1/2015
guest Does anyone have any thoughts why SCTY is down 8% today with earnings coming out after the close? I can't find any news that would make me want to sell the stock today?�
1/1/2015
guest Interesting how closely TSLA has followed SCTY!
https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1399492800000&chddm=8211&chls=IntervalBasedLine&cmpto=NASDAQ:SCTY&cmptdms=0&q=NASDAQ:TSLA&ntsp=0&ei=GVJqU7CZHMaOrQHVhoCwAg�
1/1/2015
guest "Tech/momo" market sell-off / Fed. Not much to do with SCTY.�
1/1/2015
guest Down 11% is definitely overblown. I hope this drop in price has nothing to do with the earnings coming out. The shorts are probably just standing tall while the longs sit on the sidelines trying to buy more cheap after ER.�
1/1/2015
guest I think it's lockup expiry�
1/1/2015
guest Are you speculating that the insiders are dumping the stock today? TSLA is only down 3% so I highly doubt that is the case. We'd see both stocks down big if insiders were dumping stock. It would be nice to know the reason the stock is down 11% on no news at all.�
1/1/2015
guest My guess ... "Sell on the (ER) news" + general risk off market sentiment.�
1/1/2015
guest The same would be true with TSLA if that were the case.�
1/1/2015
guest Both TSLA and SCTY report at 4pm so there is no news. I wish there was news cause I hate seeing SCTY down 12% while TSLA is only down 3% and neither company has any news out today. The good news is SCTY filled a gap on the chart for 11/29/2013 at ~$49. The August high of $45.60 was hit too as support. I wish I was one of the fortunate souls who shorted the stock above $70 but I'd surely be covering right about now.
Edit: TAN is only down 4% so SCTY being down 12% must be ER nervousness.�
1/1/2015
guest Sentiment poll: If you had to go long or short 100 shares of SCTY at today's closing price and hold it until the next earnings report release, which direction would you bet?�
1/1/2015
guest It's too bad people don't share useful information on here anymore... but I will give it a try.
Solarcity reported earnings this afternoon and they were great.
I am particularly excited about
1) official 2015 guidance of between 900 MW - 1 GW, that is a great number- in fact, it will continue for the 5th year, their annual growth rate of ~100%. Bravo.
2) Talked about the trade dispute, and their ability to source "Chinese and non Chinese" panels for low $0.7's with relative ease. That should alleviate some of the concerns about that
3) Next round of securitization (which I think is 60+ days away or they couldn't discuss it now), will be between $100-200m and should have a lower effective rate.
Lyndon sounded great, the future is extremely bullish and as the business grows they should become more profitable. I was lucky enough to buy some shares at $46 today, but I also happily bought some last week at $52.�
1/1/2015
guest I wish I was available for the conf call today. Don't forget they raised guidance for the rest of the year as well so no signs of slowing down anytime soon. If anyone could tell from the report what % of revenue came from sales vs. lease that would be great. It looked like 66% roughly was lease but I might be off a bit. I was in a hurry while reading the release.
Did Lyndon happen to comment on his recent sale of 160k shares?
If the next securitization is 60+ days away how do they know the effective rate they will get?
Today's volume was pretty high. Hopefully this is a washout bottom. I was very nervous all day how the stock was down big on no news. I can see how others got washed out. It was a nerve wracking day to say the least.�
1/1/2015
guest they didn't comment specifically on the rate, but implied/ I expect.
They didn't explicity say anything about the timing of the next securitization, but IIRC there is a rule about discussing it publicly for a period before and after (I could be wrong).
SCTY is one of the most volatile stocks in the game, and if you are the type of person to sell on a 12% down day with no news, you should not own this stock (I felt nervous as well, as I was executing my purchases)�
1/1/2015
guest I posted earlier and still agree with my assumption that today was all about short sellers ganging up on the stock during the day while the longs sat back patiently waiting for earnings to hit. Some daredevils bought today and did well. It's going to be interesting to see what type of short covering rally we get over the next week. It would be nice if SCTY rolled out more news over the next few days to fan the fire and get back in the press with good news for a change. The past couple months has been negative mo-mo BS plus the lawsuit news almost daily. A new piece every few days would be a welcomed surprise for the next few weeks.
The shorts are very quiet today vs. most days.�
1/1/2015
guest Rive and Musk typically like to fan the fire
Last time they announced year ahead guidance was the 475-525 MWs for 2014. I believe the previous day they had announced a deal with Direct Energy for a really nice 1-2 punch.
That being said it doesn't seem like that Direct Energy deal has worked out very well at all, they only installed 1MW of commercial in the Q.�
1/1/2015
guest The huge jump today from SCTY helps take some of the sting out of the BS earnings sell off for TSLA. At least I have one bright spot in my portfolio today.�
1/1/2015
guest TSLA hit $180 and bounced higher fast. A lot of people were looking for it to hit $180. I hope they all had their limit orders in place to catch it! Now they will expect $170. I see $200 before $170.�
1/1/2015
guest Cramer is starting to flip flop on his momentum stock recommendations. Now he's calling FSLR a "Deep Value Play". Earlier today he recommended SCTY as a buy.
What is a momentum stock? Can a stock that has fallen 45% in 2 months still be considered a momentum stock that everyone is afraid of?
Ummmm, probably not....�
1/1/2015
guest I thought it was funny when the analyst asked why they chose to go into Nevada because it was a small market, and Rive flatly said that there is more potential business for SCTY in Nevada than they have booked in the entirety of the company. It is just another talking point to the size of the Total Addressable Market for SCTY. There are over 1m households in Nevada. They have 100k installed residences. This 100% growth, although will not continue forever, should stay at an extremely impressive rate.
The 'momentum stocks' are beat up, and it is certainly a tough time for the stocks I focus on in the market, but good news like this will always stop a landslide like we have seen. I called bottom a few times incorrectly a few weeks ago in the mid-low 50's (as I was buying) and I think it is hopefully safe to say the bottom is now in at $46.�
1/1/2015
guest Here is an article that pretty much covers everything that I have been saying: that solar leasing is a rip-off to the taxpayer and to the lessee. They even name SolarCity in the article:
http://cleantechnica.com/2014/05/12/high-cost-solar-middleman/�
1/1/2015
guest Consumers willing to spend more for convenience.�
1/1/2015
guest So, I have SolarCity coming to my house in DC to do a consultation on Thursday. I want solar on my roof and want to see what they have to offer me. I also want to see first-hand how their consultants handle things to see if SCTY investment makes sense for me.
Sleepy, can you or theshadows recommend a purchased alternative that has any kind of financing? Sunpower panels maybe?�
1/1/2015
guest I don't really understand the hate for leasing. You guys would rather less solar out there than more? It's obvious most people still can't afford solar up front, so leasing from a company like SolarCity is the next best step. IT GETS SOLAR DISTRIBUTED. IT GETS PEOPLE USING RENEWABLE ENERGY.�
1/1/2015
guest Have you read the article?
I don't have a problem with leasing at all. I have a problem with companies abusing my tax dollars, so that the execs end up with huge bonuses.
Why does SCTY "estimate" installation costs to be above $4/W when local installers do the same job for less than $3? They (as well as other solar leasing companies) and Goldman Sachs are ripping off the taxpayers by jacking up the system price and then charge the consumer a lot lower fee than what they "estimated" because they already ripped off the government. This is why SCTY is getting sued.
I recommend reading the article.�
1/1/2015
guest I see. I was just giving a generic post from all the leasing negativity. I have not read that specific one yet, but will now.�
1/1/2015
guest So I'm going to compare the Solar City quote I get on Thursday to some non-leased alternatives because it looks like there are some kick-ass incentives I could take advantage of in my "state" which is DC if I purchase a system. I don't understand them all, but I'm sure Solar City does. I was using a cost calculator on this web site that seemed interesting too.
If anyone has other ideas on getting accurate cost comparisons for purchased solar panels (financed but owned) vs. Solar City, let me know. Looking forward to SCTY's visit. I may choose to invest depending on how it goes, and to become a customer, we will see.�
1/1/2015
guest I recommend reading this article. I did not write this article, but share the exact same views:
http://seekingalpha.com/article/2216673-solarcity-leases-and-ppas-counting-on-uninformed-customers-and-investors?source=marketwatch
Regardless of what the customer profile is, we believe that no sane customer is likely to renew the existing PPAs/leases at 90% of the going rate, as SolarCity management claims. The optimistic case for SolarCity management is renewal at a rate that is about 30% initial contract value (i.e. around $0.05 to $0.06 per KWH).Even that may be doubtful. A savvy customer could actually ask SolarCity to pay money to keep the system on the house when the lease expires. It would be cheaper for SolarCity to pay off the customer and leave the system on the roof than incur the expense of removing and transporting what is likely to be a highly inefficient system with very little market value. In other words, the retained value at the end of 20 years could actually turn negative.
Investors who buy a company's story without doing due diligence on the company's retained value shenanigans are in for a rude surprise.
If and when SolarCity makes a more rational set of assumptions in its retained value, the company's financial results will not look pretty, but as a public company, its management needs to make a better set of assumptions for its business plan and share them with the stockholders.�
1/1/2015
guest Study those incentives closely and make sure to ask a bunch of questions to see how the sales representative responds.
I did a rough calculation yesterday for my SunPower system that I bought two months ago, and I estimated (using a flat $0.16/kWh price for retail electricity over the next 25 years) that I will save over $40,000 because I bought my system. Had I leased from SolarCity, my savings would probably be only 25% of that amount.
Some questions you can ask:
1. What panels are they going to use, and what is the stated watt peak per panel. What type of technology does the panel use (thin film, multi-Si, mono-Si, etc)?
2. What is the maximum system size that will fit on the southern facing portion of the roof?
3. Can you get more efficient mono panels to put in a bigger system and how much more it will cost?
4. What happens when you have to replace your roof 10 years from now?
5. Are the panels certified to be PID resistant?
6. Ask for a bunch of other details such as degradation and guaranteed production rates over 20 years etc.
7. What kind of inverter you will get?
One very important thing in this industry is that all watts are not created equal. All chinese panels have ~3% straight out of the box, while SPWR has 0%. SPWR has 0.13% annual degradation, while Chinese guarantee no more than 0.5%. Some panels work a lot better with low lighting, shading, clouds, etc. Some panels work a lot better in high humidity, temperatures, etc.
I have had my SPWR system for 2 months now and compared it to NREL's great solar calculator on what I should be getting:
http://pvwatts.nrel.gov/pvwatts.php
My panels are actually producing 20% more than what the website says that they should. The reason for this is that Chinese panels simply cannot compete with SPWR panels, which give you a lot more production per Watt peak. I also have 1/3 of my panels facing west (slightly northwest), and I put into the calculator that they all face 100% perfectly south. So if all of my panels did face south then I am sure that I would be getting 25%+ higher production than Chinese panels.
I sent you a PM with a link that will get you a discount on a SunPower solar system. Since you are going to invite a bunch of different companies over for solar quotes, I recommend that you give these guys a try as well. I am curious to hear your feedback.
Cheers and it is great to hear that you are going solar.�
1/1/2015
guest I want to be supportive of solar but the first question that came to my mind is that theses leases will likely outlast the roofs in a significant number of homes. Who is responsible for taking system off and reinstalling the system when roof redone and is there any risk to the home owner claiming roof life decreased by mounting the system? Of course I put it in this link but I also own spwr and wonder at all the lease models. Is anyone here aware of answers. Perhaps someone who has a lease already can answer
i have installed solar but did a ground installation. Not comfortable with rooftop�
1/1/2015
guest "roof life decreased by mounting the system"
- generally the thought seems to be that systems increase roof life. Also I don't understand why SCTY would payoff the customer or bother to remove the panels. They could just offer to continue the lease at a very reduced rate or sell the system to the homeowner for a very low price that newer systems at that time couldn't compete with. They could remove the system if the customer leases/buys a newer better system from them. Unless there are people of the opinion that when the lease ends, energy will cheaper or no more expensive than today and a cheaper lease offering will be something that the homeowner doesn't want.�
1/1/2015
guest yes I can see that happening but when redoing roof (asphalt tiles 20 year life and roofs not new at installation) the home owner maybe upset at paying more to take down system and reinstall BEFORE the lease expires. The roof must be penetrated to attach the panels and any leak at attachment site will reduce lifetime of roof.
You would think company has thought about this but as an example I remember buying an emr (electronic medical record) when they first came out around 2007 and 2 years later decided to change to a new system. The first company had no plans or policy in place as to how a change could be done. They had never considered it.�
1/1/2015
guest Panels will not increase roof life, that is a huge fallacy because you are still going to have more than 70% of your roof exposed. Unless you actually cover your whole roof with panels, which no one does because is doesn't make sense to put up northern facing panels.
I asked about this when I installed my system and they said it would cost $500-$1500 to take the panels down and re-install them when I replace my roof.�
1/1/2015
guest Thanks for the answer�
1/1/2015
guest Thanks for this, Sleepy. Going to do my homework before the SCTY rep shows up tomorrow morning.�
1/1/2015
guest I feel sorry for him!�
1/1/2015
guest Hey, about the comparison to pvwatts, I've had my JASO panel system up for just about 2 months and am easily beating the PVWatts estimate. With about 2 days of downtime in both March and April thanks to inverter issues, in March I got exactly PVWatts estimate and April I got way more.
Solar Production Tracker | S1dd.com
How much more did sunpower cost compared to Chinese panels?�
1/1/2015
guest Are you agreeing with the whole article, substantively, or just the Retained Value aspect? I agree that a 20 year old solar panel system isn't worth the money it costs to remove it - a few solar company reps I talked with said that they would remove panels at the end of 20 years if I insisted, but that they'd probably offer to leave the panels up and working for free at the end of 20 years.
But, the article has other points that don't seem right to me. For instance, the escalation clauses all seem reasonable to me in light of past history of electric rates, and having those locked down even in the face of inflation is not a bad thing.�
1/1/2015
guest agree those escalation rates were historically reasonable. The big unknown is what will they do in the face of Solar disruption. They may in fact compress- I don't hold that view, I think most utilities will attempt to raise rates to compensate for fixed cost with less revenue (because they won't adapt quickly enough). But I can see the risk of that being wrong and rate taking a widely different path than historical data leads.�
1/1/2015
guest I agree with almost everything in the article. He does exaggerate a few things, and some of the risks might never materialize; but he makes a great point to bring them up.
I disagree with both you and kenliles on escalation clauses:
I (got a smoking good deal on a SPWR system at $2.50/W, so to answer dalalsid's question I doubt that I could get a better deal on Chinese panels and wouldn't install them unless I could get them installed for $1/W) and calculated that after rebate and tax credit will be producing electricity for the next 25 years at a $0.05/kWh flat rate with no escalation. I think my system will run for 40+ years (with only relatively cheap inverter replacements), so the rate I will pay is a lot lower than $0.05.
SCTY said in their recent presentation that their average rate is $0.141/kWh. So if you have an escalation clause then you might end up paying $0.18 in year 10. Now if you are trying to sell your house, then someone might not want to buy the house to pay $0.18/kWh, when they will be able to get a system for $0.03-$0.07/kWh. So the seller will be stuck pre-paying the rest of the lease and that is a liability.
I also disagree that utilities will be raising rates to compensate for their losses as solar really accelerates and grows. They will not be able to raise rates, because more people will go solar and lead to a utility death spiral. Another reason they cannot raise rates is because utilities sell at LMP's a.k.a. marginal cost. So if utilities get stuck with stranded assets, they will sell energy at cost of production in order to keep them running to pay bills. As load falls off as more people go solar, wholesale electricity prices will plummet and utilities will start going bankrupt, and only those with the most efficient power plants will survive. There is nothing they can do.
So even though I suspect that ulitility prices will continue going up for the next decade or two. As solar picks up, utility rates will actually start going down IMO. Just look at the situation in Germany. Their wholesale electricity prices are crashing due to solar. And utilities are losing money. They will go out of business one by one as solar, wind, biomass, etc. expand.
IMO the expansion of solar will cause lower utility rates and not higher rates...�
1/1/2015
guest well actually given the scenario you painted you actually AGREE with me not disagree. The escalation rates are in fact accurate based on historical escalation. What you're describing is what the disruption of Solar does to that going forward, which was the risk I was pointing out. However, I think we might have different views on current Utilities. Most (not all) current utilities I believe will seek and be granted rate increases to compensate for costs (largely because they will remain on coal/oil/nat gas for essentially forever)- those costs will absolutely increase and govt commissions will be obliged to grant the increases or raise taxes to cover the loss (not likely on that front). I think where our disagreement lies, is I don't believe the current Utilities will implement Solar (with a few exceptions of course) sufficient to lower costs- They will instead take the easy way out and simply request rate hikes to stay even. My opinion is the current utilities (again with a few exceptions) will instead be replaced by new ones formed by the Solar companies themselves (HoldCos) and/or new entities holding these assets. The current crop of utilities will become commoditized pseudo govt entities largely responsible for grid maintenance with some load sink storage for balancing. I think this will happen because Solar disruption will occur much faster than the time constant required for 70% of current Utilities to adapt. If so, that's why rates from current utilities will go up from here, only coming down as they are replaced and not responsible for generation of power but can only justify grid maintenance costs. That's going to take a while of course, but that's the way I see things playing out (I'm probably wrong- I'm just offering my current thinking on the matter). If you do the numbers, it's actually not to long that the total Solar deployments by individuals and businesses exceed the entire demand profile of the US. The current Utilities, built for power generation are simply not equipped to deal with that change- they will become network operators and exact a fee for that. But that transition is what has to occur to bring the the 'Utility' rate in line with Solar production- before that time (I would estimate perhaps 10 years) the Utility rate will go up driving more and more local Solar deployment... going to be a blast watching this play out whatever happens. Maybe I'll be surprised and the Global warming pressures on politicians and regulatory agencies will force the Utilities to adapt faster- but that's what I don't currently have faith in. The decisions will come from bottom up, by individuals and businesses much faster than top down- especially since we have (nearly)reached grid parity costs.�
1/1/2015
guest SolarCity currently does not serve Illinois. Commonwealth Edison (ComEd), which provides electricity to Chicago and the rest of Northern Illinois, will raise rates by an average of 21% on June 1st.
Here�s a link to a related Chicago Tribune article and video: http://www.chicagotribune.com/business/breaking/chi-comed-price-increases-20140507,0,7376954.story
I provided a heads-up to the contact box in the SolarCity website. Here is the response I received:
�Thank you so much for the information. I will be sure to forward your email over to our expansion team to review and look into the great opportunity this presents.�
Addendum: ComEd offers net metering and Illinois provides rebates to people with solar power installations.
�
1/1/2015
guest Wow that's a fantastic deal for Sunpower panels. The only rebate I get is the federal. Paid 1.75/W after rebate. Plus power here is only 11c/kWh but luckily (got into some limited time program) for the 1st 5 years I get paid 15c/kWh for solar power and then after that net metering. Payoff about 10 years.�
1/1/2015
guest ComEd, the electric utility for Chicagoland and the rest of northern Illinois, does offer customers net metering: https://www.comed.com/customer-service/rates-pricing/interconnection/pages/net-metering.aspx�
1/1/2015
guest But are any rebates offered? I clearly wrote that SCTY goes where there are high rebates AND net metering. 43 states in the country have net metering laws in place, and SCTY only operates in 30% of those states.
They only go where the rebates are high, so they can pocket the cash at the customer's cost.
They will get to Illinois eventually, when they start running out of options with high rebate states. They don't care if you are paying $0.18/kWh in Illinois. They will go to certain places in Texas where electricity is offered at $0.12/kWh, because the TDSP offers generous rebates that are meant for the customer; but SCTY pockets them instead.�
1/1/2015
guest Indeed, Illinois gives rebates for erecting solar power systems: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=IL05F�
1/1/2015
guest Moderator's Note: I've moved my post and a discussion that followed about the general economics of solar over to Alternative Energy Investor Discussions (formerly SCTY thread) . While it's tangentially about SCTY, it's more generally about all solar stocks (all of which rely, to one extent or the other, on subsidies and mis-pricing of electricity in current retail tariffs).
And another tranche of posts have been moved to snippiness.
Folks, let's try to focus on investment opportunities in SCTY here, and in parallel companies in the thread linked above. If it's too challenging to talk about SCTY apart from other solar companies, I'll simply close this thread and we can use the other to talk about all solar investments.
Thanks,
Robert�
1/1/2015
guest I'm agreeing with Robert.B, we've spent more time on moderating this thread than any other in the Investor section so far this year, and the darned thing is less than two months old!
