Thứ Sáu, 30 tháng 9, 2016

SolarCity (SCTY) part 260

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    Solar City is being added to the NASDAQ Q-50 on Monday. Remember how Solar City acted prior to being added to the Russell 2000. There was a brief pause and decline the week before the event, followed by the stock rallying over 100 percent in the weeks that followed. Do funds that track an index and funds that own a stock that is about to be added to be added to an index usually pause the week before the event occurs?

    Update : Why wasn't Solar City added in March? According to the first link, Solar City was supposed to be added in March.

    Quarterly Changes to the NASDAQ Q-50 Index (NASDAQ:NDAQ)

    Quarterly Changes to the NASDAQ Q-50 Index - NASDAQ.com

    Could this explain why the stock fell after reaching $80? At an $8 Billion market cap, Solar City was among the largest market cap holding for many of the larger indexes that own it.

    Holdings | SolarCity Corporation (SCTY) | ETF Analysis and Performance
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    Nice. Much appreciated. :) I seriously can't wait to see what's these two companies do in the next ten years.
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    I don't understand the thermostat sized comment...an object that small will not have adequate energy storage potential. It would even need to surpass the energy density of gasoline to have any measurable amount of energy storage on a home consumption scale.
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    Inside those "thermostat boxes" would have be some whallopy-gallopy capacitors, indeedy!
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    Has there been any time frame given on when they will build this panel manufacturing plant an order of magnitude larger than the current plants? I really need to get back into SCTY before that happens. I liked to see the recent press release about the commercial mounting hardware. I love to see the R&D ramp up in SCTY.
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    No. They need the grid. They also believe electricity consumption will increase so utilities will still sell a lot of energy.
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    Admin note: As a reminder, please respect copyrights and don't copy and paste entire articles. Link to the original article and perhaps just quote the intro or whatever relevant part. Some posts above were edited accordingly.

    Thanks! :)
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    Vivint Solar IPO




    Vivint Solar expected its IPO to be priced between $16 and $18 per share, valuing it at about $1.9b billion at the top end of the price range.


    		Market CapMarket ShareRetained VauleRetained Vaule per wattInstallation Cost
    Vivint Solar$1.9B 9%$309.9M$2.39didn't say, seems lower
    SolarCity$6.06B 30%$1800M$1.72$2.29/watt
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    What's the rub on this company. I know they are #2 on installs right behind SolarCity. Is it worth getting into? I got into SC at $10 right on the IPO, wondering if this company is a solid player in the industry....
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    I repeat the final paragraph of the post in which I initiated this thread:

    "Eventually that thread was hijacked for the discussion of other solar companies and alternative energy in general. SolarCity got lost in the noise. Now that SCTY has fallen 30% this month, I'm resurrecting a purely SCTY thread. Other alternative energy companies should only be mentioned in the context of how they might affect SolarCity. Current or potential SCTY shareholders are invited to participate."

    There is another thread in this forum for more general discussion of Solar and other alternative energy companies. It was originally a SolarCity thread but got hijacked and was renamed: Alternative Energy Investor Discussions
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    well... can we at least allow SCTY's direct competitor to be discussed here?


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    As long as that pertains to how it will affect SolarCity and its shareholders. Otherwise, this thread is doomed to be hijacked in the manner of the first SolarCity thread whose title had to be changed to "Alternative Energy Investor Discussions". It would be appreciated if discussions solely about Vivint Solar be posted in that other thread. Otherwise we'll again have to go through the process of starting up a new solely SolarCity thread for SolarCity shareholders and prospective investors. Thank you in advance for understanding and cooperating.
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    I am curious, respect curt but wonder why he gets to choose what is discussed? Originator of thread does not control content.
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    I understand. However, I hope that others understand the intent of this thread and why it was created to replace a previous SolarCity thread that had been hijacked. Otherwise, chaos reigns. As I did this spring regarding other attempts to hijack this newer thread, I have again asked a moderator to intervene. It was the moderator who then moved non-SolarCity posts to the older thread which he had renamed. That other thread still exists for the discussion of other solar companies.
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    I understand and get it. I was just really wanting someone who had read about them to give a crash course in basically one post of whether or not to invest in them.....I've seen the name for along time, but never studied them. Would be nice to spread the eggs in the basket.....but I agree, I want this thread to be focused on SC as well because I have a lot of money tied to it.
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    That's understandable; you're not the one who started posting about Vivant Solar and were simply responding. However, I suspect you may get a good answer to your question, if posted in the other much more heavily frequented thread: Alternative Energy Investor Discussions
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    because he is willing to put in the extra time needed to be a moderator. I thank them for what is normally a thankless job.
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    I have been out of SCTY for awhile but now seems like a great time to get back in. I am going to be looking at some LEAPS tomorrow.