Discussion on SCTY has to be able to include stuff on the competitive environment but it's up to you guys to keep your comments focussed; otherwise there's no point in having yet another solar thread. Oh, and all normal etiquette rules apply.�
1/1/2015
guest If you didn't remember about this today, here is the link to the webinar:
Webinar - Net Energy Metering: Update on Key Distributed Generation Policy
�
1/1/2015
guest Capital One Bank Invests $100 Million in SolarCity Fund
http://www.solarcity.com/pressreleases/241/Capital-One-Bank-Invests-%24100-Million-in-SolarCity-Fund-to-Provide-Solar-Power-To-Thousands-of-U-S--Homeowners.aspx�
1/1/2015
guest This 8-K filing with the SEC dated May 23 was emailed to me this morning by SolarCity:
"The Loan has an initial commitment of up to $125,000,000 and also permits Borrower to increase that commitment in an aggregate amount not to exceed an additional $32,000,000."
http://investors.solarcity.com/secfiling.cfm?filingid=1193125-14-217891&CIK=1408356
- - - Updated - - -
Here is the May 28 press release regarding an arrangement between SolarCity and Groupon:
"Groupon (Nasdaq:GRPN) will work with SolarCity (Nasdaq:SCTY), the nation's largest solar power provider, to offer deals on solar systems in the Groupon marketplace."
SolarCity and Groupon Offer First of Its Kind Deal on Solar Power (NASDAQ:SCTY)�
1/1/2015
guest I'm not a big fan of Groupon and the marketing avenue here doesn't fit well with my concept of Solar implementation and 'deals' - not sure currently what to make of this�
1/1/2015
guest
they have sold 450 so far, not too bad in three days.
SolarCity Deal of the Day | Groupon�
1/1/2015
guest Perhaps unfairly, I associate Groupon offers (and similar) as a sign that demand is lagging for the product. Why else offer discounts? Restaurants might offer discounts to get people in once, looking forward to repeat business. SCTY won't see repeat business (but perhaps they do get some referrals this way). I don't think this reflects well on SCTY trends.�
1/1/2015
guest I guess sales are sales; but I'm in the same camp as Robert on this one. You don't see the sales not happening due to image and marketing channel directions. Maybe it's just an add and no other effect, but I don't view this as a sign of plentiful marketing channel options. I like the Home Depot angle (and anything similar - like builder channels etc.) - This doesn't strike me well. I'm maintaining a small long position as a hedge against China tariff issues (given the module agnostic business position)- but not looking to increase from that without more clarity on market channels to customers in all states (regardless of incentives), and a stronger defense of new REIT status of Solar which provides low cost buy-lease monies that potentially erode SCTY margins.�
1/1/2015
guest I agree with you two, and I would not want my business to be associated with Groupon. People associate Groupon with businesses that are struggling financially, or in desperate need for demand growth. Not saying this is right or wrong, but that is what people think. The stock went down 3% on the day this deal was announced while other solar stocks were slightly in the green. Nothing good will come out of this deal, and I think it is really bad PR for SCTY.
The average person, who doesn't understand solar will not want to buy a system from a solar company that sells on Groupon. The only people taking advantage of this deal are those that already knew SCTY and were going to buy a system from them anyway.�
1/1/2015
guest Starbucks is on groupon too ..�
1/1/2015
guest and maybe that's the best indication SolarCity should not be. There is no further distance I can think of outside MacnDons BurgerWorld�
1/1/2015
guest Macy's, Nordstrom, Target, Toy R Us, Sephora, Best Buy are all on Groupon, I really don't see anything wrong with Solarcity teams up with Groupon.
Besides, if demand is lagging, why did they give out a 100% growth 2015 target?�
1/1/2015
guest Valid question. But equally valid to ask if demand is so good why give out discounts?
My guess would be that the Groupon deal was either a poor marketing decision or a test for the future.�
1/1/2015
guest My country club went on groupon one day, and some people that were considering joining the club dropped out after they saw the groupon add. They immediately assumed that the club is in financial trouble (it isn't) so they did not want to pay a big initiation fee to lose it if the club goes out of business.
Management of the CC wanted to sell 1-day memberships in hopes of increasing membership count. Exactly zero people signed up for a membership after using the groupon.
I am not even sure if management really thought that someone would sign up. I think that they wanted to sell a couple hunder 1-day memberships in order to get an extra $20k in revenue. In the end it probably cost them $100k+ because of the people who wanted to join, but didn't as the groupon ad scared them off.
You should not use groupon to sell luxury, high end, or other expensive items. It will probably do more harm than good.
Best case is SCTY down 3% when they announced deal while other solar stocks were positive.�
1/1/2015
guest I see Groupon as an online Outlet Store for retailers running sales and specials. That conflicts heavily with a long term lease of a 'permanent' attachment to my home of which I need education, options and relationship building. Just doesn't feed well with the market from my seat and works to diminish the brand more than add potential sales. Would be like if they decided to open a Telemarketing center and start calling people or if a home builder started offering Groupon for new home discounts (both extreme examples to make a point I guess). And to your point I don't understand the necessity for it if they are expanding 100% as stated. It gives me pause that this is one of the channels that created that projection and if so, it's validity diminishes in my mind. Residential Solar won't reach 'Groupon commodity' relationships for decades imo. It's my respect for SolarCity management that gives me pause- because I believe they know this too and yet prioritized this for some reason I don't understand. Maybe it's my deficiency, but it concurrently lends credence to 'get-the-customer-anyway-you-can' characterization (something the lease issue will also have to contend with at some point and this doesn't help that). If they can offer a discount through Groupon (as a marketing fee), I'm not getting their best price outside that channel (as a customer), so I'm not attaching a trust relationship when needing they're honest evaluation of my 'permanent' buy-lease and other options. Residential Solar is just not a commodity- by the time it is, I plan to be rich on the stock investments- and I'm not there yet�
1/1/2015
guest $400 is the same amount they used to gave out for referral, so not exactly a discount from Solarcity's perspective. Solarcity on groupon is more like a indication that Solar goes mainstream.�
1/1/2015
guest and maybe that's part of the issue- It's not mainstream. That's what SolarCity wants and needs it to be. But the hard educational work to get it there should be the priority imo. Be branded for that instead- Then the discounts mean something; right now they convey a different message. They need to build the SolarCity trust brand and this is antithetical to that�
1/1/2015
guest DaveT, Very much appreciate your thorough and balanced analysis. Given that the stock is beaten down so much from it's all-time-highs, I suspect it might be a great opportunity to invest now. Could you please share your pricing model(s) and targets? Will truly appreciate it, as you have done a lot of homework I will have quite a bit of respect for what you say. I'm looking in a long term perspective by the way, more in 5+ year time frame (and can potentially wait even 10 or 15 years if this is anything like Tesla). Thanks, Steve
�
1/1/2015
guest I haven't thought about SCTY a lot in recent weeks. Most of my investing focus is on TSLA. But here are some quick thoughts on SCTY stock pricing model for the future.
1. I'd recommend reading the Jan 14 Deutsche Bank report and their pricing model. It's not that intuitive to understand but it gives you an idea of how institutions are viewing SCTY and their business model, revenue, growth, etc.
2. For a 4-5 year pricing model, I personally use something very rough. In contrast, with TSLA I'm able to forecast (personally) the number of units sold, gross margin, expenses, profit, etc and I'm able to attach a multiple to which I think investors might give depending on the mood. For SCTY, I have a much more difficult time with this kind of traditional analysis as SCTY's business model is not a simple "sell a product one-time and make % profit" model. It's more akin to a services/subscription business model where SCTY is selling a monthly subscription to energy and eventually as they have more monthly subscribers they will be able to make more and more profit. However, the tricky part is that most subscription services don't make much money initially because they don't have economies of scale and their expenses are high. This is the case with SCTY. Currently, they're in rapid growth mode (100% growth every year) and their expenses are naturally high since their investments in growth are high. Thus, it's unreasonable to expect SCTY to make a healthy profit right now, while they're still in scaling and high growth mode.
So, if we look out 4-5 years, SCTY has a 1 million customer target. Let's say you're a believer in SCTY reaching that goal. Then, you can ask yourself how much is each customer worth? (ie., present value of future earnings per customer) You can then use that to come up with a rough price target (calculate market cap of company by either calculating net present value of future earnings factoring in growth beyond 1m customers, or by calculating a potential earnings amount with 1m customers and times that by a health multiple depending on what growth rate you assume they'll have then).
I won't give my specific values because I don't have time to defend them here and it's more of a personal exercise for me. But let's say you calculate that each customer is worth $5,000 to SolarCity in earnings (discounted to net present value), then 1 million customers would equal $5b. However, if SCTY reaches 1 million customers in 4 or so years, then that means they would be growing aggressively and you would need to factor in much more than the 1 million customers to figure out a valuation. I'd say you'd have to figure probably 3-5m customers into the valuation, giving SCTY a $15-25b market cap (but that would change depending if you adjust up or down the initial $5k/customer earnings amount).�
1/1/2015
guest SolarCity has signed an agreement to acquire Silevo, a solar panel technology and manufacturing company whose modules have demonstrated a unique combination of high energy output and low cost. Our intent is to combine what we believe is fundamentally the best photovoltaic technology with massive economies of scale to achieve a breakthrough in the cost of solar power. Although no other acquisitions are currently being contemplated, SolarCity may acquire additional photovoltaics companies as needed to ensure clear technology leadership and we plan to grow internal engineering significantly.
We are in discussions with the state of New York to build the initial manufacturing plant, continuing a relationship developed by the Silevo team. At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity.
Given that there is excess supplier capacity today, this may seem counter-intuitive to some who follow the solar industry. What we are trying to address is not the lay of the land today, where there are indeed too many suppliers, most of whom are producing relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed.
SolarCity was founded to accelerate mass adoption of sustainable energy. The sun, that highly convenient and free fusion reactor in the sky, radiates more energy to the Earth in a few hours than the entire human population consumes from all sources in a year. This means that solar panels, paired with batteries to enable power at night, can produce several orders of magnitude more electricity than is consumed by the entirety of human civilization. A cogent assessment of sustainable energy potential from various sources is described well in this Sandia paper:www.sandia.gov/~jytsao/Solar%20FAQs.pdf.
Even if the solar industry were only to generate 40 percent of the world�s electricity with photovoltaics by 2040, that would mean installing more than 400 GW of solar capacity per year for the next 25 years. We absolutely believe that solar power can and will become the world�s predominant source of energy within our lifetimes, but there are obviously a lot of panels that have to be manufactured and installed in order for that to happen. The plans we are announcing today, while substantial compared to current industry, are small in that context.
http://blog.solarcity.com/silevo/
�
1/1/2015
guest Finally a smart move from SCTY. I have been arguing that the model of buying panels from competitors is not a good one since demand is going to outstrip supply in the very near future and probably stay that way for years to come.
I think that this is a great move for SCTY, but don't like how they bash others for producing "relatively low photonic efficiency solar cells at uncompelling costs." Very unprofessional for someone to criticize a whole industry before even making one single product themselves...�
1/1/2015
guest And then I read about the efficiency of the silevo cells and they "may be" able to reach sunpower levels of 24%. This is a good move. Should have called "one of the single largest solar panel production plants in the world" the solar Gigafactory�
1/1/2015
guest The style of the blog post hints strongly of Elon's involvement. It even lists his name first as the author. That may explain the critical comment.
I like this move A LOT. Also, the fact that Elon is actively involved is a good sign for SCTY investors, especially those who are "investing in Elon".�
1/1/2015
guest I like the move a lot too, just not a big fan of the trash talking before they even played one game in the league...
I am sure that they will do a good job of running down costs, but by the time they get up and running the rest of the world will be producing panels a lot cheaper too. Manufacturing in New York will make it tough to compete on price as well.�
1/1/2015
guest "At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity."
Holy Moly.
1. Solarcity just acquired a solar panel manufacturing company, Silevo.
2. Elon (and the Rive brothers) claim Silevo's tech is unique - high energy output at low cost.
3. They're making a factory with 1 GW output.
4. In a few years they'll be making on it more plants with 10 GW output.
Guys, this is massive and game-changing.
I'll repeat. This is massive and completely game-changing.�
1/1/2015
guest Wait a minute, where are all those people arguing with me that panel manufacturing is a bad business to be in?
I would also like to point out that when FSLR acquired TetraSun last year, they were making similar claims and nothing has come to fruition yet.
This Silevo sounds like a startup company in the same mold as TetraSun. I am sure that Elon and company will make it work, but lets not get too excited until we see some actual numbers.
The good news is that whatever cost they are able to achieve, it is most certainly going to be a lot lower cost than what they pay to buy panels elsewhere. This is a big deal for SCTY, and one that I was advocating for almost a year. The downside is that they will have to raise more capital to build out manufacturing and a lot more dilution will be in the works over the next few years...�
1/1/2015
guest To be honest, I am floored. I have attended a shareholder meeting but there were indications of this sort of thing happening. The management was optimistic, as expected, but I must admit this news is beyond my expectations. It's bold and aggressive and I like it, too.�
1/1/2015
guest Wow.
SPWR produced 1,2 GW in 2013, Suntech around 2 GW, FSLR 1,8 GW. Worldwide total production in 2013 was just under 40 GW.
So just jumping in with 1 GW and soon expanding to 10 is huge.�
1/1/2015
guest I reiterate - Solar Gigafactory�
1/1/2015
guest I'm excited because it seems like Elon has been involved in this decision to acquire Silevo and to plan to build the massive plants. The blog post sounds Elon.
Also I think Elon is probably the smartest guy out there to evaluate new tech/companies in light of their tech, business model, and also practicality to scale. It's quite obvious he's evaluated Silevo and it's quite obvious that Elon is very excited.
I'll be looking into Silevo later today.
But initially I'm very excited. There's no other company in the world who's talking about making a 10GW solar plant.
This might open up new sectors for Solarcity if they can significantly lower their panel costs. Imagine if they can get into utility-scale power plants but provide the whole package - panels, install, stationary storage, maintenance. If the panels are as good and cheap as Elon and the Rive brothers say they are, then it's totally possible.�
1/1/2015
guest Here's more info on the Silevo acquisition put out by Solarcity:
http://files.shareholder.com/downloads/AMDA-14LQRE/3206410324x0x762403/aa368a6f-c0ba-4164-8068-be869edd4e98/Sunflower%20Investor%20Presentation%20FINAL.pdf
There was apparently a conference call this morning. If anybody has a link to it, please post.�
1/1/2015
guest I agree with you, but just wanted to point at that it will take a lot longer to build out 1GW of manufacturing capacity than some people might expect. 10GW is a long ways down the road 5+ years or maybe even 10+ years.
Panel manufacturing is still very capital intensive and will require a lot of capital raising that quite frankly SCTY does not have. It will be a very dilutive exercise for SCTY shareholderd.
Ironically, SunPower CEO just said in an interview that 5,10,maybe 15 years from now it might not make sense for them to manufacture panels any longer and could license out their technology and have someone else build panels for them. It is too capital intensive and they would rather use capital to do projects.
In the end though SCTY really needs to make its own panels, so this is a good move for them.
- - - Updated - - -
Thanks for the link.
A lot of fluff and no real (important) information in that presentation (like all other companies always do).�
1/1/2015
guest There is a lot of good reasons for this. The Tesla gigafactory will be powered by solar and wind. That means off the bat, SolarCity has a huge order of solar panels to fulfill. And with solar + battery solarcity will now have a full coverage.
Solar manufacturing is a very competitive market but solar + battery is going to belong to only Tesla and SolarCity.�
1/1/2015
guest The GF is a very small order of panels...�
1/1/2015
guest Definitely valid points. SCTY will need a lot of capital to build these plants.�
1/1/2015
guest +1.�
1/1/2015
guest Solar City will be so much more than an installer and supplier of solar panels. Guys. Gigafactory. Solar + battery energy storage. I'm working with the Solar City engineering group right now to put a demo storage battery in at my house (hopefully in time for the TMC Connect bbq, but waiting on permits) that could eventually allow me to be off the grid if I desired.
I believe that the gigafactory is still bigger than we can comprehend right now. And I believe that Solar City plays into that vision. Elon does nothing in a silo. Everything is interconnected.�
1/1/2015
guest Why do you say that? They will probably need at least 50,000 panels if not much more (You have to charge and discharge all those batteries just for testing/QC, so charging 35-50 GWH of batteries multiple times is going to need some power). Plus pretty sure Tesla plans to make multiple gigafactories in the long run.�
1/1/2015
guest I am running another thought experiment. Two points.
Point I: Confrontation / Legal Risk
I realize that there is a long history between utilities and photovoltaic (PV) producers, since 1960's to be exact. So, is there a risk of utility companies fighting back in the same manner as autodealers did against TSLA? After all, companies are "persons" and as such they have a 'right for life'... News or hints of news for legal battle might end up gyrating the stock price, I think.
Here is a set up that I have:
1) GOOD NEWS: There is public sentiment in favor of renewable energy.
2) GOOD NEWS: Some traction with PV sales & retail customer base.
3) GOOD NEWS: Geopolitics and oil price fluctuations.
4) BAD NEWS: There are entrenched interest groups with deep lobbying pockets.
5) BAD NEWS: Utility companies own the grid.
Possible considerations:
a) Declining cost of PV's,
b) Battery storage.
What am I missing? What factors might tilt the balance of power? And what could be possible dynamics / what-if scenarios?
=====
Point II: Housing Design
PV production by itself does not seem sufficient to me. Incremental improvements in consumption even with factories rolling out solar panels en masse would not slow down the rate of CO2 emission fast enough. In the US, housing is re-built at around 2% annually...
Unless we start building new houses & office buildings with embedded PV's within the construction material, e.g. roofs, walls, and windows, I don't see fundamental changes in user lifestyle. Perhaps the next move for SCTY would be to buy one of construction companies and build houses with an entirely new concept in mind?..
Please feel free to make counter-arguments and critique. I would appreciate that. Thanks!�
1/1/2015
guest That is an extremely small order in the grand scheme of things.�
1/1/2015
guest I think the good news has triggered a small short squeeze. There's no reason for the price to have kept going up except people who feel forced to buy.�
1/1/2015
guest Good news. Important points from the presentation:
� Only six core production steps
� Highly automatable
� Off the shelf equipment from the semiconductor and flat panel display industries
� Use of standard n-type wafers
� Lower labor content per module due to higher efficiency and increased automation
Each of top ten solar panel producers already produce more than GW a year. And those top10 do increase market share rapidly at expense of smaller manufacturers. But with SolarCity being one of the biggest solar panel customer around Silevo as part of SolarCity could make into top ten in no time.
�
1/1/2015
guest Responding to:
Short-Term TSLA Price Movements - 2014 - Page 509
Convertible bonds issue should dampen implied vol. on the longer dated options (LEAPS), right?
Also, I think SCTY would issue additional equity to satisfy the convertible bond hedge. -- Typically hedge funds short the stock to hedge against the credit risk on the bond. Since the supply of equity is limited (or hard to borrow), sometimes companies issue additional equity, which helps with overall fund raising. TSLA in particular issued more common shares when it was issuing convertible bonds last spring if I remember correctly. Equity dilution was small.�
1/1/2015
guest Is anyone expecting a capital raise soon with this surge in share price? If they are expecting to produce 1GW within two years, how much will that cost?�
1/1/2015
guest I am. I think that in the presentation it even says that they are in talks to raise capital.
I don't know how much it will cost, because it all depends on what kind of technology they are going to use. SPWR just spent $200m to build a fab for cell only production of up to 350MW/year. The Chinese on the other hand could probably build out close to 1GW of cell capacity with $200m.
I think that SCTY will need to spend about $500m - $1b in order to build out this manufacturing facility. But if they can acquire empty buildings on the cheap then it might be a little less.�
1/1/2015
guest That would be a page from the Elon-Tesla playbook...�
1/1/2015
guest Elon on CNBC: Answering questions about why did SCTY buy Silevo: "trying to think a few years ahead" - i.e. when solar really takes off ("booms") it's important to secure production capability (disregarding the current situation of oversupply). "Important to have high efficiency panels, more generation per surface area, lower installation cost because of less cables, less surface to cover".�
1/1/2015
guest Replay of the Solarcity Conference with Elon Musk, Lyndon Rive and Peter Rive:
http://www.media-server.com/m/p/sfwejz2i�
1/1/2015
guest I had a bunch of SCTY July 19 55 dollar, options which I sold yesterday for 50% loss. If i sold today I would have had 200% gain.�
1/1/2015
guest It's a bad business to be in right now. About a year ago, Elon Musk equated solar panel manufacturing with drywall manufacturing.�
1/1/2015
guest it is a bad business, labor intensive, capital intensive, low margin, high pollution. well .. just as bad as a battery business..
btw, below is what Musk said about solarcity
"Everybody thought that the panel was the problem but actually - it's a problem, but it's not the most important problem. The panel is somewhat commoditized at this point. "Making standard efficiency solar panels is about as hard as making dry wall. It's really easy. In fact, I'd say dry wall's probably harder." What is a thorny problem is trying to figure out how to get solar on tens of thousands, eventually hundreds of thousands, of rooftops. It's kind of like you've got to re-roof millions of buildings and then figure out how the grid interconnects work and then manage all those systems. If you've got hundreds of thousands or maybe millions of systems, eventually, you've got to manage all these distributed systems. You've got this really complex distributed utility, essentially. Which I think actually plays to their prior strength in creating really scalable software for managing hundreds of thousands of computers in a distributed fashion. That's kinda what they did and an awesome job"�
1/1/2015
guest I'd expect a raise as well. As for the cost of the plant, in the conference call Lyndon Rive mentioned a capex cost of $0.35-0.40 per watt excluding building cost. That's about $350-400m plus building costs. So, sleepy's $500-$1b estimate is spot on.�
1/1/2015
guest 1. Great conference call. I highly recommend listening to it.
2. It�s interesting that Elon was very active in the conference call. Seems like he had a lot of input into this decision.
3. Elon is super bullish on SolarCity�s future installations. He said, "We ultimately expect to be installing tens of GWs a year."
Let's take a deeper look at what it means to be "installing tens of GWs a year."
Let's say an average solar system is 7 kW (you can change this number based on your assumptions).
So, with 1 GW of panels/modules a year, SolarCity can install 142k houses per year.
With 10 GW of panels/modules a year, SolarCity can install 1.42m houses per year.
Yet, Elon said they expect to be "installing tens of GWs a year."
So, let's say SolarCity is able to eventually 50 GWs a year (ie., in 15-20 years). That would be 7.14m houses per year. This sounds kind of crazy, but this is what it means to install 50 GW per year of residential solar (of course, SolarCity could install commercial and utility scale as well).
I�ve stated in a previous post that I think SolarCity can reach 50-100 million customers by 2040 (SolarCity (SCTY) - Page 23).
If SolarCity reaches 50 million customers (would be quite likely if they eventually install �tens of GWs a year�), then let�s take a look at revenue.
If each customer pays SolarCity $150/month for electricity, then that�s $1800/year. Times that by 50 million customers. That�s $90 billion in annual revenue. Let�s say $10b in earnings. 15x p/e multiple. $150b market cap.
4. Interesting quotes:
Peter Rive - �We looked at every promising technology company we could find.�
Elon Musk - The key was finding �an advanced technology that was ready to scale�.
Lyndon Rive - �We can hit the point of providing energy at a lower cost than fossil fuels without incentives. If we do that the market is essentially infinite for the next 30-40 years.��
1/1/2015
guest You need to account for larger corporate installs. SCTY also own bid for HP's campus�
1/1/2015
guest interesting comment from VP of YGE,
"Darren Thompson - Vice President, Sales and Managing Director, Yingli EuropeMaybe I will give some comments and I can ask Robert Petrina to give some supplement. So basically in post Q1 and Q2, our shipment to U.S. is very strong and even during the -- before and after the announcement of the CVD -- preliminary CVD in early June, we still see a very strong demand from U.S. customers in the second half of this year.
Our customers are very actively talking with us about different solutions how to reason, fairly solve the issues through commercial solutions and also based on our current assessment and understanding of the background scope and even the potential anti-dumping duty which may announce by the end of July, we believe that such kind of announcement or additional cost that arising from kind of potential tariff will not significantly impair the second half of our U.S. market demand."�
1/1/2015
guest DaveT,
Have you looked into what Silevo is planning on spending in the Buffalo Riverbend site? According to what I have read, "Silevo, also based in Silicon Valley, has also pledged to invest $750 million and create 475 jobs." I don't know if there are any details about how Silveo is planning to raise this money or if it is up to Solar City to raise the capital now.
Also in that article it mentions:
"Cammarata said he expects all the necessary legal work will be completed in the next few weeks.
and
�Needless to say, there�s a lot of interest in closing this deal as quickly as possible,� Cammarata said."
It seems to me that a capital raise is imminent if they plan to close this deal ASAP
link to article: Riverbend details still coming together - Buffalo - Business First�
1/1/2015
guest Thanks for the article link. Here's another from the same website: Silevo sale may place Elon Musk in heart of Buffalo development - Business First�
1/1/2015
guest Excellent video interview from 2012 with Silevo's VP. He gives a good summary of their tech. PV America - Silevo - Chris Beitel VP Solar Energy Technology - YouTube�
1/1/2015
guest A question right out of the blue: I am considering to buy a considerable long-term position in SolarCity. Is there a place, post or other source where I can get a reasonably comprehensive overview of the company's finances and future plans? I get the vibes that this is a company which is really well positioned for big growth in the renewable energy sector, but it's a bit hard to find a comprehensive summary of what is going on.�
1/1/2015
guest Thanks for this post, but I am going to modify your numbers a little bit:
A 7kW system should produce roughly 800kWh per month give or take depending in large part on geography. I am currently producing electricity at about $0.025/kWh wil my solar system. So to get $150/month SCTY would have to sell electricity at close to $0.20/kWH and that is never going to happen. I think that a more reasonable rate in the future will be about $0.05/kWh. So each customer should be paying around $40/month. Then you will need some battery storage since net metering will be going away (remember we are talking several years in the future), so this might be an extra $20/month.
So I would use something like $60/month pre customer instead of $150, which brings the market cap down to $60b (how ever many years down the road you expect this to happen). But such huge growth will lead to huge dilution, so at $60b market cap we might only see a $300 stock price 10-20 years down the road with 20m shares outstanding.
500% return in 10-20 years would be a great return still.
Just want to caution you guys on extrapolating earnings deep into the future in the solar sector. You have to really be cognisant of the fact that the cost of solar drops 50% every 3-5 years and this means that a lot less revenue will be earned per watt,whether you are an installer or manufacturer. You cannot say SCTY is doing $X per Y watts today, so when it does 10Y watts in the future it will be doing $10x of revenue. It will be more like $3-4x revenue for 10Y watts of installations. Same goes for panel manufacturers, but they already suffered the 1x/1y to 3x/10y in the 2011-2013 time frame. So for them going forward, it will be more like $6-7x revenue for 10Y watts...�
1/1/2015
guest Also, in 5-10 years time IMO the leasing model will be dead. Residential systems will be very cheap to buy and there will be mortgage like products out there with low interest rates for those who can't afford to pay up front. There will be no reason to lease a system anymore.
7kW @ $1.50/W = $10k of revenue per system.
10GW per year = $15b in revenue for 1.42m customers.
DaveT on the other hand used $150/month or $1,800 per year per customer over 20 years. If you use these numbers then you are getting $51b in revenue from that same 1.42m customers.
$51b for 1.42m customers vs. $15b (according to my estimate) is a huge difference. So with these numbers you are looking at a $50b market cap and not $150b market cap.
I haven't read many research reports on SCTY, so I don't know how these analysts model out SCTY's earnings 5+ years down the road. But I would bet that they are doing it wrong and using extremely generous $/W assumptions. On the other hand, I would also bet that they are using a lot lower growth levels than SCTY will achieve in terms of watts installed per year. So those two errors will offset each other. I am just speculating here, but I know how analysts do research for other solar stocks and they have been way off over the past two years. Not even close to reality. Which explains the outsized returns that I have been enjoying in the solar sector.�
1/1/2015
guest SCTY is in my portfolio, not because I think they'll experience growth in the leasing part of the business, but because I believe they will become more and more integrated with the larger gigafactory vision. They have a large group of R&D battery engineers (100+) in the local area (some will be at the bbq here at my place next month), are looking way past the future we talk about for SCTY. I'm betting on them the same way I bet on TSLA.
I don't believe the standard way of analysis will work, just like it doesn't work with TSLA. Using that approach is valid ... but if I had, I would have missed out on the TSLA story. And I believe SCTY will have a similar, albeit smaller, story to tell, too.�
1/1/2015
guest Is "They" referring to Solarcity or to Tesla?�
1/1/2015
guest Sorry for the vagueness. Solar City.�
1/1/2015
guest That was good to hear, thanks for sharing the link! So when will SolarCity start using these new panels? Not until they build the plant in NY or will they go ahead and use what's available already from Silevo? I've had a SolarCity quote and est. but haven't jumped on solar for the house yet. Would love to get these new ones from them.�
1/1/2015
guest My guess is that it will take a while before SolarCity is able to use Silevo's panels. It appears that Silevo has a small plant in China that does 32 MW, but they've been planning a much bigger plant in the Buffalo NY area which SolarCity will be spearheading now. They seem to be targeting it to be completed in 2 years.
- - - Updated - - -
Thanks for your thoughts. Going out 20+ years I figure there's a lot of room for error. Electricity cost IMO will be more than $0.05/kWh since SolarCity would be competing with the grid/utilities and I don't there's there's any realistic way where utilities will be able to charge $0.05/kWh.
But I think it's fine to have different numbers. My point being is that if SolarCity installs "tens of GWs a year" then it will be worth a lot more than it is now. I like a company that has a huge vision and a huge addressable market - and SCTY fits this.�
1/1/2015
guest Recent thoughts on Solar PPA/lease vs Purchase
I've thought about this a lot. I personally don't think the leasing model will be dead in 5-10 years. I there's there's a strong likelihood that it will remain indefinitely. I liken it to a subscription model where people are paying for a service. But let me qualify this some.
I understand the appeal to outright purchase a solar system. I've looked into both leasing/ppa and purchasing, and if one has cash to spend the purchasing works out to be the better deal. The thing is the market is so big and while many people will purchase, I think the PPA model might address a larger market than purchasing (as it is currently doing so). But I think the PPA model needs to grow and adapt in order to do so. Perhaps Solarcity's bigger competition might be some companies that offer affordable financing to purchase and are as relentless as SolarCity to drive down the costs of solar. But SolarCity will have plenty of time to adapt and make their PPA program much better than it is now.
I actually had a great idea (at least in my opinion) yesterday when I was talking a walk. I was thinking how can SolarCity scale their PPA model and compete effectively if/when solar becomes much more affordable to outright purchase and there are compelling financing vehicles available to do so. Here were my ideas:
1. SolarCity should adapt their model to allow the customer to scale up or down their system when they want.
The idea is similar to Amazon Web Services (AWS) which allows developers to scale up or down computing power whenever they want. In SolarCity's case, if they can allow a customer to start using their service by installing a very small system (ie., 2kW solar system) just so that the customer can avoid the high tiers their paying (ie., I'm paying $0.33 for tier 3 energy). And then SolarCity could allow the customer to "scale up" the system whenever they want. In other words, if the customer wants to add solar power, SolarCity would come by and install more panels (of course this could be complicated with mounting, permits, install... but this is the magic that SCTY will have to create and solve). So, if I wanted to scale up my 2kW system to 5kW, SCTY would be able to do so seamlessly (they would just come by within a month or so and do it in a few hours). Now, this is going to take some major innovation from SolarCity to be able to do this type of "scaling" or "adding" to an existing solar system in a cost-efficient manner. Perhaps they can make their mounting system more modular (if it isn't already enough so) and they can streamline the permit processes even more.
2. SolarCity should offer customers to remove the solar system at any time at no cost.
So, if I wanted to remove my solar system, I should be able to request that from SolarCity and they do it (ie., within a month) and at no cost. Sure, it will cost SCTY to do so (man-hours, etc) but they could recycle the panels, inverter, mounts, etc.
The reason why I think SolarCity needs to offer this is because there are situations where a customer might want that kind of flexibility to remove the system. One example is I might want to rent out my house but I don't think the tenant will appreciate/use solar (who knows who's out there). Another example, if if I'm selling my house and the next owner doesn't have good credit so it might be difficult to transfer the currently structured PPA over to the new owner. In this case, I could just request SolarCity to remove the system at no cost to me.
3. IMO the ability to scale up/down a solar system and the ability to remove it at no cost would allow expand SolarCity's addressable market.
One example, is I would immediately get started with SolarCity and have them install a 2kW system at my house and get out of any Tier 2/3 usage, so my electricity bill will drop substantially. I'm thinking of perhaps moving in the next year or so, so that's why I wouldn't want to buy/purchase a system outright. And if SolarCity could offer this on-demand scaling service where I could scale up or down my system size at anytime (and remove it at no cost), then I probably would be tempted to forgo purchasing a system completely and just use SolarCity. Sure there will always be people who will outright purchase their system, but if SolarCity's PPA program offered this scalable optionality (with no-cost removal) then it would make it much more appealing to even more people.
Imagine if SolarCity offered this scaling up/down feature, no-cost removal and no-commitment approach. SolarCity could get people started with a small 2kW system to get people off high utility tier usage. And if it was no-commitment (no-cost removal) and free scaling up/down, I would imagine a flood of people (1m+ this year alone) would take SolarCity up on this offer.
Now some people might say that what I'm proposing is impractical or impossible. But as SolarCity scales, their cost improves and their able to improve their product services. What I'm proposing might not happen overnight but it might be where SolarCity is headed. Especially so, since Elon Musk is SolarCity's chairman and he likes to view things with First Principle. And what I'm proposing is what I think solar ought to be:
- no commitment, no initial cost
- can start off with a small 2kW system (or even smaller) to get off high utility tiers
- can scale up my system at anytime for no cost
- can scale down my system at anytime for no cost
- can have my system removed at any time for no cost
Compare this to outright purchasing/financing a solar system. Outright purchasing/financing a solar system might be the better option for those who are confident they're going to be staying in their current house for the next 10 years. But for those who think they could move in 2-5 years, they might want more flexibility and convenience. Also, purchasing/financing could require additional complexity (longer applications, credit checks, etc).
Right now, SolarCity probably doesn't need to focus on offering what I'm proposing since their currently addressable market is so huge that they just need to provide energy for less than what the utility offers it for. As long as they do that they can probably continue to grow rapidly for the next several years. But at some point as solar costs come down, SolarCity will need to make their product/service more compelling (more convenient, more flexible, etc) than what will be offered for those who outright purchase/finance their systems from other companies. I'm fairly confident that SolarCity will be able to do this... especially with Elon as Chairman and SolarCity following the Musk Ethos of relentlessly cutting costs and improving their product/service.�
1/1/2015
guest for what it's worth- in 20 year time frame, given the current trajectory on both panel/battery; I don't see how the Utility (as currently defined) survives as a producer at any price- they'll be more of a grid operator probably sinking more power than producing; the consumer of power will have it available for nearly free grid or no-grid; As opposed to a communication network, the purpose of the power interconnect disappears when the Sun is the distributor - agree with Sleepy on this one and maybe even a step further. I see in 20-30 years a virtual no cost for electrical power as we know it- that's going to become a major disruptor of it's own as the Solar industry essentially eats itself into the same position PC manufactures have created for themselves- precisely because they achieve the mission- making limitless power available to everybody, everywhere for next to nothing�
1/1/2015
guest In a utopian society, energy (and food, eduction, healthcare, housing, etc) is all provided for free-of-charge. But in reality, it's not going to happen. Energy costs money and for the foreseeable future will cost money. There are too many costs associated with harvesting, storing and delivering energy for energy to be free. Somebody has to pay for those costs. Now if you say the government will step in and subsidize energy to make it free, that's a different story (albeit a very, very unlikely one).�
1/1/2015
guest What about using roofing companies to tie in a solar system installation with getting a new roof? The average roof lasts between 20-40 years depending on material. I think a good time for people to consider putting solar on their roof is when they have to get a new roof installed, which if 30 years is the average, means that about 3.3% of 'used' houses will need their roof replaced each year. This is a huge market for potential solar installations and tying in solar installation with the roofing companies somehow (discount if packaged together or something) could be huge. Roof companies could get a 'finder's fee' for every successful referral they make, which would make them motivated to sell the idea of solar to customers. The basic cost savings on electricity could be shown and I am sure lots of people would be willing to chip in more on their roof to get solar installed at the time for huge future cost savings. People would know that the panels won't have to be taken down and replaced (which I am sure has a significant cost to do + potential for damage) with a new roof so they would be more willing to do it. If someone knows their roof will need to be replaced in the next 5 years or so, most would not consider getting solar installed before the change (this is the situation I am in and the reason I thought of this). The goal would be to try to make solar an automatic consideration every time someone needs a new roof. I think now any time a new house is built, solar is at least considered by most builders. If this same consideration could be made every time a new roof is installed, then the demand would be much greater.�
1/1/2015
guest not free- virtually free relative to today;
strongly disagree with "Energy costs money and for the foreseeable future will cost money"; In 30 years, it'll cost so little money, you won't think any more about it's cost than you do a cup of coffee (and not Sbux)- standard issue on every home/apt/office building built into the amortized costs of whatever you live and work in. Similar to WiFi today- in 30 years- cost of electrical power will be a non-issue. Not much more than the cost of sunlight is today- just my opinion of course�
1/1/2015
guest While there are certainly discerning buyers, the vast majority of solar power purchasers consider their electric bill a "monthly bill". SolarCity's PPAs sell to that mindset. Most residential customers will not "burn the calories" to evaluate the differences between purchasing and leasing.
It boils down to "can you lower my monthly payment?"�
1/1/2015
guest First, I don't think energy and WiFi are good comparisons in terms of cost. But even if you do compare them, people still pay similar prices for the internet connection now compared to 15 years ago. And similar prices for their cell phone plans now compared to 15 years ago (in fact, people probably pay even more monthly now). Cable TV, probably people pay the same or even more today.
WiFi, cable/sat TV, cell phone, etc. all have infrastructure and service costs associated, so even though the bandwidth speeds have increased at an impressive rate the companies providing those services still need revenue to pay for their associated expenses.
With energy, for the foreseeable future (ie., next 30 years) there will be required infrastructure needed to harvest, store and deliver energy and those infrastructure and servicing costs are not trivial.
Also, technologies like bandwidth, cpu speed, etc. benefited from tremendous exponential growth in speed (ie., Moore's Law, Nielsen's Law, etc). But with solar the rate of improvement is not as fast (ie., panels aren't doubling in efficiency every 18 months). Also, solar has a lot of associated fixed costs that are unavoidable like the cost of materials for the panel/module, mounting, inverter, permits, etc.
The point being is that I fully expect energy to not be "virtually free" in 30 years. Rather, we'll probably pay less per kW for it but we'll probably use a lot more of it (ie., average 2 electric cars per household, etc) so the average we spend on electricity in 20 years might actually be similar to what we spend now... maybe a bit less but definitely IMO not virtually free.�
1/1/2015
guest I just need to vent. I am short SCTY now after this run up and I can't stop second guessing myself, that I am going to be slaughtered tomorrow as it runs another 5 dollars up.�
1/1/2015
guest Then this is not the game for you. The only way to win is not to play.�
1/1/2015
guest I am going to have to agree with kenliles on this one:
My solar system cost me $1.15/W out of pocket and at that rate it costs 2.5c/kWh to produce electricity assuming that it lasts 30 years (I have a 25 year warranty).
Right now small business installers are installing systems for as little as $2.50-$2.75/W. 5 years from now we will see systems installed at under $1.50/W. 10 years from now at under $1/W.
At $1/W you will be paying about 2c-3c/kWh depending on where you live.
At $1/W the average solar system size (installed by SCTY) of 6kW will cost only $6000. Nobody is going to pay $150/month or $1,800/year or $36,000 over 20 years for a $6,000 system. You can easily finance a $6,000 system over 5 years and pay $100/month (if 0% interest).
The solar industry is really not much different from the semi-conductor/computer industry: it just keeps getting cheaper and cheaper.
20 years from now solar will be a lot cheaper than $1/W. BTW, JKS built its recent power plant at $1.13/W, so we are already there.
I still think that SCTY will grow into a huge company, but that it will require huge dilution (which we have already seen over the past year and will continue). It is also operating in an industry where its revenue per watt will decline by 75% in 5-10 years. Elon Musk IMO does not care about how much money we make on SCTY or TSLA shares. It has become very obvious to me that his only goal is to save humanity and he doesn't care about shareholders at all. The only reason he wants the share price to go up is to be able to raise more capital to grow as fast as possible (for humanity's sake). This strategy will definitely deliver outsized returns for TSLA shareholders going forward. But when it comes to SCTY, there just isn't as much upside as in TSLA. It will probably do better than 10% per year going forward, but I am not sure. I don't think that SCTY will come close to TSLA when it comes to shareholder return from this point in time.
There is a lot of extremely exuberant valuation methodologies applied to SCTY in this thread and I fear that a lot of people are ignoring the economics of the solar industry.
If 10 years from now SCTY is installing 10GW's per year, then that is $10b in revenue. Applying a very generous 10% net profit margin gives them $1b in net income. 15x PE is a $15b market cap. Share count will most likely double, which means that SCTY would still be trading under $100/share 10 years from now, which would be an awful return on investment. I have purposely ignored battery and other potential business opportunities just for illustration purposes to show how much everyone here is overvaluing SCTY's stock price appreciation potential from the solar side of things.�
1/1/2015
guest If I t goes up $5 tomorrow I will join you :smile:�
1/1/2015
guest I'm really confused here. Ken, so can you clarify what you mean by energy being "virtually free" in 30 years? Do you mean people will have a $5 monthly electricity bill in 30 years? I'm trying to clarify into numbers here because I'm having a hard time grasping your reasoning and what is "virtually free".
- - - Updated - - -
1. I doubt that in 10 years the average cost to install solar will be $1/W. If you said $1.5/W in 10 years I might say it's possible, but $1/W is really pushing it.
2. Electricity usage will likely go up in 10 years (i.e.., people having electric cars, etc). It might boost the average size of a system to 10kW. So, $15,000 (for a 10kW system at $1.5/W) is still a hefty amount to finance and while there might be compelling financing vehicles for people to purchase, it doesn't mean that SCTY can't compete with extra convenience and flexibility (like the options I've listed prior like free scaling up/down, free takedown, etc).