    Key Strengths that have brought me back to SCTY (I have always believed in them but at some point on a huge pullback from TSLA I dumped all other securities into TSLA.

    -The rate at which they are adding retained value

    -The financing company they bought that included the creator of Prosper coming to work for SCTY.

    -Their plans to build a Giga Factory for High Efficiency panels.

    -I believe the money they are pouring into R&D will continue to separate them from the pack.

    -The rate at which they are adding retained value !
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    Falling below previous support... could this be the start of a correction coming?

    I have been waiting for a reentry since I sold a few months ago.
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    I bought a few SCTY calls and leaps today. Seemed like a good time to get back in with everyone distracted with BABA. Hoping for a good week for SCTY next week!
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    Money being withdrawn from momentum stocks to buy the BABA IPO may have pressured SCTY this week. An upcoming IPO from another solar company might also affect SCTY. I'm waiting for that to pass before considering reentry into SCTY.
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    Thanks for the heads up on the solar IPO Curt. I take it your referring to Vivint Solar Inc.? Is it possible that Vivint Solar could boost SCTY by bringing attention to the solar stocks? I don't see people selling SCTY to buy this new solar stock.
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    You're welcome, Chris. Yes, that's the IPO to which I was referring. You may be right about attention being helpful. However, I remain cautious due to the possibility that some people may want to diversify their solar holdings by selling some SCTY to buy the IPO. Then again, they may not. I don't believe a firm date has been set for the IPO, but it should be soon. We'll learn how investors react before long.
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    Curt, I found this article that talks a little about Vivint Solar and Solar City. I posted the link just because it talks about how Solar City has a 30% market share and Vivint Solar only has about 9%. Vivint Solar will be valued around 2 billion where Solar City is valued around 6 billion. So to me it seems Solar City is still a better buy at a 6 billion Valuation. The Blackstone Group - Vivint Solar IPO: A Potential Green Triple-Play? | Benzinga.
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    I think SCTY should Buy or merge with VSLR.
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    SCTY Jan2017 LEAPS are available now - not sure when they started but figured I would pass it along.
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    Man does SCTY look tempting at these prices...I'm thinking about it.
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    I recently went long on some Jan 2017 140's and added some Jan 2017 120's today. I was excited to see SCTY more or less hold the line at the 200 day. With SCTY adding 500million in retained value per quarter (and increasing quickly) I think it is a very attractive proposition at these levels. As a TSLA permabull I am even considering transferring some of my TSLA calls over to SCTY.

    - - - Updated - - -

    Why do you feel this way? I am not sure what that would bring to the table for SCTY? not the mounting hardware :)
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    I think SCTY would benefit due to:
    1. Knocking out #2 in market share, (9% + SCTY 30%=39). More exponential growth for SCTY.
    2. Decent Retained Value $309.9M.
    3. More reasons to serve customer Alarm, Smart Home, etc. SCTY does Home Energy Audits.
    4. 850,000 Customers they have only penetrated 2.5% of that amount with 21,921 customers w/#3 above. Here is a good article:
    All The Numbers Of The Vivint IPO You Need To Know | SolarWakeup.com

    I could be wrong as I'm not a businessman.