3. If SolarCity reaches $10b in revenue within 10 years, the market will likely give them a much higher P/E than 15 since the SolarCity model is a subscription-type model with recurring revenue (ie., Netflix) so future revenues are more secure. Also, if they reach $10b in revenue in 10 years, their growth rate will be very high and it'll warrant a higher P/E multiple, maybe 20-30x.�
1/1/2015
guest 1. The DOE Sunshot Scenario is looking at $1/W by 2020 for power plants and $1.50/W for residential. The avg. residential installation cost was $2.20 in Germany 1 year ago. I have no doubt in my mind that we can get to $1.50/W by the end of this decade, so $1/W 10 years from now is reasonable although high inflation would put a dent of course.
2. 10kW is not possible IMO since SPWR avg. system size is about 8kW and they said that the limiting factor is constrained roofs. New housing will have to be built with solar friendly designs in mind, i.e. lots of southern facing roof space. At $1/W SolarCity will not be able to afford to scale up/down, free takedown, etc. Way too labor intensive, i.e. expensive.
3. PE ratio's in the solar industry are going to fall below 10x PE, since it is a commodity business with small margins. If SCTY can do $10b 10 years from now, and then $15b in year 11, $20b in year 12, then yes it will deserve a high PE ratio, but it will not be able to grow that fast. Chinese solar companies are growing revenues over 50% YoY and they are getting 6x PE ratios right now.
Anyway, my numbers are just hypothetical and for academic purposes to show that the future earnings potential in the solar industry is not that great. I am not talking about $10b from revenue from customers who make monthly payments. I am assuming $10b in revenue from selling systems, since I don't think that leasing is going to make much sense 10 years from now. If they are leasing 10GW 10 years from now then they will only have $1-2b of revenue at best and not $10b. You are misinterpreting my numbers here: I am using a 100% cash sale, while you are applying my numbers to a lease scenario.
Also, as I posted in the other thread: SCTY's SG&A and interest exp. is over $1/W right now (82MW installed last Q and $88m in SG&A+interest exp), and this is going to be a big problem if they can't get it down to $0.10 - $0.20/W (which seems pretty impossible right now). A mom and pop shop would be less than $0.10/W on these unnecessary costs. So if SCTY can't bring the costs down then it could be a huge problem. If they do install 10GW per year, then they will need to keep corporate expenses at under $2b per year. It could be doable, but they are already at $0.5b/year while doing 20x less than 10GW.�
1/1/2015
guest The balance of system costs for residential solar are still very high in the U.S. I've read some case studies on Germany's solar history and it appears they have a much more streamlined permitting process. Also, in Germany after they reached a certain cost per W, the low-hanging fruit to reduce costs was taken so they've been experiencing a much more difficult time to decrease costs. I would imagine a similar thing to happen in the U.S. Once cost per watt falls below $2/W, then it becomes increasingly difficult to reduce costs. Although it will happen, it might not happen as quickly as some people want/expect. Although the drop to $2/W might happen faster than some think. So overall, I think the drop to $2/W is low-hanging fruit but after that it gets tougher. So I definitely wouldn't expect $1/W in 10 years for residential solar in the U.S. Anyway, it's probably semantics we're dealing with in some ways because it's tough to forecast that far out.
In 10 years, it's likely that they can pack more watts in each panel so 10kW might be possible.
If SolarCity offered me an on-demand no-commitment PPA with the ability to scale up/down w/o additional cost and free takedown, then I would definitely pay a premium for that service and probably would choose it over outright purchasing a system (considering I plan to move in the next several years). I'd start with 2kW and scale up from there. And if I ever wanted to move, I would have them take it down for free. The more I think about it, SolarCity will have to more in this direction of offering superior service/flexibility/scaling to customers to make it more attractive than outright purchasing/financing. But for now they have more than enough addressable market competing with utilities.
Thanks for the clarification. I don't think SolarCity will sell many systems in the future. I think they've dropped that business model in favor of a PPA/lease model. In the future I hope they adapt it further into something even more flexible like I've described.
Regarding SolarCity's revenue 10 years out, if they reach 1 million customers in 4 years then it's possible they could reasonably reach 5 million in 10 years. If each customer pays $130/month ($1560/year), then that's $7.8 billion in revenue. I'd give them a 15% operating margin (I know you give them a 10% but I think as a service business they can get fairly high margin of at least 15%). So, $1.17b of profit. Since they'd be growing very fast still and it's a subscription business (future revenue is more or less guaranteed), I'd give them a 30x multiple at that time. $35b market cap (or course there will be some dilution due to secondaries, but still not bad for a market cap 10 years out).
I'm not too worried about SolarCity's expenses. They are growing 100% per year and are bound to have very high expenses. They are scaling out their warehouses, equipment, teams, R&D, etc. However, as they ramp up installations to reach 1 million customers in 4 years, those expenses will drop significantly on a cost per watt basis as they reach greater scale.�
1/1/2015
guest Dave, to get this reference (and I fully admit, not an easy picture to draw from our current context for power), it's important to return to first principles. There is no inherent 'cost of energy'- it's everywhere for the taking by anyone. And it's already distributed. You receive it everyday in the form of heat when the sun's photons hit your face and those molecules convert it to heat- how much do you pay for that heat? the cost of being alive whatever that is- it's virtually free.
Let's try to paint a picture for the image I'm describing:
The transition I believe we are making over the next 30 years, is akin to discovering how to use fire (think Castaway here). Long ago that used to cost a lot- it's now free (I call the current cost of manufacturing and distributing matches free- because it's so small the cost is barely more than breathing). When I say virtually free, I mean so small that, for example, the average person will pay for all their energy use for a year with 2 days labor. The cost will be as low as you consider matches today- or pencils- or perhaps a cell phone if we include storage for overnight usage; The point is not whether it takes 2 or 4 days to pay for your yearly energy use- the point is it's so low, it's no longer considered a human want or even concern, it's considered a given (because frankly it is by the Sun fusion reactor). And inevitably(I'm saying 30 years), except for a tiny cost to manufacture a deck of playing cards, there is no inherent cost required.
This comes about because it's already there- the photons that impend on the space you occupy contains more energy than you can ever use, you won't pay more for it than you pay today to breath and be part of society. We have crossed the threshold now technologically to convert a tiny tiny number of the free photons to electrons as a useable form. It's already there, pre-distributed to every sole for free- with the current trajectory of both technology and cost to manufacture the 'convertors' to produce the 'matches' for everyone to purchase for pennies per day.
I'm trying to form an image here of what I believe is inevitable. The flat panels today are sufficient to make this inevitable, but later they will be micro-mirror concentrating(within the panel) and convert many times more photons per square meter than today- exactly like the semiconductor path- The energy captured in a few square meters will OVERpower everything you'll need for a household. The problem will reverse itself and the issue will be how to safely sink that much power- which likely as not will REQUIRE DETACHMENT from the grid rather than attachment- the sun has already resolved both production and distribution for free. The cost of the convertors(photon>electron) will fall to the equivalent of picking up a couple of plywood panels at home depot- so yeah, there's a cost, it's not free, and yes it's virtually free.
You'll pay more for the plywood roof over your head that today shields that head from getting burned by too many photons slamming on it every day, than you'll pay for panel surface area sufficient to convert some of those photons to electrons for you're own use. In fact, it's will be part of the same cost integrated into the material protecting you from the very energy you used to pay for- you'll now pay more to protect yourself from it than to collect it for use in a different (electrical) form. And I'll go a step further, the technology for this is already known, the scaling of manufacturing and distribution channels for those 'matches' is all that remains- only this time it will happen in compressed time- more like the cell phone did- 30 years or less. It's already done and baked in my opinion there's no way to stop it now.
that's what I mean when I say 'for free'�
1/1/2015
guest I would say that SCTY is also looking beyond installation of residential solar. From the comments by Elon, JB, the cousins it seems that they are looking at what it will take to move the entire grid to renewables (not just solar). This includes batteries and, very importantly, grid level capabilities to generate and shift power. I think this is what Elon was discussing the other day with his comments about software.
Right now SCTY is focusing on leasing and end to end installations at home and business level because it's the easiest money for them. I'm sure, later, they will be happy to sell you batteries, panels and monthly subscriptions to their management software that probably will buy/ sell power for you automatically.
I also disagree that this will all come at massive dilution. There is plenty of profit available and Elon also realizes that he can't do this by himself. He has to show others how to make reasonable margins in order to get other companies to contribute to scale - similar to Tesla.
Just like all all growth companies returning dividends to shareholders isn't the primary goal. It is to grow value in the overall business including using growing cash flows to finance expansion.
in other words when it comes to Elon - think BIGGER!!
after all he seems to have set himself a goal of saving the earth so he can start colonization of Mars.�
1/1/2015
guest SolarCity finally did something to make me interested in them, so I'm going to dive right in with my "expert" opinion after having started my Solar research by reading the last two pages of this thread (because reading just one page wouldn't be very thorough). Though, I suppose that technically I just skimmed the last two pages.
Still, given my vast insights on this subject, and the maybe one word in three that I actually read over the last two pages, I would say that the one statement that I know I agree with is the one I highlighted. I would contend that at no time in the next trillion years will Humanity say "oh hey, this is enough energy, lets call it a day".
And the maximum amount of insolation available to any homeowner probably will be insufficient to that homeowner's needs even in the relative near term. To the extent that there are periods where typical homeowners have excess capacity, there will always be a buyer for the energy.
How SolarCity itself fits into all of that is much more problematic, and one reason why I haven't invested before now. But with this vertical integration into panel manufacturing they are well positioned to be able to control their destiny to an extent they were not before. I always hated how they seemed to be mainly a finance company peddling risky securities based on an untested business model.
With the moves they are announcing to massively ramp up production capacity and their commitment to become the IP leader in the industry they are much better positioned to switch up their business strategy if their leasing model goes south on them.
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Yes, what we've seen over the past 6 months is Elon publicly committing to a program to take over the world, where previously we had just speculated that he was planning to take over the world.
Specifically, he is going to leverage the "Musk Mystique ETF" effect to finance an endless number of battery and solar module plants to vertically integrate the competition into flaming dust bunnies.
He already has the dominant IP (which he just semi-open sourced) in the energy storage side of things, and he has just committed to acquire whatever IP he needs to acquire on the solar generation side, while simultaneously installing one of his signature ultra-R&D/engineering teams into SolarCity so that he can replicate his IP success in Tesla and SpaceX.
In fact, this announcement just constitutes Musk deciding to import Musk Industries "Best Practices" of vertical integration and R&D/Engineering into SolarCity. He is fundamentally changing the nature of SolarCity from some hinky finance and installation company into a technology and manufacturing powerhouse.
I was always fuzzy on what the fundamental identity of SolarCity was going to be moving forward. Not any more. It's going to be just like Tesla or SpaceX, only for solar technology.�
1/1/2015
guest $1/W is unrealistic unless you assume that the solar components are free and labor costs don't go up. In the $2.50/W that an installer charges, 75c/W for panels, 40c/W for inverter, ?c/W for other components. Can't be much less than <1$/W for labor.
Personally, I highly doubt that the pre-rebate price can go much under $2/W. 1$/W for total system components and 1$/W in labor/permits etc. Also comparing JKS building a utility scale project in China at just over $1/W is not comparable to a retail rooftop installation. For the price to hit that kind of low we need to see something radically different like using panels as the roof material in new construction/roof replacement. I say even if total component cost goes down to 50c/W, labor will rise enough to keep the cost around $2/W.�
1/1/2015
guest I think it would be wise for SCTY to think longer term and become a roofing company. If the PV system $/W keeps falling (and SCTY's move to produce is clearly focused on keeping that going through cost-efficient improvements in panel efficiency), and rooftop solar becomes as ubiquitous as I think it will be, then to minimize overall $/W they need to apply Muskian holism and think about the whole issue of roof installation, maintenance and replacement. With that approach, plus their storage arm, they would be able to get in on new construction.
I think that holistic thinking on solar could drop the labor costs significantly. Historically the roof just kept the elements out: with active components there, we just need to start building with the expectation that people will need to be up there. Easy access and a safe environment (railings anyone?) would make labor a lot cheaper. Enclosed ladder and railings, anyone?�
1/1/2015
guest And I disagree with you:
They already diluted shareholders 100% in the past two years alone. And their balance sheet is still really ugly. They have a very capital intensive business, and their cash flows are extremely negative which means a lot more capital raising required.
They issued ~3m additional shares to purchase Silevo and will issue another ~2-3 million in the future. That is an extra 5-7% dilution just to buy the Silevo technology. They will have to dilute another 10-15% just to build out 1GW of manufacturing capacity. Building out 10GW's will dilute a lot more in the future.
SCTY has been diluting shareholders to the extreme over the past 2 years. So now that they are entering panel manufacturing, which is extremely capital intensive, you are saying that there will not be a lot of dilution required? It just doesn't add up to me and sounds like a lot of wishful thinking.
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Completely disagree with this one as well:
SCTY does up to 2 (or even 3) systems per day per crew. Lets assume that a crew is 6 people doing one system in 4 hours. Even if you pay these guys $20/h (which is a huge stretch) then you are only paying $480 for labor. The avg. 6kW system size means that labor costs are $0.08/W.
Then you have inverters already under $0.20/W and panels are already made at under $0.47/W. Roof racking material is cheap.
$1/W is very doable in 10 years!
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Completely agree with you on this one.
But it raises the question in my head of why am I investing in the solar sector if their won't be any profits in it?
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Good discussion DaveT and this is what makes a market.
If you are correct and 10 years from now residential systems still cost almost $2/W or even $1.50/W and SCTY is able to keep its highly profitable leasing model, while doing 5-10GW's or more per year, then the stock will do great and might even be a 3-5 bagger if dilution is kept at bay.
But if I am correct and the world moves away from the leasing model and installation costs are closer to $1/W, then I can see SCTY still trading under or around $100 10 years from now, especially if my heavy dilution scenario comes into play.
One other note I wanted to make is that buying a system on your roof is not a liability if you sell your house. If you pay $6000 for a 6kW system 10 years from now and sell your house within 5 years, then 1. it will add value to your house; and 2. it already paid for itself. Your flexible/scaling lease option does not make much sense in my mind and I don't think that they will ever implement anything like this especially since it is really hard to reuse panels since they already suffered degradation.�
1/1/2015
guest I do not quite understand the comparison. A match can light a tiny fire. To keep a substantial fire burning (enough to cook or keep warm), you would need some sort of fuel or firewood. In that sense, fire today is not free. To keep a fire burning is still a noticeable expense today, isn't it?
You are also assuming demand for energy use will not grow proportional to the ability to supply it.�
1/1/2015
guest Great discussion sleepyhead, DaveT and kenliles. Very interesting to follow. I think sleepy's analysis are the most realistic ones, coupled with ken's where the margins for SCTY will be coming down and where the leasing model will die off. However, it was surprising to many (including my self) to see SCTY aquire a solar panel producer. This means they are agile, forward thinking and hungry for more. If SCTY does become what it looks like it's becoming: a true integrated solar company they will be the first one's to have, within one and the same company 1) R&D 2) Production of panels 3) Sales, installation and maintenance of whole systems 4) Financing. It's hard to gauge the importance of having all of the components integrated in one company - perhaps this gives them possibilities in the market that are difficult to foresee as of today?�
1/1/2015
guest just a metaphor to to paint a comparative picture. It was not meant as a literal regarding the fuel itself.
The cost to start a fire in early days of humanity was high (hence the reference to Castaway movie)- today the cost is zero and freely distributed. Nothing but a visual metaphor for where I see Solar moving in 30 years from today's position. 40 years ago, your PC filled a room and was much less powerful; today it's in the palm of your hand. That's the same 30 years we'll see in Solar imo. Flat panels using nano-structure short focal length parabolic concentrator channels 'manufactured' with 3D printing is one of several paths (think SPWR C7 in a flat panel made using 3D printing)- just one of many paths. that's my story and I'm sticking to it
Invest now and for the next 10-15 years, then get out because it becomes completely commodity with low and shrinking margins imo. It's the transition investment that will make the money- then move to the next one. These types of disruptions now occur in decades, not lifetimes; those are my thoughts...�
1/1/2015
guest This is my same thought process. Wall St. is very short sighted and has a very hard time of seeing the future more than 3 months out anyway.
I plan on investing in solar until exuberance hits and that is when I will slowly begin pulling out of the industry. I aslo think that in the long run there will not be that much money made in the industry, since margins will be wafer (pun intended) thin.
In the mean time though, we are heading towards a supply/demand balance in the industry, which means higher margins and more profitability for solar component manufacturers. Once these prices go up, then those who own the manufacturing will be able to build projects a lot cheaper than those who have to buy panels. This is the reason why I invest in panel manufacturers (SPWR, JASO, CSIQ, JKS, TSL) that are expanding into downstream. SCTY is doing a good move of entering into panel manufacturing but it is a very costly exercise:
I expect us to hit a recession about 2-3 years from now, which will coincide with the time it takes SCTY to get its manufacturing plant running. SCTY (like all other solar stocks) will tank in a recession, and that is when I plan on getting in to SCTY as a longer term investment; hopefully around $30, while letting today's shareholders hold the bag as SCTY continues raising funds to build out manufacturing. If SCTY takes off and goes to $150 before hand then I will be shorting that stock heavily if a recession is looming.
That's my game plan for SCTY and I am sticking to it�
1/1/2015
guest You are really optimistic�
1/1/2015
guest Take away half the time frame and I will meet you in the middle at $1.50/W by 2020�
1/1/2015
guest I agree with low margins in the solar industry and I've said this multiple times before. This is the main reason why I don't hold a long-term position in any Chinese solars or other solars besides SCTY.
Even in low margin industries, a company with stellar management can often find a way to make good margin. Think Apple. While the PC component/manufacturing industry is largely low margin, Apple makes good margin on their PC products (ie., iMac, notebooks, etc). Not only that, but they leveraged their PC/computer experience (think MacOS) and basically ported a computer operating system over to the phone to disrupt the entire cell phone industry and increase their market cap by $350-400b from the iPhone alone.
SCTY has a stellar management team along with one of the greatest business/innovation minds in Elon Musk. Elon sets the tone, strategy, direction for SCTY and he knows how to push a big move when needed (ie., Silevo).
If any company in solar will find a way to make good margin in solar, it will likely be SCTY.
There's a ton of examples of companies coming along and re-inventing a low-margin industry via innovation to make high margin. Even trash cans, Simplehuman came along and recreated the kitchen trash can and charges $200 for it. Their kitchen trash can is the best ever, and to me it's fully worth the $200 I paid for it. Sounds crazy to pay $200 for a kitchen trash can, but they made a product worth it when others gave up on innovating with trash cans. Another example, OXO... they're re-creating every kitchen utensil possible and charging a premium for it, making good margin along the way. Nest re-creates the thermostat and charges $249 for it and people love it.
Point being is that stellar companies focused on innovation will find a way to re-create, innovate, push the envelope and deliver stellar products/services that are significantly better than what's out there, and they will charge a premium for it and make high margin since they deserve it. I fully believe SCTY is in this camp, and a large part of why I think this is because of Elon's influence and involvement. I wouldn't advise betting against Elon or any of his companies.�
1/1/2015
guest The solar industry is about delivering electrons and there is nothing you can do to make it worthwile to pay more for commodity electrons. Trash cans, kitchen utensils, iphones, etc. are all material items and serve different purposes, so there is a market for high end high margin products, as well as low end low margin products.
Electrons are electrons and I don't care how I get them as long as I get them at the cheapest cost possible to me and my AC works when I come home. So unless Elon finds a way to deliver an ice cold beer with every electron there is really nothing he can do to make a "premium" product that delivers high margin electricity.
The only way the SCTY (or anyone else) can make high margins is by being cheaper than everyone else, and I doubt they can get their with their huge overhead.
I invest in Chinese solar companies, because they were in low margin panel manufacturing business, but are now moving into high margin project business while their valuations are extremely cheap. SCTY might do 500MW of 0.14/kWh projects this year and has a $7b market cap. JKS will do over 400MW of $0.18/kWh projects and has a $700m market cap, 10x less than SCTY. JKS cost to build those plants is about $1 - $1.50/W, while SCTY's cost is double.
I will gladly stay with Chinese solar stocks over the next couple of years. Their country is actually serious about figthing pollution and making a big push into solar, while the US keeps fighting solar from taking off.
The battery storage business is the only thing that can make SCTY stand out. But if Tesla fails then so will SCTY. If Tesla succeeds then SCTY will get cheap batteries. Since this is the case, there is no reason to invest in SCTY when TSLA will most certainly outperform it over the next 5, 10, 15 years.
I would not recommend being a buy and hold SCTY investor. Trading in and out of it makes a ton of sense. But if you are going to buy and hold, then buy TSLA instead; much more upside with a ton less risk.�
1/1/2015
guest I think you're grossly overestimating the rate of progress with solar technology. You're largely comparing solar to high-tech products like chips/cpu and internet bandwidth. CPUs were doubling in processing power every 18 months via Moore's Law. Internet bandwidth probably increasing 50% every year. However, solar technology is advancing much slower. I would compare it more to batteries, which is more like a slow but steady improvement where you see the improvement more in decades rather than over a few years. This is important because it's the rate of progress that will determine the speed of the disruption. Your "30 years" projection where energy is "virtually free" is way too optimistic and is based one the false premise that solar tech will mimic the pace/speed of innovation in other high-tech industries like Moore's Law ... it hasn't happened and it's not happening. Solar is innovating but much slower than Moore's Law.