    BTW Thanks for answering my first post here ever! And I would like to thank all of you for posting here and teaching me so much! Much respect to you all! I got into SCTY and TSLA with my retirement IRA because of positive comments from Sal D., breaking through the Massive amount FUD on Seeking Alpha. I can't believe it's even legal to operate that sight!
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    the latest upgrade w/ a PT $95 from Canaccord.
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    Well, Flux - neither any press release or blog from Solar City, as of this afternoon, nor ANY reference in that article other than the first paragraph, makes use of the giga-word. I looked it up just to make sure that it was indeed either ann over-enthusiastic reporter and/or headline writer who snagged that soon-to-be-waaaaay-overused term:mad:

    But, as far as the development of a Very Large factory for Silevo/Solar City in the Buffalo area, yes, that has been discussed over the past several months.
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    Indeed, the story is three months old, but the New York governor put out a press release today and apparently thought the term Gigafactory is cool and applicable. Here's a story from June: SolarCity to build factory in New York - Jun. 17, 2014

    Of more immediate concern, this notice of a half billion dollar convertible note offering came out after the market close and may have caused some jitters in the after hours:
    SolarCity Launches $500 Million Convertible Senior Notes Offering (NASDAQ:SCTY)
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    I would love to know what the expected output is? Elon had mentioned 1GW in the Silevo call, but I did not see that mentioned in any of the articles today about it? Anyone know anything on this?
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    Huh. 5 billion dollar plant. Funny same figure as tesla giga factory. Are these realtime estimates or pulled from the air. I find it hard to think each one would have the same estimate. Remarkable coincidence
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    The real figure is 750 million. The 5 billion includes all payroll and other things over the next 10 years.

    Edit: seem to be conflicting news reports and now I can not find that article I had read. I sure wish I could get a video of this event.
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    Indeed - it will be interesting to see how the market responds to this convertible note offering. It's not dilution so that is good.

    What are the risks associated with this convertible note? Are they on the hook to meet certain benchmarks by 2019? Some of the legal-speak in their announcement was a bit over my head and I didn't see specific note pricing.
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    new upgrades from Roth and Deutsche

    Roth Capital Partners PT $98, Deutsche Bank PT $90
    ...and Credit Suisse (no PT !!, "restricted"!)
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    I should have bought at $60.
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    Stock or Options? Why is $3 a game changer for you? Just curious...
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    Oh I was referring to the fact that I posted on the day of the dip to $60 that this was down below what I thought was fair value given the news of the day, and was going to buy short term calls, but I didn't. That's all.
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    SolarCity breaks ground on huge solar factory in New York, strikes deal with state


    SolarCity broke ground on its massive solar panel manufacturing facility in Buffalo, New York on Tuesday, according to a release from New York Governor Andrew Cuomo. The facility, when, and if, fully completed in early 2016 is supposed to make a gigawatt worth of solar panels a year, in the one million square foot facility on 88 acres of land in the development park called RiverBend in South Buffalo.


    SolarCity � led by Chairman Elon Musk and his cousins CEO Lyndon Rive and CTO Peter Rive � is following a similar strategy to the one that Musk is using for his electric car company Tesla, with Tesla�s plans to build a massive battery factory outside of Reno, Nevada. The similar strategies are causing some to refer to the new SolarCity factory as Elon Musk�s other �Gigafactory.�

    SolarCity breaks ground on huge solar factory in New York, strikes deal with state Tech News and Analysis

    The above was posted 2 hrs ago.
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    My leaps I bought at 60 are still underwater due to the hugespread on the bid and ask price but come 2017 they are going to look sweet
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    Solar City was already way undervalued before this deal. If the details of this article are correct then the implications are staggering. This article had the best paragraph I have found so far on this deal.

    "SolarCity expects to spend US$150m initially to fund construction of the facility, with the state kicking in an additional US$750m. The company will lease the facility for a 10-year period at a rate of US$1 per year, but must provide 1,450 manufacturing jobs and employ 2,000 downstream jobs in sales and installations, as well as help create 1,400 more jobs to support contractor and suppliers."

    http://www.ifrasia.com/solarcity-funds-gigafactory-with-us$500m-cb/21165975.article

    To only spend 150 million to build out this huge factory is so amazing !

    edit: SolarCity - Current Report

    very nice ... 150m confirmed as the price they expect to get factory operational.
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    Guys, checkout SolarCity twitter feed at SolarCity (@solarcity) | Twitter

    There are a ton of tidbits. Here is a good one:

    "W 700+ crowd @NYGovCuomo announces deal to create largest solar power manufacturing plant in W Hemisphere to Buffalo"
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    500mil convertible is priced. Details are here:

    SolarCity Corporation Announces Pricing of $500 Million Convertible Senior Notes Offering (NASDAQ:SCTY)

    - - - Updated - - -

    A few key points.

    - The notes will bear interest at a rate of 1.625% per year.

    - The initial conversion rate for the notes is 11.9720 shares of common stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $83.53 per share).

    I am not an expert in convertible pricing. But this looks like a very good deal for the purchasers of the notes. SCTY already reached $83.53+ early this year.

    - The Company expects to use approximately $57.6 million of the net proceeds of the offering of the notes to pay the cost of the capped call transactions described below and to use the remaining proceeds of the offering for general corporate purposes, including working capital, capital expenditures and potential acquisitions.

    Not clear until what price there will be dilution protection. Nevertheless this is a positive.
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    OK, I'm in at these prices. Go SCTY!
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    This is a really good deal for scty. The 8K has some juicy details. This is probably the best part:

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    more info of the purchasers

    [TR="bgcolor: #cceeff"] [/TR][TR="bgcolor: #cceeff"] [/TR][TR="bgcolor: #cceeff"] [/TR]
    Purchaser Aggregate Principal
    Amount of
    Securities to be
    Purchased    		 Aggregate Principal
    Amount of Optional
    Securities to be
    Purchased if Maximum
    Option Exercised
    Goldman, Sachs & Co.
    		 $166,666,000 $25,000,000
    Credit Suisse Securities (USA) LLC
    		 $141,667,000 $21,250,000
    Merrill Lynch, Pierce, Fenner & Smith
    Incorporated
    		 $141,667,000 $21,250,000
    Deutsche Bank Securities Inc.
    		 $25,000,000 $3,750,000
    Barclays Capital Inc.
    		 $25,000,000 $3,750,000
    Total
    		 $500,000,000 $75,000,000






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    new upgrades from Credit Suisse and Raymond James

    seems that Patrick Jobin is realizing the potential of SCTY.
    "outperform", PT $97. Raymond James, "outperform", PT $80.
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    Looks like we got dilution protection up to $126.

    See the latest 8K filed on 25th.

    "The Capped Calls have initial strike prices of $83.5282 per share and initial cap prices of $126.0800 per share, subject to certain adjustments."
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    Just bought a bunch more SCTY stock!
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    good timing, I think VSLR IPO tomorrow should pumps scty up, unless the oil price keeps crashing ..
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    At these prices, it's a bloody clearance. Just went all in with the IRA
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    I grabbed a handful of Jan '17 $60 calls at these prices. Maybe will buy more if we keep going down.
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    I know this is the SCTY thread, but the VSLR price is pretty low right now. Would I be betting against myself to buy (using new cash) some of it since it's direct competition is SCTY or does the whole "spreading your eggs around" and the fact that there is enough room for solar installations to go around make it ok?
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    As stated in my post that initiated this thread, discussion of other solar companies should only be made in reference to how they might affect SolarCity and its shares. Otherwise there is a thread in this forum titled "Alternative Energy Investor Discussions". It was originally a SCTY thread but got hijacked by discussion of other solar companies and SCTY got drowned in the noise, so its title was changed. That's the reason I initiated this new SCTY thread last March.

    As I expressed in post's #903 & #905, I was holding off on reentering SCTY due to the possibility that some investors wanting to buy VSLR would sell some of their SCTY shares and depress SCTY's price. Apparently you would use new cash to buy VSLR. I can't quarrel with diversification, but keep in mind that yours is money that would not be used to support the SCTY price.
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    Well, I'm really wondering where I would make the most money. SCTY or SCTY + VSLR. If Vivint starts to move on Solarcity's turf, then that could affect SCTY pricing......so to me they are linked in discussion.
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    You called it Curt. I started buying too early and my SCTY leaps are pretty deep in the red. I did save some cash just in case it went south so I bought some more SCTY leaps today. Hope SCTY can recover a little tomorrow.
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    Since its founding in 2011, Vivint Solar has been in competition with SolarCity as a solar panel installer. Vivint Solar was a subsidiary of Vivint and later the Blackstone Group. Today Vivint Solar became a publicly owned company whose VSLR shares compete in the stock market with SCTY.
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    Curt- I'm curious if your buying SCTY now that the price has come down quite a bit? I know you were holding off for a pull back, is this it or do you see it dropping more?
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    I would be a bigger buyer today but I'm worried about a margin call. I wish someone would ask Elon what he thinks about solar cities price
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    Mr Musk bought scty secondary offers at $46 .. so I assume at least $46 is a fair price for him.