You're also overlooking the fact that just because solar energy exists (via the Sun), that doesn't make it usable by any means. To make that energy usable it needs to be:
1. Harvested
2. Stored
3. Delivered
1. Harvesting energy
In order to harvest the sun's energy, massive amounts of investment in infrastructure (panels/modules, systems, etc) need to be set up. And that infrastructure is far from free. It's very costly and it needs to be paid for. Your premise seems to presume that this infrastructure cost will drop within 30 years to become a trivial amount, thus making energy "virtually free". However, again you're I think you're overestimating the rate of progress in solar technologies. Infrastructure costs will drop but it won't be anything near as dramatic as what you're alluding to when you claim it'll be "virtually free". Another obstacle is the cost of materials which isn't going to zero. Panels, modules, investors, mounts, wiring, etc all cost money and no matter how cheap you make it it still has cost of materials and a markup. Barring a revolutionary breakthrough in energy generation what we have is more of a slow but steady progress in solar innovation that not only includes the panels but also the balance of system costs, and this will lead to a gradual reduction in the costs of solar over time. But no where close to the "virtually free" you're hoping for.
Another caveat is I think that energy usage will go up over time probably to match the efficiencies gained via innovation. In 15 years, people might consume double the energy they do now. Add in two electric cars per household and extra convenience items and a typical household might be consuming double in 15 years. This might offset any reduction in energy prices. Thus, the typical family in 15 years might actually have the same or similar monthly electricity bill as they do today. Fast forward another 15 years, and I can see new products consuming more energy and driving up average household energy consumption (ie., if someone makes a flying car, people will travel more and use more energy). The point being is when energy becomes cheaper there is room for more new products to take advantage of that energy and provide new experiences and value and this drives consumer behavior to consume more energy over time as the cost of energy drops.
2. Storing energy
You also seem to be assuming that the cost to store energy will be negligible. I don't see much evidence to that assumption.
As more houses go solar, there will be a greater need for stationary storage to balance the load of high energy production during the day. If a typical household has a 100 kWh stationary storage battery, that will add significant costs to the cost of energy. Sure, battery costs will go down (ie., 7-8% per year) but still it takes 10 years to halve the cost.
3. Delivering energy
If households have stationary storage coupled with panels, then the delivery mechanism will largely be built into the house. But it will be a long way off before the grid completely disappears and even in 30 years, I still think there's a need for the grid and the grid is very expensive to operate. I don't think you can ignore the cost to deliver energy.
Let me take another angle with this. Just people solar energy exists doesn't mean that in 30 years that the mechanisms will be place to harvest, store and deliver that energy at a negligible price. The reality is that battery improvements and solar improvements are taking time and will continue a slow and steady march to increased efficiency and lowered costs, but I don't see any evidence or clear facts that lead me to think that your time frame is reasonable by any standard.
If anything in 30 years I expect people to be paying a similar monthly bill in energy as they do now but their energy consumption usage will likely be much, much greater (ie., maybe 4x as it is now). Sure, in 30 years energy to charge my laptop might be "virtually free" but if I'm using 4x the energy I do now, I'll likely be spending the same amount on my energy bill as I do now.
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I disagree with this. Creative/innovative companies always seem to find a way to differentiate their products by adding additional high value. I remember when people were saying that Apple was doomed with their PC business because computing was going to be a commodity and laptops were going to cost $100 eventually. But Apple found a way to de-commoditize the computer by adding extra additional high value to the product. SCTY can find ways to do this as well. Whether solar panels are ugly or look amazing is actually important to people and adds high additional value. Whether I can scale up/down my system when I want adds high additional value. Whether I can start with a super small system (ie., 2 kW) at no cost and no hassle adds high additional value. The way I interact with my energy usage and costs (ie., similar to what Nest is doing with their product) also adds high additional value. The list goes on.
My "long-term" perspective is 5-10 years. I think solars overall will probably do well over the next 2-3 years and have no issues with people riding the wave while they can. But I like the have a safety of margin with my long-term investments where I believe the management is stellar, their addressable market is huge, and their business model is strong, so in case of a recession I'm confident that this company will overcome the hard times and emerge as even stronger. I don't have that confidence in any other solar company besides SolarCity.
Regarding TSLA, I think it's an investment in it's own league. That's why my long-term stock position is 90% TSLA and 10% SCTY. I would caution people though against chasing momentum stocks when the mood is exuberant. I like accumulating when the mood is foul and the stock has been hammered (ie., 40%+ drop) but the fundamentals haven't changed. I also think a future recession is always something to keep in mind as all/most-all high-growth stocks will likely be hit hard.
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I wouldn't be surprised to see SolarCity making innovations with how solar is integrated into roofs over time. Stellar companies have a way of surprising people with the innovations they come out with, but it'll take time.
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I largely agree with this. I think it's largely "can you lower my monthly payment" and also "is it super convenient and flexible with no strings attached". On the second point, SolarCity has some work to do.
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I completely agree that Tesla, SolarCity and SpaceX are more similar than most realize. They are/will leverage each other technology, expertise, business models, cost-cutting ethos, etc. I don't think this is a new thing, it's just being progressed at a faster rate and being made more public.
I do also see SolarCity becoming heavily involved in R&D. The mounting company they acquired was best of breed. This solar company they acquired... I've been impressed by with the limited research I've done on them. And SolarCity will add more and more engineering resources to make better panels and equipment. This model of constant innovation at high velocity is something that others will have a difficult time catching up to, especially with the tight vertical integration.
In the conference call (for Silevo's acquisition), it was mentioned briefly that Tesla and SolarCity are cooperating regarding inverter technology. This is the next vertical integration move in my opinion. SolarCity will release a best of breed inverter, or will acquire a company to achieve this.
I also think what some/most skeptics are missing is that momentum that SolarCity is picking up, and with "momentum" I mean they are acquiring and growing their technological portfolio and starting to really focus on engineering. I agree that SolarCity is looking like it'll become a "technology and manufacturing powerhouse" along with a tightly integrated customer experience (from customer acquisition, install, financing, maintenance, etc). IMO, it's by far the sexiest play in solar long-term.
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I agree with both points. Energy ain't cheap... it needs to be generated/harvested, stored and delivered.
Also, demand for energy will grow as greater availability of lower cost energy will drive further innovation in products/services that will increase standard of living. Man's constant drive to improve their lives and live better will lead to new products/services that require more energy as energy costs decrease.
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SolarCity has been acquiring best of breed technology/companies as it expands it's vertical integration. I see this is just early stages of the bigger plan. As SolarCity sets itself up for full vertical integration (ie., with inverter technology coming up next), SolarCity will apply it's religious fervor to drive innovation faster in each of the areas they're involved with (ie., similar to SpaceX driving down the costs of rocket launches by religiously innovating on all aspects of the launch).
Google does this well with their ethos focused on execution and velocity. They focus on quickly iterating products to get them better and they measure the rate at which they're able to do that.
Elon Musk is applying this concept of velocity in innovation to all his companies. This is why I think it's still very early stages for SolarCity in what it is becoming. I can see SolarCity iterating their solar panel technology and manufacturing to the point where they become far ahead of all its competitors. The same will go for inverters, mounting racks, and the rest of the balance of system costs/processes. It'll just take time.
Elon even mentioned in the recent conference call regarding Silevo, that SolarCity is working on making the panels look aesthetically really good. That's the Elon way. Continuously innovate on all aspects of the product/service, and then some.�
1/1/2015
guest Not counting or expecting a moor's law doubling for every 18 months; It's not required for the goal I describe - largely because most of the work is already done;
The more we use, the cheaper and 'freer' it will become- that's a counter argument that will prove the case in my opinion
Regarding the infrastructure required
Here's one of the most recent studies I saw posted, that draws a good visual
We're projected to use 44% more by 2030 and assuming panels don't get any more efficient than the current 20% or so in that time. And forget about electrical power usage - this is for all power used from all sources for all purposes, including you're cars and planes;
Here's the infrastructure needed
Land Art Generator Initiative
Of course you can just as easily install that surface area across the entire country on roofs and other- distribution is already provided.
It's certainly possibly I'm over estimating our ability to reach the point I describe in that time- even if I'm off by a decade, does that really matter to the inevitability of the conclusion. I think not. All power for our uses is destined for commodity food-stuffs
Also, the Apple example you use is nearly a polar opposite. Apple garners high profit margin by appeal of product function and aesthetic- they apply the same scale of software to hardware making that possibly; They are akin to Tesla in that regard. There is NO premium in electrons - they're all the same - the cheaper the better and the cheapest will win the day with the customer of electrons. Other than perhaps an aesthetic of the panel, there are no premiums (beyond the cost per sq foot to produce electrons from photons). I do agree battery storage will delay the goal of my description- but not by much imo.
I guess we'll likely disagree in the end on this- hopefully we'll be around to watch the development play out and see where it goes. I do enjoy the discussion! thanks�
1/1/2015
guest Just because energy becomes cheaper doesn't mean it become "freer" or "virtually free", especially if you consider that energy usage will grow over time (probably much more than 44% by 2030 in my opinion if you just factor in electric cars). It'll probably just mean that people's monthly energy bills remain similar as they are now (more energy used at lower cost per watt). I'm not seeing any precedent or hard data facts that support the notion that energy could by virtually free in 30 years. Doesn't make sense to me at all.
I think you're completely missing the point here. Yes it's true that you don't need that much surface area (compared to world's total surface area) of panels to supply the world's energy, but the problem is even if you create those exact areas filled with solar fields, there still is a huge storage and distribution problem. You need to get that energy stored in massive amounts and then distributed to each person around the world. The cost is enormous and vastly prohibitive. That's why there are no plans to make one massive solar plant field to supply all the U.S. energy needs. It's impractical and vastly cost-prohibitive.
Energy harvesting/generation, storage and distribution needs to happen at a somewhat distributed scale, whether that be on a rooftop or at a local solar plant connected to the grid. The local solar plant is relying on the grid, which is very, very costly to maintain and operate and will continue to cost a lot in the future. Getting solar panels on rooftops is costly and even after you do that, you still need a way to store the energy... thus most are connected to the grid, which again is very costly. You can go stationary storage, but that is very costly.
Whatever way you look at it, we're not going to get to the "virtually free" price of energy you're hoping for in 30 years. No where close.
Further, whatever reduction in energy costs that are realized will likely be completely (ie., 100%) offset by the increased usage in energy consumption driven by new products/services that require more energy (ie., think of how much more people would travel is fuel costs were lower, or how many more products would be shipped if shipping costs were lower, or how many products could be created if cost of creating those products were lower via lower energy costs, etc.), so that the monthly energy bill of a person will likely be similar as it is today. Far from virtually free.
Can you clarify this?
Let's expand on the Apple example. A computer is a computer, made of mostly low-margin commodity components... providing computer power. What Apple did was add value on top of that.
1. Aesthetics
Apple's computers not only look better, but are smaller/lighter etc. In a similar way, SolarCity can eventually make panels/modules/systems that are super sexy and blow away all their competitors. Electrons are electrons, sure just like computing power is computing power. But looks matter on your roof. It affects how your neighbors think of you and your house, and how you look at your house as well.
2. Easy service
Apple provides easy customer service (ie., genius bar, etc). Much better than anybody else in the industry. Other PC manufacturers went cheap (thinking a computer is a computer) even with service but Apple focused on quality. In the same way, sure a solar system might need servicing that often but it is does require occasional servicing (ie., roof might get bunch of leaves or something stuck on panel, or inverter goes bad, etc). SolarCity provides a full-service model. Again, if you add the potential of SolarCity to provide on-demand scaling up/down your system at no cost, this is something that is very difficult but could provide super high value to people. To me as a homeowner, "electrons are electrons" doesn't mean much and it really isn't true. I want convenience - to be able to install a small 2 kW and scale up whenever I want at no cost. I want the ability to get my system removed at any time at no cost. I don't want to put any money down. I don't want to borrow money. I want to give a quick signature and get it done. This is beyond "electrons".
3. Better customer experience
Apple has better advertising, better store experience, better buying experience, better servicing experiencing, better OS updates, etc. Overall, they provide a better customer experience than their competitors. In a similar way, this is what SolarCity is driving at - better marketing, better signup, better/easier financing, better/easier install, better maintenance, etc. The overall customer experience matters a lot. Again, electrons are not just electrons... it's more about my overall experience with energy generation and usage.
Add in stationary storage, and experience matters even more.
It's not just about providing the cheapest electrons or computing power (or etc) possible (that's one part of the puzzle), but it's about the overall customer experience and ensuring that every part of the picture is stellar and better than the rest of the competition.�
1/1/2015
guest I believe that's exactly what it means. There is nearly no bottom to the cost, and concurrently there is no top of availability (I say this with the understanding of practical in mind- yes there will always be a small cost, and yes there is photonics impingement maximum). But there is more radiant energy from the 'free' source, distributed to you for free than you will ever use, almost no matter how much you can engineer into useful purposes. The physics is irrefutable - and the cost of the energy and its distribution to you, wherever you are is free. The only cost is to convert photon to electron and intermediate storage. My supposition is that there is nearly no bottom to the cost of that process. I use examples of other leverages mankind used to make the similar advancements.
It's my supposition those bills (measured in equivalent dollars of course) are due to come down drastically - furthermore, the more energy we use, the more they will reduce. The cost reduction will exceed for example the net reduction in your transportation bill that today's hard evidence shows is imminent between use of fossils-ICE and use of Electricity-EV - even if electricity is generated from fossils, much less that from Solar. -Due to the physics behind efficiency of EV motor vs ICE at the source of use coupled with the leverage of an already in place electrical distribution scaled cost.
The cost reduction we are to experience from Solar will be several times greater than that in my estimation. Because the power generation itself AND its distribution system are both free; This induces a feedback cost loop that (similar to moore's law you quoted) results in a LOWER cost with HIGHER usage- because the only cost is production of the (photon>electron)convertor and storage(which will end up as Super Capacitor cost structure in 30 years). In other words the increased scale of it's production (and technology) more than compensate for the larger number of conversions being done to accommodate your usage increase, precisely because there is no (practical) limit to the number of photons available to convert, nor is there any increased cost in it's distribution to you.
Wouldn't be the first time, but I'll take a shot just in case I didn't
The map and associated article wasn't presuming those specific spots as the only solution- it used those as a way to make the calculations and illustrate a visual on one possible. And this does get to some of the heart of the disagreement- those areas are there to depict what needs to be distributed. The point is, that distribution is (almost) no cost- because the source of the power travels with the panel. Applying the equivalent panels across the country IS the distribution- It distributes the convertors(photon-electron) directly to the source of usage (as does the EV). And it does so for (almost) no additional cost and much less net cost (no grid required with associated losses)- It can do so precisely because the Sun performs the distribution for us. Generation is free - distribution is free; Convert and store at the point of usage.
It's my supposition the physics underlying those costs are gone; manufacturing/scale of the local photon convertors/storage in 20-30 years will be no more costly than a cheap appliance is today. Not free but nearly so when amortized over its useful life. Agree we will use more energy because it's available; that's part of why it will be so cheap to convert and store- the cost is (largely)not a function of amount used because at the site of usage, there is no limit of availability nor cost to distribute - the grid becomes superfluous as it was originally needed to distribute from a concentrated source. If it survives it will be for other purposes such as sinking excess power, local grids in downtown areas and security - supported largely by taxes would be my guess
yes the reference to food-stuffs was a quick metaphor for what we went through in the agricultural age. The cost of food used to be nearly 100% of our daily cost structure - still is in some places of the world. Applying scale of production and leveraging given energies, it's now a small cost in relative terms. I believe Energy via Solar will exceed that transformation by several times, both in magnitude and time compression. Just another example I was pointing to, in an attempt to portray harder facts for a future supposition where hard facts are of course impossible without extrapolation of past facts.
Disagree on that as well. The experience is not with energy generation and usage; it's with the product that uses it. I'll give you an aesthetic for the panels on the roof- that won't be a premium for any company in my view. And I take your points regarding customer service quality etc. But in my view we are talking past each other here. Apple makes and missions making very personal, tactile, and interactive functional devices (ala Tesla for that matter). The vision I'm protracting is a semiconductor based convertor sheet and a super capacitor panel in the garage that requires little or or no service. None of the items you list are value add in the scenario I picture 30 years from now; the maytag-panel man will most assuredly be lonely
Using your description- "the overall customer experience" is best deployed as a non-experience all together. Leave that to the 'living-products' of human interaction.
thanks for the discussion�
1/1/2015
guest Just because an energy source exists doesn't make it virtually free (ie., in 30 years) unless you can extract/harvest that energy, store it and distribute it in a manner that is virtually free. That isn't going to happen in our lifetime and most likely won't happen ever.
It takes a lot to extract/convert energy, store it and deliver it. Taking solar energy and converting it to usable energy takes a lot of equipment/infrastructure cost (think trillions of dollars for the world) and somebody's going to be paying for it - namely, the end consumer/user. No investor is going to invest trillions of dollars over the next 30-40 years as the world's energy generation industry transitions to renewables, only to give away energy for free. Those trillions of dollars invested in solar/renewable infrastructure over the next 30-40 years will need to be paid for. And more tens of trillions of dollars of investment will be required to meet the growing energy consumption of the world as well. It makes no economic sense to me how you're claiming energy will be virtually free.
You state several times that the sun gives free radiant energy. That's true. But everything in this universe holds energy. Even an atom contains/holds vast amounts of energy. The tricky and costly part is extracting the already available energy sources around us. The sun's solar energy is just one form of energy available to us and like all forms of energy it requires vast/immense amounts of infrastructure/cost to harvest that energy, store it and distribute it.
It's also possible, the more energy we use and the more new products/services that are created and made available due to lower energy costs, that our actual monthly energy bills will increase over time.
I think of energy as a huge part of every part of the economy. If you lower the cost of energy, it creates vast incentive for new products/services that weren't possible before and lowers the cost of virtually every existing product/service. Think if energy costs were free, most of the products we have today would cost less than half of what they do today (negligible shipping costs, negligible factory energy costs, etc). This opens up a whole new world of innovation and increase in standard of living.
There's no way if energy costs decrease that energy consumption rises minimally. Energy consumption will increase in proportion to energy costs decreasing, and probably even more. I wouldn't be surprised if the rate of energy consumption actually increases faster over the next 30 years than the rate of energy costs decreasing. It's possible that our monthly energy bills could actually be higher as a proportion of our household spending compared to today.
Power generation is not free. Distribution is not free. Just because solar energy exists in the format of the sun's solar radiant energy doesn't mean it's harvesting, storage or distribution is free. Just like there are atoms everywhere filled with vast amounts of energy, but that doesn't make that energy free. We need to account the costs to harvest, store and distribute that energy. The costs are immense.
The technology to harvest solar energy (ie., solar panels) are not improving at a pace that even can compare with Moore's Law and computing power. The improvements to solar panel efficiency has been much, much slower. Maybe akin to battery tech. And as we know, battery tech (although it improves 7-8% a year) is not where improving at a 50%+ annual rate like cpu's did with Moore's Law.
I think you might be looking at solar innovation and thinking that it's advancing as fast as other high tech innovations in the past have (ie., cpus, internet bandwidth, etc). But that's simply not the case.
Again, using an example of an atom... the energy is already there and we have it all around it. So does that make it's generation and distribution free? Similarly, the sun's energy is all around us but it's not until we harvest/convert, store and distribute that energy does it become useful to us.
You mention all we need to do is "Convert and store at the point of usage." And that's what I'm saying is going to cost the world tens of trillions of dollars over the next 30 years and the investments will likely just expand over time. Converting and storing solar energy (or any energy) is not easy or cheap.
I think the logic you're using might compare to internet bandwidth which you mentioned before. The cost to deliver a 1 mbs internet connection has fallen so dramatically in the past 10 years, that providing a 1 mbs internet connection into a home in 10 years might be a negligible cost (ie., under $10/month). However, that analogy might work if people didn't need/require higher and higher internet speeds as the pace of internet innovation correlates with the increase speed of bandwidth. So, now that I have a 50 mbs connection at my home, I'm actually using all of it and I want a faster connection. When I have a 500 mbs, I'll use all of it (since the Internet will evolve) and I'll want more. in 10-15 years (?) when I have a 10 Gbps connection, I'll still want more since the Internet would have evolved. The end result is that I'm still paying $40-100/month for my home internet connection.
While the cost to deliver 1 mbs of bandwidth falls to negligible, that doesn't mean that savings is passed on to the consumer's monthly internet bill. Rather, the monthly consumer bill largely stays the same, and the drastic drop in cost to deliver 1 mbs of bandwidth is largely translated in a bigger/faster connection.
In a similar way, just as companies innovate to create needs for people to have more and more internet bandwidth, companies will also innovate to create needs for people to consume more and more energy in various forms (ie., conveniences, travel, shipping/delivery, products, services, etc).
There are a lot of assumptions here. You're assuming solar panels (ie., local photo converters and storage) will drop in price to the point where it's negligible (at least when amortized over useful life). I don't see that kind of drastic cost reduction as you. Let's look at battery storage. Improving at 7-8% a year. In 30 years, the stationary storage required to power most households will cost a decent amount of money - definitely not negligible. Also, there are so many surrounding costs to solar (ie., balance of system, permitting, mounting, etc) and there are limitations with solar as well (ie., limited roof space, sun/shade, etc). Also, if you look at the efficiency improvements in solar panels over the past 30 years, it's slowly improving but not at a rate like other high-tech.
My rough guess is that in 30 years, we'll be consuming as an average household 4x the energy we do now, and our monthly energy bill will be roughly the same as it is now.
It seems like you're looking at energy based on how it has been provided in the past by utilities as a commodity, unsexy item with no added value beyond electrons. Just because the utilities provided it like this, doesn't mean that all energy in the future will also be provided like that as well.
Stellar companies have an unusual tact at getting into industries that appear commoditized but adding additional high value via innovation and charging a premium that's well-deserved.�
1/1/2015
guest well we definitely have some fundamental differences. sounds like we have a market!
without quoting all points above; just the heart of the disagreement- I'll choose 2:
1)
"Just because an energy source exists doesn't make it virtually free (ie., in 30 years) unless you can extract/harvest that energy, store it and distribute it in a manner that is virtually free. That isn't going to happen in our lifetime and most likely won't happen ever."
That's true- and the heart of the difference. I believe the 'unless' part of your supposition is already inevitable
I do in fact believe we are entering another super-disruption that indeed does convert energy from one form to another at quantum level in a semiconductor based format- destined to achieve the associated cost structure, amplified by a no cost source and distribution. The technology will in fact accomplish that in the field.
I'm a little uncertain as to your distribution concept- but once conversion and storage at the point of use is deployed- the distribution is concurrently accomplished in my view (and so free)
2)
"There are a lot of assumptions here. You're assuming solar panels (ie., local photo converters and storage) will drop in price to the point where it's negligible (at least when amortized over useful life). I don't see that kind of drastic cost reduction as you. Let's look at battery storage. Improving at 7-8% a year. In 30 years, the stationary storage required to power most households will cost a decent amount of money - definitely not negligible."
yes- we disagree; I believe those prices will in fact drop to (amortized)negligible - storage will not be battery (although will be initially at a very attractive price), but will be capacitive hybrid, produced with 3D printing at an extremely low cost, completely dislodging the 7-8% per year (although that alone largely turn the trick over 30 years.)
anyway- definitely a different vision - and relative to investment patterns- short term, probably doesn't make a market difference. But over time your belief system, might point toward the YieldCos and similar investment vehicles with emphasis on recurring revenue from system deployment and service, power generation and distribution revenues.
My investment scenario would take (after initially being similar of course) a different path that eschews the power revenue based path, instead deploys against the disruptive application of extreme DG (down to individual & business), followed by a withdrawal to other industries- as I believe inevitably the user will generate/store their own power beyond their ability to use it- even at 4x current levels, disrupting the market for sale and purchase of power.
that's the way I see it anyway�
1/1/2015
guest It definitely does look like we have some big differences in opinion, but it's understandable considering 30 years out is a very long way away.
I do agree that the core of our disagreement is how quickly costs for solar harvesting/converting and storage can decrease over the next 30 years. I'm assuming that solar continues it's pace of innovation as well as battery technology and leads to lower costs over time but will likely be offset by the increase of energy used per household so that the average monthly energy bill for a household remains relatively the same (or could even higher). The reasoning I gave was "It takes a lot to extract/convert energy, store it and deliver it. Taking solar energy and converting it to usable energy takes a lot of equipment/infrastructure cost (think trillions of dollars for the world) and somebody's going to be paying for it - namely, the end consumer/user. No investor is going to invest trillions of dollars over the next 30-40 years as the world's energy generation industry transitions to renewables, only to give away energy for free. Those trillions of dollars invested in solar/renewable infrastructure over the next 30-40 years will need to be paid for. And more tens of trillions of dollars of investment will be required to meet the growing energy consumption of the world as well." Basically, even with solar costs decreasing, we're still going to be spending tens of trillions of dollars transitioning to renewables over the next 30 years and it needs to be paid for. And even after 30 years, we'll still be spending trillions of dollars in energy infrastructure as energy needs grow.
Your stance is "I do in fact believe we are entering another super-disruption that indeed does convert energy from one form to another at quantum level in a semiconductor based format- destined to achieve the associated cost structure, amplified by a no cost source and distribution. The technology will in fact accomplish that in the field." - It appears that you're expecting a major breakthrough in solar energy conversion, so dramatic that it lowest the cost of harvesting/converting energy so low that the costs become negligible. I'm not expecting that dramatic of a breakthrough. I lean toward a steady march of innovation that lowers costs steadily over time. New technologies tend to be integrated over time. Consider the battery field... there's so much talk about revolutionary breakthrough in cell technology. But usually how it works is that new technology has holes and it takes time to mature and eventually gets integrated into the product to make things more efficient. The level of breakthrough required to bring down the cost of energy to near zero is unrealistic IMO.
Let's say there's a revolutionary/historical fusion breakthrough and it brings down the cost of electricity in 30 years to 1/20 of the cost of today (note: there will still be costs because fusion reactor/plant, storage, distribution, etc still needs to be paid for). In this scenario, I personally think that households will just use 20x the amount of electricity/energy they do now. It won't all be in the form of electric outlets in the house. But there will a myriad of applications. For example, my personal drones would fly to LA to pick up dinner from the best chef in the city and bring it to my house by dinner time. I could send my drone to practically anywhere to pick up practically anything. I could even have a drone pick up every piece of a new house I'm building, one little piece at a time. I could have robots create things for me - ie., they can farm food for me, become my own personal industrial robot force, build a business with them, etc. If I had a flying car, I would travel a lot more and use more energy as well. Personally, if energy was cheap enough I think humans can use 1000x+ the amount of energy that we use now, and that would just be a beginning.
The point being is that I think there will always be a healthy market for energy. It will likely remain one of the largest markets in the world (like it currently is). And it will be probably one of the most important markets (as it currently is) as well.
In other words, I think SolarCity has a bright, blue ocean to swim in for many, many decades to come.�
1/1/2015
guest I think that kenliles and I are saying the same thing in a different way. "Virtually free" does not mean $0.37/month electricity bill. It just means that the cost of electricity will be inconsequential:
In today's dollars, 10 years from now solar will be at $1.00/W installed, so 30 years from now it might be $0.50. A 10 kW system would cost you $5,000, and is enough for 10,000-18,000 kWh per year. With better technology it might last 40 years or 500 months. That is $10/month, I.e. virtually free. Another $10 for battery storage and you have your car as backup storage too.
But who knows what kind of technology we might see. If SPWR can scale C7 technology to fit on roofs, then electricity might become extremely cheap soon enough. I am sure that we will see a lot better technologies 30 years from now.�
1/1/2015
guest Agreed we have different visions of end point. The 1/20th cost is already baked in for my scenario and may be more like 1/100th and provide near endless power available to every individual/business.
I couldn't agree more that we disagree!
SCTY is it's own issue within the context of our disagreement
However, I'm currently uncertain as to SCTY because I don't know which direction they will head. In many ways they are on my side of the argument, eschewing Utility scale power and distribution in favor of individual rooftop DG with higher efficiency panels. On the other hand they charge exorbitant fees to own the power, modeling as a power generator which I do not adhere to. As an investment they are fine for a time. Under my model they will have to adjust rapidly, but that's down the road a bit. Remember my supposition is 20+ years out when Elon is on Mars.
That said I really like the catalyst of rooftop and storage SCTY has ascribed and applaud that strategically. I'm currently agnostic SCTY, but with a slight long bias pending more clarification. I really like the new direction of adding high efficiency panel production in house. I'll point out though they are very late to that recognition. It's couched in massive expansion that others have already achieved and are engaged. Others are already (correctly in my view) projecting in a few years that panel production will consolidate to massive outsourced capital outlay. The only way they maintain a viable position in that endeavor is to massively dilute to catch up, then abandon to others. Where as Tesla is ahead of the game via GF. SCTY is playing catchup to others who already have those for panels.
In short, I'll be using SCTY for a trading mechanism. Agree with Sleepy on that count, but with a long bias to the trade given Elon involvement and integration of storage from Tesla. Thought s are highly dynamic on that though, so reserve the right to change at any moment. SCTY for my vision, is schizophrenic - ahead in certain aspects, way behind in others. Thats a market!
Anyway. Really enjoyed the conversation Dave. Thank you
Cross posted with Sleepy. So quick edit from his post. Yes I agree with that position. The cost in my model becomes inconsequential relative to other life costs at the time - doesn't mean exactly free, but it's simply a non issue and no longer an investable growth channel. It's simply water from an appliance To our everyday lives. My time frame for that is 30 years, but investment wise, 10-15 and move on.�
1/1/2015
guest $10k for a 10 kW system plus stationary storage is not negligible in my opinion. That's quite a large expense. Further, no way that it can be amortized over 40 years. More like 10 years for the individual consumer, maybe a bit longer if there are creative financing vehicles.
Add to this that in electricity usage will likely increase dramatically (if costs per watt decreases dramatically), people might need a 30+ kW system, which only dramatically raises the costs for the system and storage. So, for a 30 kW system costing let's say $25k, amortized over 10 years, that's $2500/year (not including interest). That's $200/month for the consumer to pay. Or if we amortize it over 20 years, then that's $100/month... but that's not including interest payments over 20 years. Add in interest payments and for a 20 year loan for $25k at 5% interest you'll have a $165/month payment. Far from trivial.
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Regarding SCTY specifically, I would suggest researching the company more in-depth. The recent Silevo conference call with Elon Musk is a great call to listen in on. From the call, you can feel the confidence, clarity/focus, and how the management team (Rive brothers with Elon as Chairman) are completely on the same page, following the Musk way as demonstrated by Tesla and SpaceX:
http://www.media-server.com/m/p/sfwejz2i
I've also gained a lot of insight listening to all their quarterly conference calls and interviews with management. The more I learn about SCTY and their management, the more confident I become of where they're headed. They are top notch and really a stellar team, guided and inspired by the leadership/vision of Elon. They are truly unique in the solar industry, and IMO best of breed. They will continue to surprise people by their innovation and out-of-box thinking/ways.
Same here. Good opportunity to think through things, hear different perspectives, and write ideas down. Best of luck.�
1/1/2015
guest I did exactly that and they have been a very strong part of my investment (small part currently). And there we agree. They have an excellent management team and I give high marks to their ability to adjust and maneuver. Probably one of their best assets frankly Based on that alone, I can understand those who invest. And to be clear I swing from bullish to bearish with SCTY, but much of the bullish comes from the excellent management quality. No issue there. And I really admire the aggressive mission. With the recent run up I'm very light SCTY, but on pull backs will add. I'm basically with a Sleepy on this one, it's a good trading vehicle with a bullish bias for this early Solar stage. Will evaluate continually. The recent move is a good one IMO and long overdue, but if aggressive enough (and sounds like it is) will work out well
Thanks again, for a great debate and conversation - one of the reasons I really like this forum and the people on it. Regardless of right or wrong, it's going to be a blast to be a part of this important set of events for all of us.�
1/1/2015
guest Did anybody else catch on the SCTY's Silevo conference call last week that they mentioned that Tesla and SolarCity were cooperating on inverter technology? I want to go back and transcribe that part of the conference call but I don't want to listen to the whole thing over again. So, if anybody remembers when in the call it was mentioned, I'd appreciate your help. Thanks.�
1/1/2015
guest ** It's right in the first few mins, where Musk started explaining the acquisition.
Elon R. Musk:
Thanks. So I think this acquisition will come as unexpected to some probably maybe to most, but SolarCity has decided to go into the actual solar panel production, which is something we'd stayed away from for a while. We do think though now there was really a need to do this. But Lyndon and Peter and Tanguy and the team actually came to me and said that they thought the timing was right to make an acquisition and go into advanced solar panel manufacturing, because if we don't do this, we felt that there was risk of not being able to have the solar panels we need to expand the business in the long-term.
So we ultimately expect to be installing tens of gigawatts a year. And if you look at the capacity in the world, it's simply not going to come online to be able to do that, and moreover the rate at which solar panel technology is advancing, at least the panels that are being made at large scale, it's really not fast enough. But we're seeing high volume production of relatively basic panels, but not high volume production of advanced panels. So we think it's important that that should be combined in order to really have dramatic impact on solar power, and in particular in order to be able to have solar power compete on an unsubsidized basis with the grid, with fossil fuel energy coming from the grid, it's critical that you have high efficiency solar panels at a total installed cost which is as low as possible. And there are really just two key levers for that; one is economies of scale and the other is making sure the fundamental technology that's being scaled is as best as it can be. So with the Silevo acquisition, that's what we believe we can do and are doing.
So we expect in the future to build solar panel plants that are an order of magnitude bigger than any plants that exist in the world today to assure we're taking maximum advantage of scale, and then we intend to put a lot of effort into R&D on the panel side as well as into the mounting hardware, which we already own and into inverter technology in partnership with Tesla, as well as battery pack technology to provide an overall solution that gives someone electric power at a price that is less than if they were drawing it from fossil fuels burned over the grid; that's really the key threshold. And obviously the demand grows exponentially as the price drops and you can imagine that it really grows at an enormous pace if we're able to compete with grid-powered electricity with no government incentives and that's really the goal, and that has to be the goal in order for the world to have sustainable energy future.
Thanks. Now, I'll turn it over to Lyndon and Pete.�
1/1/2015
guest Thanks, SBenson. That's a very inspiring Solarcity vision/mission statement by Elon.
Looks like Solarcity is working with Tesla on both inverter and battery technologies. Exciting times ahead. I'm very interested in the inverter solution that they're working on. Originally I thought they might acquire a company but from this it appears that they're working on this in-house with Tesla. My speculation is that they will release an innovative inverter solution, a sort of hybrid between microinverters and regular inverters that will allow them the flexibility to scale a system that microinverters give but the stability and reliability of a regular inverter. Also positioned where it'll be easy to access as well.�
1/1/2015
guest The inverter thing is a bit confusing. Here is another snippet around 27mins.
<Q - Pavel S. Molchanov>: Okay. And then just one kind of higher level question if I may, you guys obviously bought a mounting systems company last year. You've now bought a module company. Are you looking to get into other parts of the hardware value chain, and I'm particularly thinking inverters or power optimizers perhaps?
<A - Lyndon R. Rive>: The way I'd like to answer this is, we will continue looking at ways to reduce our cost per kilowatt hour. And so we're always out in the market to find out anything that will reduce our total installed cost or cost per kilowatt hour, we will be interested in acquiring.
- - - Updated - - -
On a different note here is a snippet on battery partnership.
<A - Elon R. Musk>: Yeah. The crazy thing is gigawatt plant is almost like the pilot plant for what will come. Obviously, the bigger plants to come beyond that will as we start to deploy a lot of solar panels, we'll need to start adding in stationary storage, so battery packs, Tesla is certainly working on that in partnership with SolarCity.�
1/1/2015
guest Finally, here is a Lyndon Rive interview on Bloomberg TV explaining the acquisition. A couple of good points here:
Why Elon Musk's SolarCity Agreed to Acquire Silevo: Video - Bloomberg
The one thing I found interesting was how these guys think they can manufacture at prices competitive to chinese standard panels. Apparently energy costs are lower in US than in China. Also it would be highly automated. Add to that, low freight costs and no tariffs. It all seems to add up quite well.�
1/1/2015
guest From their Q4 2013 conference call (Feb 24, 2014):
Pavel Molchanov - Raymond James
"And then let me ask something on a related point. You guys have historically been avoiding the use of microinverters in your systems. Any change in your stance on that?"
Peter Rive - Chief Operations Officer, Chief Technology Officer
"No, we are fans of local DC optimizers, but have not changed our position in regard to providing an inverter that is coupled directly to the module on the roof."
In other words, I take this to say they like the idea of "local DC optimizers" (meaning having the inverter closer to the module and smaller) but they don't like the current microinverter that are "coupled directly to the module on the roof." So, I'm thinking they'll have another place where they're pool all the microinverters together (rather than having one microinverter coupled directly with a module), and maybe each microinverter might be for 4 panels rather than 1. So, you could have the microinverters installed altogether on the side of the roof, maybe one one side of the mounting racks. That would make it easy to access in case the system needed to be scaled up/down or if an inverter failed.�
1/1/2015
guest No, that's not what that means. Local DC optimizers are not the same thing as micro-inverters. Optimizers have lots of advantages over micro-inverters including better efficiency, cost, and serviceability.�
1/1/2015
guest Thanks for pointing that out. Just did some reading and learned the following: (Power optimizer - Wikipedia, the free encyclopedia)
"A power optimizer is a DC to DC converter technology developed to maximize the energy harvest from solar photovoltaic or wind turbine systems. They do this by individually tuning the performance of the panel or wind turbine through maximum power point tracking, and optionally tuning the output to match the performance of the string inverter. Power optimizers are especially useful when the performance of the power generating components in a distributed system will vary widely, differences in equipment, shading of light or wind, or being installed facing different directions or widely separated locations. Power optimizers for solar applications, can be similar to microinverters, in that both systems attempt to isolate individual panels in order to improve overall system performance. A smart module is a power optimizer integrated into a solar module. A microinverter essentially combines a power optimizer with a small inverter in a single case that is used on every panel, while the power optimizer leaves the inverter in a separate box and uses only one inverter for the entire array. The claimed advantage to this "hybrid" approach is lower overall system costs, avoiding the distribution of electronics."�
1/1/2015
guest that was great, thanks. question for anyone....why are they so concerned about getting to a point where the price of solar will be lower than normal electricity without tax incentives? is it for psychological reasons for the public? because oil still gets and will be getting massive subsidies.�
1/1/2015
guest It's practical.
The key is that once you reach parity with the marketplace you can eliminate the subsidies and get political consensus.
You can then have PV installations crank up the renewable percentage, and there's enough room for a huge market up to whatever the ceiling is for each local grid.
Then the attention shifts to storage technology. That's where Tesla's focus on lowering storage costs comes in. As long as Tesla-Panasonic can lower the cost of storage enough, they raise the potential renewable percentage and lower the effective price ceiling on electricity.�
1/1/2015
guest ah, that's it. so basically psychological reasons. hahaha. I understand though. solar shouldn't have to lean on something to make it noticeable.�
1/1/2015
guest I disagree. Not psychological.
When a technology becomes market competitive without government involvement, that's a very significant milestone.�
1/1/2015
guest True. Wonder when Oil will ever reach that one. I'm guessing Solar gets there first�
1/1/2015
guest Nice one!
Is there anywhere data on just how much or what % oil is subsidized? Anti-solar people live to trot out solar subsidies but it would be nice to have the counter-argument for oil with actual sourced numbers.�
1/1/2015
guest In the US something like $35B per year, some estimates up to $50B.
$500B globally
Energy subsidies - Wikipedia, the free encyclopedia
Guess they still need help starting up. Soon they'll want the help to shut down.�
1/1/2015
guest Maybe not real soon, but still ROFLOL.
GSP�
1/1/2015
guest
I played golf with two oil and gas guys a couple of weeks ago; and they invest a lot of their money in those industries. I asked them why are they investing their money in a dying industry? Their response was that Houston can't find enough CNC specialist to work in oil and gas.
Then later they started talking about Russia cutting off gas supply to Europe and the conversation looked like this:
Oil and gas guy - "we can start exporting our LNG to Europe."
sleepyhead - "...or Europe can simply go solar."
Oil and gas guy - "I knew you were going to say that."
sleepyhead - "because it is the obvious solution."
End of discussion...
This conversation I had, just strengthened my investment thesis in solar. People are so far behind that it will be a very investible industry for the next decade.
Side note: one of the oil and gas guys said that he played options in those companies because those stocks have extremely predictable intraday movements. He would buy front month slightly OTM call options and try to cash out same day with a 40% gain. He said he turned $20k to $120k in a few short months doing this.�
1/1/2015
guest very interesting- thanks for that perspective. I agree, the blind spot currently is massive and will apply it's Solar-short for years to come, while collection of squeeze will be a continual support;�
1/1/2015
guest I've followed this discussion. I feel that SCTY has popped and its future growth is limited. Today I sold the shares I purchased the week of their IPO . I will be redeploying that capital to increase my position in TSLA.�
1/1/2015
guest Will SolarCity partner in the GigaFactory? I see that as a significant catalyst.�
1/1/2015
guest I believe Lyndon answered this in the last conference call. Basically that is the point in which you have "unlimited demand".
When you can install solar with battery backup for less than normal electricity you are literally talking about every home/building in America. Or at least where the Sun shines a lot.�
1/1/2015
guest I think the better question is "what company can install beautifully architectured solar systems?" The man who takes Steve Jobs obsession for beautifully designed computers and applies it to solar will become incredibly wealthy.�
1/1/2015
guest The cheap panel will be installed on most roofs though. If you can make it cheap and beautiful even better.�
1/1/2015
guest SolarCity had 29% of Q1 US solar installer market share, beating out its 2013 overall share of 27%. Second biggest installer, Vivint Solar had a 9% share in 2014 Q1.
Overall trend is promising, small installers are becoming more and more irrelevant:
SolarCity, Vivint Solar Top US Solar Residential Installers In Q1 2014 | CleanTechnica�
1/1/2015
guest I can't help being skeptical about research like this. There's little doubt that SolarCity is the largest single installer but given their current coverage in 16 states then to have a 29% overall market share they'd have to be closer to 100% in some of those individual markets. It's worth noting that much of the data is based on state rebate numbers which are simply not available in many states.
SCTY's coverage map:
The next question would have to be: If SC has a 29% national market share they should be hugely profitable without facing downward margin pressure, no?�
1/1/2015
guest Actually, no.
Solar Market Insight Report 2012 Q3 | SEIA
SCTY's coverage includes states with the clear majority of installations and the vast majority of residential PV installations.�
1/1/2015
guest Seems like Mr. Rive has been cashing out a substantial amount of shares the last 5 weeks. Net proceeds of ~$9,000,000.
I'm out of SCTY right now but watching and I don't like this.
Now if I were able to buy at .87/share and sell at $71/share I would not be complaining! And in this case i don't think its healthy diversification...
Date
NAME
TRANSACTION
SHARES
PRICE
VALUE
7/3/2014
Mr. Lyndon R. Rive
Sold
30,293
$71.58
$2,170,000
7/3/2014
Mr. Lyndon R. Rive
Bought
25,964
$0.81
($21,031)
7/3/2014
Mr. Lyndon R. Rive
Sold
12,982
$71.58
$929,240
6/27/2014
Mr. Lyndon R. Rive
Bought
153,450
$0.81
($124,295)
6/27/2014
Mr. Lyndon R. Rive
Sold
76,725
$70.76
$5,430,000
�
1/1/2015
guest Absolutely nothing to worry about. Those trades were automatically executed under his 10b5-1 plan which was discussed up-thread here. You can see the SEC filings here.�
1/1/2015
guest
How many shares does Mr. Rive have?
It looks like he's exercised some options and NOT sold shares. Why isn't this "healthy diversification"?�
1/1/2015
guest Do you mean profitable now? I believe that SCTY would be profitable now, and for the next 15 to 20 years, if they'd just stop spending money on doing new installations! Of course, then they wouldn't be growing or even maintaining market share. They're definitely riding a tiger here.�
1/1/2015
guest Yes, he exercised options and bought shares. He could have held them. Instead he sold them. I don't think its healthy diversification when the company is still young and not profitable. His trades netted him $9-Million while the company lost ($56 Million) in 2013 and ($100 Million) in 2012. Sure they may have good reasons for the losses but I personally don't like it when CEO's do this.�
1/1/2015
guest The majority of the YELP reviews on solarcity is pretty negative:
SolarCity - Westchester - Los Angeles, CA | Yelp
Anybody has 1st hand experience?�
1/1/2015
guest There is also the yelp effect going on where a lot of reviews are hidden or don't count.�
1/1/2015
guest Interesting, how does Yelp decide which reviews are hidden or don't count?�
1/1/2015
guest So no substantive answers to the actual questions. Got it.�
1/1/2015
guest Ok sure, if that's what you think. I gave my reasons for my opinion and you go all snippy.
What do you think would happen if Musk sells the shares he gets from is next options tranche windfall? He already said he will hold them...first in last out.�
1/1/2015
guest apparently they have some controversial secret proprietary algorithm and have been sued by businesses a couple of times because they hide good reviews. but Yelp afaik won all those lawsuits.�
1/1/2015
guest I have first hand experience. I had a system installed by Solar City and everything went very well. The city inspector told me that Solar City "always does the job right the first time". He said most other companies have to return a few times until the city requirements are met.�
1/1/2015
guest I've had experience with both ends of this.
I help run a restaurant in my semi-retirement; Yelp is reputed to slant the display of reviews one way or the other depending on how much the business spends on advertising. They only "slant" the reviews, which means that businesses with consistent (good or bad) reviews still come across that way, but most have mixed reviews and the slant can be bad for the business.
We have a Solar City installation, and it was great, and we're currently negotiating to expand it. That's a positive review.�
1/1/2015
guest Sorry for any snippiness.
I was asking for facts and figures as I think it would help discern whether this is a serious concern or noise.
How many shares does he own and how much do these exercised options represent of his holding?
80% 50% 5%, 1%?
That's a much more important piece of information.
Were these part of a timed sale?
That we see an insider selling shares isn't very helpful.
As far as "losses", SCTY is making 20 year contracts that pay off over time. There are often investments in infrastructure in heavy growth phases of a business.
SCTY buys a marketing firm Paramount, for $120M.
Then they buy ZEP, a quick install hardware company helping them "double throughput" for $158M.
Then buys SILEVO, solar panel technology (with tax package), from the State of NY for $350M.
32% US Market share (both MW and % of customers) and addresses less than two tenths of 1% penetration.
Regardless of whether the PPA or outright sales model is adopted, Tesla is in the driver's seat to be one of the largest producers and storers of renewable energy in the US.�
1/1/2015
guest How come this is important? Almost certainly these sales are his major source of income. And what make you think that he is in position to invest ANY money into SolarCity or any other company?
From what we know he could be very well just spending them now instead of waiting till he be 80yo retiree.�
1/1/2015
guest Guys, if you're not familiar with them read up on 10b5-1 plans. It's good corporate governance to have one and Rive filed his last year to make the sales now; it's sensible for him to diverse a little or maybe he's building a house or something, the point is that there's nothing ominous in the recent trades.
Federal Regs/SEC/10b5-1
Investopedia.com/terms/rule-10b5-1
Wikipedia.org/SEC_Rule_10b5-1
Now if the trading was happening without a 10b5-1 in place that would be a different story...�
1/1/2015
guest I don't really agree that since he is not breaking the law all is rosy. A CEO or insider can file his/her sales plans via 10b5-1 in accordance with the laws and still make millions when shareholders are left holding shares in a sinking ship. I think it requires more analysis than blindly accepting all is good because is was done by the books. CEOs and board members can and do get relieved of their positions by making out like bandits when shareholder don't see good returns. (Not saying that will happen with SCTY.)
And in the case of SCTY I sold at 72 because I felt that compared to their peers SCTY had popped and future growth was limited. Whereas TSLA or other Solar companies are at a fraction of the market cap they will eventually be awarded. I decided to realize my 350% gains in SCTY and plan to reinvest elsewhere. For the record I did not sell because of the insider selling, I've followed them closely since the IPO and happen to agree with Sleepyheads and think some others here are a bit too exuberant.�
1/1/2015
guest It's not about "not breaking the law"; Rive 10b5-1 was put in place last August. I've run public companies and there's not a CEO on earth who can predict his share price 9 months out; you just have to plan your personal finances the best you can and then commit to your plan.�
1/1/2015
guest I don't want to add to the snippiness of this thread since I'd rather be engaged in constructive dialogue. First, congrats on your SCTY gains.
Regarding other solar companies vs SCTY, SCTY in my opinion has the following advantages:
1. Stellar management - includes Elon Musk as Chairman and strategic advisor
2. Fastest growing mainstream solar company - growing at 100% per year in terms of installs, customers, personnel.
3. Most complete vertical integration of any solar company - from marketing, permitting, install, maintenance, mounting equipment, now panels, and eventually inverters. This allows SolarCity to continue to drive down costs (along with economies of scale) and offer an unique value proposition from which they can and are accruing good margin.
But I'm not going to knock other solar companies, as I've mentioned on this thread that there are some that I find as decent investments (though I don't hold any long-term positions).
All in all, solar is a massively growing industry and there are going to be multiple investment opportunities. I just haven't found a better opportunity than SCTY (but I advise SCTY holders to have a very long-term outlook, ie., 10-15 years).
ps., I have to admit, and I've said this before on this thread, that I'm a fan of CSIQ. I think they might have the best management out of the non-SCTY solar companies, and they've proven that they can grow their company in a smart way. I don't have a long-term position in CSIQ (currently), but I respect that company a lot.
Here's a link to CSIQ's latest investor presentation. It's notable that they're projecting revenue growth of 75% YOY (from $1.6 billion in 2013 to $2.7-2.9 billion in 2014). Impressive.�
1/1/2015
guest - - - Updated - - -
Fantastic! so how big is your solar system and how much savings do you realize on your monthly electricity bill? Also, what type of maintenance work does SCTY need to perform on your solar system? and how often?
?
- - - Updated - - -
?�
1/1/2015
guest We currently have a 6-year-old 3kW system. I can't remember what our electricity bill used to be, but we now pay a bit over $1k/year (SDG&E sends an account monthly but you only have to settle once a year) to support the house and two Teslas and a pool; I also work from home now so power usage has gone up. The pool has its own solar heater, but that's old and starting to leak, so we are looking to replace/move it, and put PV on that part of the roof for an additional 3.75kW. The estimates are that that will pretty much zero out our bill. Payback (after tax rebate) will be about 6-9 years.
As for maintenance, we had an inverter failure about a year into ownership. I got a call from Solar City's monitoring people, they organized a time to have it replaced... all perfectly simple. Nothing else needed except some tree trimming.�
1/1/2015
guest Thanks a lot! Your electricity bill is exceedingly low. I got a house+pool without any heater in Dallas, and my annual bill is more than $4K. So the ROI is really impressive. So how often do you need to wash the panels to get rid of dirt and dust and how much does it cost to hire some one to do it?�
1/1/2015
guest NigelM - I agree with you that 10b5-1 sales are nothing to worry about and good corporate governance. Heck, I just put half my money in GTAT, right after the CEO sold about 100,000 shares via a 10b5-1. But in the case of SCTY, I see something EXTREMELY WRONG with Lyndon Rives sale of 120,000 shares; let me connect the dots for you guys:
You guys remember last October when SCTY was trying to raise capital, and they couldn't get enough interest from people to buy the shares (not sure if the last part is true, but my understanding was that they couldn't get interest)? So SCTY, completely out of left field, decided to issue 2015 guidance in order to jack up the stock price to raise more capital. On top of that Elon Musk and Lyndon Rive agreed to buy 560,000 shares of SCTY as part of the capital raise to show the rest of the investment community that they have faith in SCTY. Well in the end the bought less than 400,000 shares, o/w Lyndon Rive bought 107,434 shares.
If what NigelM says is true that Lyndon Rive put his 10b5-1 plan in place last August (just a couple months before the capital raise) to sell 120,000 shares of SCTY (just 8 months after the huge "vote of confidence"
SCTY already diluted the heck out of shareholders by doubling share count over the past 2 years, and now we see that they are dishonest and misleading shareholders by playing these "vote of confidence" games. I am sure that Elon does have confidence in SCTY, and probably will not be selling his shares. But what Lyndon, the CEO, did is completely unethical and the guy is a joke in my book for trying to fool shareholders. The truth always comes out, and I am always happy to do the detective work to point out these jokesters.
Disclosure: I just recently cashed out my deep ITM SCTY J15 30/40 Bull Call Spread for 92% of max value (I wanted to hold to maturity, or at least Sep. for LTCG, but I needed to raise capital somehow to buy more GTAT on this illegally fabricated pullback by UBS, who had notes due July 10-15 that cost UBS a lot more money the higher GTAT's stock price was. This is another example on Wall St. how the big players, i.e. CEO's and investment banks, screw over the little guy, i.e. retail investor. But I digress). Therefore, I now do not have any SCTY positions, and absolutely do not have any short positions in the stock either. But I do hope that the stock keeps going up, because I will be looking for an entry point to short once it goes all bubbly again. At the same time, I will go long the stock if it crashes another 30%. I think that SCTY is a good trading vehicle. I actually think that the stock will be a lot higher 5-10 years from now, but fear that there is a 20%-30% chance that the business model will fail the shareholders, i.e. not deliver decent returns, and therefore I don't buy as a long-term investment due to huge perceived risks.
But the main reason I am not a fan of SCTY is because they are an unethical company as proven by this whole capital raising mockery they made out of shareholders, ripping off customers by pocketing the whole benefit of installing a solar system for themselves while the customer is left holding the bag on a lease in the form of depreciated home value due to solar lease (yes your house may lose as much as 10% in value due to solar lease, while owning a system can increase your property value by up to $25,000); note I am not a fan of SPWR (or any other company) leasing either. On top of that they screw over the taxpayers by jacking up the "appraised" system value price in order to maximize MACRS depreciation, so that Goldman Sachs can pay less in taxes and screw over the taxpayers (just what we need: an investment bank screwing over the taxpayers even more).
I am sorry, but SolarCity is a complete joke of a company to me! Extremely unethical in my book...
edit: jacking up the "appraised" solar system value price also means that SCTY is screwing the taxpayers over by pocketing 30% on this higher "appraised" value than the actual value of the system, which would be a much lower value; but that would mean less taxpayer dollars for SCTY to pocket for their own coffers, so that the executives can get their tens/hundreds of millions of dollars.
Also, make sure to read my hyperlink in the last paragraph about how solar leases can significantly lower the value of your home during resale, and how owning a system can actually increase the value of your home (I point I have been arguing here for over a year).
I am not a solar installer, and I have no positions in SCTY. Everything I write here is my own, unbiased, and honest opinion on this matter; and I understand that many people will disagree with me. That is what makes a market...�
1/1/2015
guest Laziness wins... they get washed once a year, when it rains... :-/�
1/1/2015
guest I'm my case that's daily lol�
1/1/2015
guest This do sounds like California
�
1/1/2015
guest If you live in Dallas, then you are in the Oncor TDSP service area. Oncor is offering a very generous rebate for installing solar panels right now (at least they were 3 months ago when I installed mine, and the program has been going on for at least a couple of years).
If you get a lease with SCTY, then they will pocket your 30% tax credit, they will take away your generous Oncor rebate, and you will be left holding the bag when you try to sell your house and have to lower your asking price by $10k - $20k just to get people interested in buying your home.
But ignoring the home resale part, I also live in ONCOR TDSP area and just installed a 7.7kW solar system on my roof and it only cost me $9k out of pocket. This will give me a cost of about 2.5c/kWh ($0.025/kWh). Whereas, if I went with a solar city lease, I would probably have to pay 3x-6x (300% to 600%) more per kWh.
Do not lease a system from nobody, especially since Oncor offers very generous rebates. Find a reputable local installer that will do a solar system for around $3/W and then get your 30% tax credit and an Oncor rebate (mine was over $1/W) to bring your system cost down to about $1.30/W out of pocket.
BTW, ggr lives in San Diego, where the temperature is 75* year round and is nowhere near comparable to Texas. Get the biggest system that you can fit on your roof while Oncor is still offering these generous rebates. That way you will have about a 6 year payback period, and get to keep your solar system 30+ years. With a SCTY lease, you will have a 12-13 year payback period and then have to return the system to SCTY at the 20 year mark.
It is a no-brainer to buy in your situation if you are considering solar. Leasing a system in Dallas (with Oncor's generous solar rebate) is the worst financial decision you can make (unless you get an extremely good offer, such as $0.03/kWh on pre-paid lease or $0.06/kWh on a 20-year no money down lease).�
1/1/2015
guest I worked for three years as a "Solar Rebate Inspector" at the Los Angeles Department of Water and Power. In this capacity I was privy to both system financial data as well as technical data. I am in complete agreement with Sleepy regarding the advantages of purchasing vs leasing. Shop prudently and you will miles ahead for years to come.
I am vested in SolarCity because of their accomplished sales and marketing organization. Most residential solar customers will not burn the calories to ferret out the best terms and deals. That said, SolarCity provides an incredible turnkey solution. They simply reduce your monthly power bill.
- - - Updated - - -
Just a couple thoughts on panel orientation. The ideal stationary (static) panel installation is facing due South, with the array pitched roughly at the latitude of the installation.
LADWP has used a couple variances. First, they consider everything from due South to due West as optimal, this favors afternoon production. Secondly, they consider everything from a horizontal pitch to installation latitude as optimal, this favors summer production. The idea being to produce the greatest amount of energy at peak loads. We all turn our air conditioning units on in the summer afternoons.
The devil in in the details is your utilitity company's "Time of Use" rate plan. The installation will affect production year after year. Plan your production to match the highest price power.�
1/1/2015
guest
Wow and well said.�
1/1/2015
guest So since you hate leasing so much, what would you suggest someone like me to do? I dont have $9,000 just sitting around, but could get on solar immediately from someone like SolarCity. So do you want more people to move to sustainable energy or not?�
1/1/2015
guest *note This was not a complete quote
I don't agree that it is a no brainer. Depending on someone's situation I would argue there could be much better uses for that 9k depending on the person. For instance possibly buying 9k worth of Tesla Stock. Over the life time of the solar panels the stock could arguably go to 2000 a share which I think would be better than any additional savings you got from buying Solar vs Leasing.
I think for many people buying solar might be the best option but I think Lease will be the way to go for many other people.�
1/1/2015
guest Sleepy - I'm not sure if I understand what you're trying to get at. Would love a clarification.
Here are all the Lyndon Rive stock transactions I could find from the SEC filings since IPO:
7/3/14 - Lyndon Rive exercises 12982 shares for $1.62 and sells those shares and 30293 more shares for an avg of $71.57. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013)
6/27/14 Lyndon Rive exercises 76725 shares for $1.62 and sells those shares for an avg of $70.75. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)
5/6/14 Lyndon Rive exercises 89,580 shares for $1.62 and sells those shares and 30,420 more shares for an avg of $54.15. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)
4/19/14 Lyndon Rive sells 160,000 shares for an avg of $52.25. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)
10/21/13 Lyndon Rive acquires 107,434 shares for $46.54/share during SCTY secondary offering.
6/11/13 Lyndon Rive sold 220,743 shares at $14/share. (As previously disclosed in the Issuer's Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 30, 2013, and in the Issuer's final prospectus dated December 12, 2012, filed with the SEC pursuant to Rule 424(b), on December 30, 2011, the reporting person granted an option to 137 Ventures, L.P. to purchase 330,520 shares of reporting person's common stock at $14 per share. On June 11, 2013, 137 Ventures, L.P. exercised such option on a cashless basis, resulting in the reporting person transferring 220,743 shares to 137 Ventures, L.P. and withholding 109,777 shares to cover the exercise price.)
Note: From the 12/12/12 sec filing, Lyndon Rive had about 3 million shares (1,000,000 personally and 1,952,378 in a family trust). In addition to these 3 million shares, he has 2 million more shares that he could own via options (presumably milestone/achievement based). 1,000,000 of those shares have a $1.62 strike price (10 year period from 2009-2019), and the other 1,000,000 has a strike price of $5.07 (2011-2021 period).
In context, here's what I'm seeing:
1. Lyndon Rive had 3 million shares at IPO and an additional 2 million shares in options.
2. Lyndon Rive sold 220,000 shares in June 2013, apparently Lyndon Rive sold some options on Dec 2011 to a company and they exercised them.
3. On August 30, 2013, Lyndon Rive submits a 10b5-1 to sell some shares.
4. On October 21, 2013, Lyndon Rive buys a bit more than 100,000 shares in SCTY's secondary offering.
5. From April to July 2014, according to the 10b5-1 plan he sells about 400,000 shares. (There could be more shares he's selling in coming months, I haven't seen the 10b5-1 plan.)
Lyndon Rives still has 2.6 million shares as well as a possible 1.8 million options (until 2021).
It's also likely that SolarCity will give him (and other executives) more incentive plans in coming years as well. So he'll likely end up with more shares than he currently has.
If things are strange with insiders selling, then I'm definitely a person that would point that out. (see Short-Term TSLA Price Movements - 2013 - Page 376 and Short-Term TSLA Price Movements - 2013 - Page 377.)
But in this case, it looks like a normal selling of a small portion (ie., 10%) of Lyndon Rives holdings. To sell 300,000 shares (since he bought 100k and sold 400k shares) at let's say $50/share is just $15 million. After taxes, it's probably under $10 million. Probably just enough to buy a nice house in the Bay Area.�
1/1/2015
guest l
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looks like little maintenance work is needed in many parts of CA and FL. This is great!�
1/1/2015
guest Thanks a lot, I'm indeed in the Oncor service area. A few questions for you:
1. Any idea why Oncor is so generous?
2. At cost of around $3/W?who is the manufacturer of your panels?
3. how often do you need to wash the panels?
4. Any other maintenance so far?�
1/1/2015
guest Answer: Use common sense!!!
I really can't believe that this question keeps popping up, and I apologize if my response comes off as rude, since I am annoyed having to answer this same question every month. The reason I post all of this stuff is because I am trying to help you guys make sound financial decisions, so that you can save yourself tens of thousands of dollars. I have no other agenda behind this stuff. Seriously people, this is not hard. Every time I bring up the topic how much better it is to buy vs. lease, I always get this exact same annoying question. I have already answered it at least a handful of times in this thread.
What do you do when your car breaks down and you don't have $20k to buy a new one? What do you do when your AC/furnace breaks down and you don't have $8k to buy a new one?
The answer is simple: you get a loan!
Step 1: Go ahead and google "solar loans" or "credit union solar loans" (or something similar to find CU's or banks in your area that give out these loans). You can find loans for up to $60,000 (or more) and 4%-7% interest rates. My loan was for $21k at a 3% interest rate with $0 down:
Step 2: Apply for loan
Step 3: install solar system
Step 4: Sign up with Green Mountain Energy that offers net metering.
Step 5: Make payments on loan
It really isn't that hard and I feel like there is a lot of willfully ignorant SCTY investors here pretending that if you don't have money to buy a solar system that your only option is to lease. Banks are one by one finding out that solar is an extremely safe investment and there are more new loan products coming out every single day. SPWR for example just announced a partnership with Admirals Bank for loans up to $60k. But if you go with a local installer then get a loan at a credit union to pay off the solar system.
The only caveat is that you have to pay the full price of the system, and then wait a few months for your rebate as well as tax credit. But this is not a problem:
E.g. For someone who lives in the Oncor TDSP area (which is what this discussion is about): Say you want an 7.7kW (same size as mine) solar system at $3/W = $23,000
1. Take out a loan for $23,000 at 5% interest rate over 5 years.
2. Now you have a solar system on your roof and a $434 monthly payment
3. You will get your $8,000+ rebate check by the time your second (or 3rd) payment is due
4. You will get your $5k ((23k-8k)*30%) tax credit when you prepare taxes in less than 12 months.
Side note: if you don't have tax liability to take advantage of tax credit then you most likely can't afford a home anyway (unless retired or some other uncommon circumstances). If you don't have good credit to qualify for a solar loan, then you most likely will not be able to qualify for a solar lease either.
So you have a $23,000 loan and $13,000 cash back. You can use that $13k to pay down your loan principal and you are left with a $10k loan to pay off over 5 years, which knocks your payment down to $188/month. After 5 years, your loan is paid off and you are free and clear receiving free electricity for the next 20-30 years (might possibly need inverter replacement, but those have 10 year warranties and should last).
A 7.7kW system here in Texas produces on average 1000kWh/month, so you will be saving about $120/month on electricity. So effectively you have a $68 ($188-$120) monthly loan payment for 5 years. And then you will be saving $120/month (or more due to most likely higher electricity costs in the future) for the following 20 years.
Buying a system will cost you $68*60 = $4,080 over the first 5 years and then save you $28,800 over the next 20 years for a total savings of $24,000 over the life of the system. Leasing a similar system from SCTY might save you $30/month on electricity, which over 25 years would save you $9,000.
So you decide, do you want to save $24,000 or $9,000?
And before I get the next annoying question about "what if you sell your house...?" I recommend reading this Bloomberg article from last month:
Rooftop Solar Leases Scaring Buyers When Homeowners Sell
http://www.bloomberg.com/news/2014-06-23/rooftop-solar-leases-scaring-buyers-when-homeowners-sell.html
If you lease a solar system you might have to lower your home resale value by $15,000. But if you own a solar system then it could increase your home resale value by up to $25,000. That is a $40,000 difference!!!
This why I always say that SolarCity's business model is built on preying on the uneducated customers. If people knew everything I said here then the lease model would not be so successful. I understand that people will most likely remain uneducated for a long time and most likely SCTY will be successful for many years to come. But I am not willing to bet my money on that.
The reason I make all of these posts is because I am trying to help my friends here at TMC make smart financial decisions when going solar. A lot of people here at TMC make great contributions and this is my way of giving back.
If you can find a way to buy a solar system then please do not lease one. It can give you huge headaches and cause big losses when selling your house, and it won't save you anywhere near as much money as buying a solar system outright...�
1/1/2015
guest 1. I really don't know the reason for this, maybe they had some kind of deal signed that they had to earmark dollars for solar systems. I think that they set aside something like $8m for this program last year, and I really can't believe that it hasn't been exhausted (it is possible that they renew the program every year, I am not sure; what I do know is that I got a rebate check for more than $8,000 for a 7.68kW system or more than $1/W).
It is very possible that this is simply good business. In Texas the high cap price for electricity is going up and will be $9,000/MWh very shortly and I heard they are trying to raise it to $14,000/MWh. My solar system offsets peak load perfectly, which means less investment necessary in transmission lines and other power plants. So if my system is producing 6kW's during a time when prices are at $14,000/MWh or $14/kWh, then I am saving that company $84/h. You get a couple hundred hours like this over the next few years and I saved them over $2,000. Then at other times when electricity is less expensive I am still saving them money at a lower rate.
IMO, the $8k that they gave me for this solar system will create a lot more value than $8,000 to Oncor. It truly is a win-win situation here.
2. I actually paid $2.50/W for a Sunpower solar system (best that money can buy). I got a great deal since a family member of mine works there and I got "scratch and dent" panels that have no downside at all (just aesthetic, but you can't see them anyway; I inspected them before they went up and wouldn't have known they were scratch and dent if I hadn't been told).
I would say that you can't go wrong with any tier 1 Chinese solar panel supplier. They all buy cells from Taiwan to ship to US to circumvent 2012 tariff scheme, so they are all similar in quality; and the Chinese do make high quality panels). With this new round of tariffs, the Chinese might start shipping using home made cells. In this case I would recommend using JA Solar (JASO) panels, since it appears that they put the most effort and pride into quality compared to peers. But in the end, I think that all should be similar. I am not an expert in this field, but a solar installer here on TMC said that you should stick to the tier 1 solar panel producers and you will be fine.
3. I don't wash my panels at all and let the rain wash them. It doesn't rain here much recently so I probably need to wash them. But all you do is hose them down and voila. I once had back to back 0% cloud cover days and did a test (since it hadn't rained for a month and the panels looked dusty): On day 2 I hosed them down and got about 5% more production. So you may want to hose them down from time to time if it doesn't rain, but no washing is really necessary (maybe once every 3-5 years). Note: it is possible that I get better production due to cooling the panels with cold water as much as washing off the dust. I really don't know, but did get 5% more for sure on virtually exactly similar days with 0% cloud cover.
4. No maintenance on solar is necessary, and that is why you don't need to lease a system to get the benefit of no additional cost for service and maintenance. I have only had my system for 4 months, but a solar installer here on TMC has installed many systems over the years and never had to perform any maintenance on any systems. That speaks louder than any one persons testimony. He said he only got called out once because of a faulty inverter, but that was the manufacturers fault for supplying a bad inverter. He replaced it with a new one and that is it.
The only problem with buying over leasing is if the inverter breaks down you have to pay for replacement. But you get a 10 year warranty and these things go for $0.15 - $0.25/W today, so for a 5kW system it is only $1000 to replace if necessary, and these things might get cheaper in the future too.
I think that if you shop around, you can get a system installed for $3/W minus $1/W rebate minus $0.60/W tax credit = $1.40/W out of pocket cost. I got a flyer from some random solar installer called longhorn solar and they were advertising prices of ~$3/W. But go to the SEIA or other solar websites to find reputable and accredited installers. I can't remember what the other website/organization was called.
I can get you a discounted deal on a SunPower solar system for $4.40/W installed. So after rebate and tax credit that is about $2.30/W out of pocket. But you can get a solar system for $3/W elsewhere from a reputable dealer then it probably isn't worth paying 80% more for a SPWR system. SunPower makes by far the best systems and if you want to build a forever home that could withstand a zombie a apocalypse and keep your AC running, then definitely go with SPWR (and buy a bunch of backup inverters). I recommend SPWR even if you have to pay 30% or more for it, since you will get your money back over time due to lower degradation, better performance, and most likely significantly longer useful life). But it is hard to justify a SPWR system at $4.40 vs. $3 for Chinese if you are not planning in living in that home for 30+ years.
Good luck with your research and let me know if you have any other questions.
Cheers,
sleepyhead.
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That's why you take out a loan to pay for the system if you are worried about applying your cash elsewhere.
You may think that lease is the way to go for many people, but I know for sure that buying a solar system is by far the best way to go for the vast majority of people. Heck, even a solar inspector chimed in on the other page agreeing that buying is the way to go if you are willing to put in some legwork: a few hours of legwork to save thousands or tens of thousands of dollars.�
1/1/2015
guest If that is all that you are "seeing" then you have been fooled by Lyndon Rive as well. These guys are purposely misleading shareholders and I may have to write an article about it. I don't have time right now to respond to your post, but I have done the research and they are obviously screwing around here; probably hoping that nobody will notice how they tried to "trick" the shareholders into believing that Lyndon Rive is buying more shares in the company as a "vote of confidence."
Thanks for your post, this story is getting better every minute for me. On second thought I have to do a little more research on this subject, because there is still a couple things that I need to check that might make the story even better.
Stay tuned...
Edit: changed Give to Rive. Thanks autocorrect�
1/1/2015
guest I agree with all the solar analysis. I own my system and would absolutely recommend ownership to anyone looking to go solar.
However the note about GTAT interested me. Mind expanding on it in the "Other Investments" thread?�
1/1/2015
guest I had a chance to go back and read your other post again. It appears that your claiming that Lyndon Rive was insincere(?) in his purchase of 100k shares in last October's secondary offering and you go on to say that he's "purposely misleading shareholders". I'm assuming you're claiming that he's trying to boost stock price for the secondary by purchasing 100k shares while knowing that he'll be dumping 400k shares in 6-8 months (with the 10b5-1 already filed in August 2013).
It seems like you're reading into it a lot. Lyndon Rive is free to buy shares and to sell shares as he wants, as long as he follows SEC regulations which he did. You might have interpreted his October secondary purchase of 100k shares as a big "vote of confidence" that wasn't sincere because he knew he was going to sell 400k shares the following year. But it could also be that he instituted his 10b5-1 plan with the idea of divesting 10-15% or so of his holdings in 2014. But when the secondary offering came along, he thought it was a good deal to buy some more shares. This is totally legal and understandable. Could have there been other motives as well, like showing support for the company and helping the secondary? Sure. But I don't think it's stock price manipulation or deceiving shareholders, since his later selling of stock (ie., this year) is done publicly. And if he thought him buying 100k shares was going to boost the stock price, then surely he would think that selling 400k shares later would tank the stock price (which would not be good since they might need to raise more money). The reality is he's probably not thinking on those lines. A few hundreds thousand shares here or there isn't a significant number compared to his total holdings.
On another note, I've seen Elon Musk if he thinks the stock price is low (ie., the company is undervalued) he will go in and buy more shares at the secondary. Elon Musk doesn't actually have the money, as practically all his money is vested in TSLA, SCTY and SpaceX. But he's using a line of credit from Goldman Sachs to make purchases like for his house and other things. And he uses that line of credit (kind of like margin) to buy more shares of TSLA (ie., at $92/share in May 2013), and at SCTY's IPO and at SCTY's Oct 2013 secondary offering. Elon thinks the stock is cheap and he buys more stock, even on margin. Now Elon is unique in that he's okay with holding hundreds of millions of dollars on margin, but most people are not like that. So, in the case of Lyndon Rive, he's more of a normal human being (compared to Elon Musk) and he's going to buy and sell stock and that's fine. As long as he follows SEC guidelines, I'm fine.�
1/1/2015
guest I can see the points from both sides of the argument and the questions sleepy raises could have very simple answers; as an ex-CEO I know how difficult it is to juggle personal financial planning with laws and regulations. (FTR: I'm not in SCTY right now just because I'm uncomfortable with nailing down what the true potential really is, and I'm personally not a fan of their leasing model).
On a slightly different note, SCTY missed an opportunity here:
With Leilani's connections to Tesla and her driving a Model S etc...�
1/1/2015
guest I get what you are saying, short-term work for long-term gain. But someone like me doesn't have an extra $434 a month until 3 and 4 kick in. I guess we would have to save that much money first and then do it this way, because the only debt my wife and I have is the house. We do the Dave Ramsey thing and try to not use debt as a way to have things in our lives. Houses and cars are the only thing loans are used for, but maybe solar panels will have to be an add on to the list.
Part of getting panels is to save money, but it's also to get onto sustainable energy. So if others out there can use a company like Solarcity to automatically get it with a lower price on their electricity bills, then that's great to me. I thought there was talk that Solarcity could eventually one day become like a utility company, where they are supplying the equipment, and you pay for the energy, so owning doesn't really matter. It's more about getting people to switch. I don't know....I see it both ways...�
1/1/2015
guest here is some bad news for my man sleepyhead.
"The world trading body ruled that the U.S. improperly imposed duties on Chinese steel and solar products. "
http://news.investors.com/business/071414-708616-us-steel-and-solar-firms-impacted-by-elimination-of-tariff-on-chinese-products.htm�
1/1/2015
guest What's with the personal attacks again?
And you couldn't be more wrong. This is really good news for me, so I have no idea what you are talking about.
Go look at the charts: as soon as the news came out JASO went vertical and so did my smaller positions in JKS, SOL, and TSL. My only other solar positions in CSIQ and SPWR finished in the green as well. As I wrote over the weekend, I sold off my SCTY deep ITM bull call spreads for 92% of max payout and I now have no SCTY positions at all.
Now can we stop with the personal attacks! Please?�
1/1/2015
guest Everyone play nice please or we'll go back to zero tolerance. Thanks.�
1/1/2015
guest I've seen this mentioned before...and often wondered: with his salary very low, and claiming he won't sell TSLA shares, and cannot sell SpaceX shares, does that mean the only "income" Elon gets is from selling SCTY shares? He has to pay back this line of credit somehow.�
1/1/2015
guest My previous post on this topic was incomplete and there is more to this story, but I just don't have time to spare to research this.
That said, your response is very reasonable if you assume that the part I bolded is correct. But it isn't correct...
Here is the timeline of events:
June 18, 2013: SCTY announces secondary offering. In order to prevent the stock from tanking, as a vote of confidence Elon Musk and Lyndon Rive announce they will purchase up to 560,000 shares.
http://www.streetinsider.com/Corporate+News/SolarCity+(SCTY)+Files+2.8M+Common+Secondary%3B+Elon+Musk+Plans+Purchase/8425605.html
Stock tanks anyway over the next few months...
Aug 30, 2013: Lyndon Rive submits 10b5-1 plan (that "no one" reads) to sell 400,000 shares over then next 6-8 months (possibly a lot more shares than 400,000, I really don't know if there will be more sales based on that filing; just going off of what DaveT posted, and I know I can trust his research).
Oct 16, 2013: SCTY stock is still weak so they announce 2015 guidance outside of normal announcement time to jack up the price of the stock, so they can issue shares 5 days later.
Oct 21, 2013: SCTY raises capital and Lyndon and Elon purchase 400,000 shares, of which Lyndon buys 107,434 shares.
Over the next half year, Lyndon Rive unloads 400,000 shares...
I hope that with additional detail you now see that Lyndon Rive, CEO of SolarCity, is purposely misleading shareholders that he is buying shares as a vote of confidence, when in fact he was planning on dumping 4x the amount of shares that he actually purchased.
I see this as extremely unethical and they are screwing around with shareholders. All you guys who own SCTY, should be asking them a lot more questions...
Even though I have no skin in this game, this whole situation still bothers me immensely. How can you trust a CEO when he makes a mockery out of shareholders like this?�
1/1/2015
guest So you're telling me Elon and his cousin are the best con artists we've ever seen? Slap me silly. Pull out your TSLA shares too then....come on man. If this ever was true and brought to attention, this would sink TSLA and the Tesla name. You think Elon needs and wants that attention?�
1/1/2015
guest Thanks for explaining the timeline more. Now that you mention it, I do recall that it did take quite a while between when they announced the secondary (June 2013) and when it closed (Oct 2013). And so Lyndon Rive first decides to buy 100k or so shares in the SCTY offering (June 2013), then files his 10b5-1 plan in August to sell 400k (at least) shares 8-10 month later, and then closes his 100k purchase in the secondary in October.
While it does seem a bit strange, I'm hesitant to jump to conclusions because we don't know the whole story. And there could be some financial planner helping Lyndon with his personal/family finances. Maybe the financial planner was pushing Lyndon for the longest time (i.e., since IPO) to divest some of his SCTY shares (ie., 10-15%) and Lyndon finally agreed to it (maybe in Spring 2013 but he filed the 10b5-1 later). And maybe he wanted to buy 100k more shares to support the company's secondary, but also because there's some kind of reason that we're not aware of. Or it could have been he decided to buy 100k shares in June, then his financial planner went bezerk on him and told him he was crazy and that he needs to be divesting, and then Lyndon Rive's wife also disagreed with the 100k purchase and wanted to divest to buy a house, etc, etc, etc. So, it's too late for him to go back and cancel his 100k share purchase in the secondary, so he decides to sell 400k shares by filing his 10b5-1 plan to sell in April-June 2014.
Is it strange? Yes, somewhat. Is it clearly a misleading of shareholders? I don't think it's that clear. It somewhat of a grey area because we don't have the full story. And he didn't break any SEC rules.
Also, in the bigger picture Elon's purchase is much bigger than Lyndon's. And Elon is the company's largest shareholder as well. And to my knowledge, he hasn't sold any shares yet. If anything, Lyndon Rive's confusing purchase/selling of SCTY shares is dwarfed by Elon's monster stock position in SCTY and him borrowing money to buy even more shares.
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Yes, somehow Elon will need to pay back his line of credit with Goldman (and maybe others). He could either sell shares of SCTY, or SpaceX, or TSLA (which he said he'd be the last one out). Or perhaps he has some other investments that strike it big (I know he's made several investments in some startups but probably not very large investments, so this probably won't be enough to pay off his debt). Or he could wait until his companies start issuing dividends (ie., 10-15 years later) and use those dividends to pay down and eventually pay off his debt.
Elon's situation is quite fascinating to me. It's really interesting that he's chosen to use a line of credit to not only fund his lifestyle (ie., buy house, etc) but also to buy more stock in his companies. He's really gone all-in, and then some. Most people in his position would be divesting and diversifying, but he's putting more in.
I personally lean on the following scenario... Elon is thinking of keeping his TSLA, SpaceX and SCTY shares "forever" (at least until he dies and passes them on) and doesn't want to sell a single share. He's content with a large line of credit in the hundreds of millions of dollars range to fund his lifestyle and even investing more in his companies. He figures that all his companies will eventually pay handsome dividends and he'll use those to pay off his debt. He doesn't care much, if at all, about divesting or diversification into other assets. He'd be happy of all the assets he ever had were shares of TSLA, SpaceX, and SCTY. He did buy a house though but it wasn't necessarily because he really wanted to buy a house but he wanted to remodel and such and couldn't do that as a renter. He did buy the house across the street from his house but that was more for security purposes. So, he'll buy stuff but his real/true assets/investments are TSLA, SpaceX, and SCTY. And he doesn't intend on selling ever.
Now, this "scenario" might not be true. We do know that his intention with TSLA is to be the "last one out" (meaning never sell his shares unless the company is sold). We don't know what his intentions are for SpaceX or SCTY shares. But it's an interesting thing to ponder.
And the day if/when he starts to sell SCTY shares, my theory will be destroyed.�
1/1/2015
guest Dave spacex is not a listed company. We do not know his salary from that venture. Another potential source of income. I have known people who inherited their wealth and are scared of it going away. They have no confidence in their ability to replace it. He has had 5 ventures all paying off well. I doubt he has any fear of losing it, he knows he can make it again�
1/1/2015
guest Yes true that he could be getting a salary from SpaceX, but I doubt it's much since they run SpaceX as a fairly tight ship regarding expenses. Also, a few hundred thousand a year from a salary is not going to put a dent in Elon's total debt, nor is it going to fund his lifestyle either (ie., private jet, ex-wife/child support, etc).
I agree Elon's not afraid of losing it all, since he knows how to create value. I just find it interesting that he'd go into debt to buy more shares of his companies. It strikes me as fairly uncommon.�
1/1/2015
guest Just FYI, as of Feb 2014 (according to Tesla's annual report) Elon has a $275 million line of credit from Goldman Sachs (a large portion used to buy TSLA and SCTY stock during secondary offerings) and a $25 million loan from Morgan Stanley.�
1/1/2015
guest Based on my own situation, which is...well, not quite the size of Mr Musk's!.....a $275mm line of credit at Goldman is going to run him LIBOR + ABOUT 100bps, or 1.2%, more or less. So as long as we're conjecturing, let's conjecture what gross salary he would need to service, say, $200mm of that: about $2.4mm. Less of a salary - at that borrowing level - and he's falling a bit behind all the time.
Now, I really think that neither he, Goldman, MStanley nor we should worry much over this situation. On the other hand, someone I've known since we were lads put his full faith and credit behind loans to one of his companies, securing it with $1bn of his own fortune. However, when things turned nasty, and the stock price plummeted, his own $30bn turned to ashes, he couldn't make good on his promise, creditors seized what was left...and Eike Batista became known as losing the largest amount of money a single person has incurred in history.�
1/1/2015
guest Are you getting a line of credit for 1.2%? If so, that's amazing. I didn't know that was possible.
That's one amazing story. I had to look up his wiki page to read more about it, Eike Batista - Wikipedia, the free encyclopedia .�
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