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    Yeah im in the same boat. I wanted to buy some more today on a 6% drop but didn't want to over do in case it fell even farther tomorrow. I am happy to see SCTY up a little in the after hours even though I know that means nothing.
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    I'm not currently in SCTY, but it remains under consideration.
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    SCTY finally sees a little green. Maybe because TSLA is having a good day it is following suit or maybe because the market is up I don't know. But I'll take it!
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    Where has all the chatter gone? Big news this AM with the SCTY Leases... anyone?

    Is there another forum I don't know about :p ?
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    Yep, pretty big deal.

    Solar Installation at no Additional Cost and Immediate Utility Savings Just Like a Standard Power Purchase Agreement, But Now You Own it

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    Posted on G+:
    Well, this is quite an obvious outcome, SolarCity is the #1 installer in US, and economy of scale is kicking in big time. I bet new SC product got as good if not better margins than PPA offers from SC, while allow more fair direct comparisons with offers from small scale installers who could not realistically compete on price. And on the long run this will ensure even bigger and faster market penetration for cost effective solar.
    US-PV-Installer-Market-GTM.png
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    Definitely an interesting loan product by SolarCity. It appears to be a 30-year loan. This is something I haven't heard of existing in the solar industry for residential customers prior to this. SolarCity will definitely charge a premium in terms of total purchase price, but since it'll be amortized over 30 years the monthly payments will be quite low. I'm curious to learn more of the details.
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    I am very surprised to see this from Honda as they seem to be lagging in electric vehicles the one type of car that could benefit from solar.
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    Low payment BUT increased total interest over the life of the loan. Why wouldn't one just refinance mortgage and get lower interest rate and interest tax deduction? Seems like a product to prey on the lower financial class
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    Disagree. this will be much simpler than refinancing your house. You can also pay it off at any time without penalty. It sounds like an exciting new loan package that will give people a huge benefit over a lease. There is also no lien on your mortgage with this.
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    Never heard of a lien on your mortgage before but home equity line would also do better and can be paid off earlier. Not sure about Texas but Virginia there is no penalty for paying off mortgage faster. I am curious, is there a lien placed on the home for the loan? If not what is the collateral? Home could be sold without settlement agent or buyer aware of loan that would need to be paid off for the solar system. For that matter what does solar city do to secure their interest in the solar system on a lease? Do they rely on the sellers good will?
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    Thanks for letting us now. I really like this part:

    Now, it's only been a few years, and I'll be interested in seeing what it's like 15 years from now, but as an investor and potential buyer this is great to see.
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    It's quite possible they're getting a lien or 2nd mortgage on the house including the solar system. That often qualifies it for home mortgage, not home equity because it is used to buy or build your home. I don't know what they're doing. Don't worry about the owner selling the house without paying it off. The note will be recorded with city/county records and can't be overlooked when the property is sold.
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    How could it be paid off faster, I thought you could pay off the Mypower loan whenever you want. Keep in mind all other loan options are still open to homeowners. For people who just purchased their home or are underwater in their mortgage this loan would make a lot of sense.
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    Then it is lein against home
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    One thing to keep in mind is that this program also includes all repairs and maintenances to guarantee a certain output from the system throughout the life of the loan which creates an inherent value added. You could classify it as a Rent-to-own scheme but at the end of the day it opens up solar to a much larger market.
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    That's a very informative podcast. Thank you!

    - - - Updated - - -

    One thing that struck me in the podcast: Rive says the Retained Value is net of tax equity guys but it is NOT net of debt. He said that debt is on the Balance Sheet that we can see so that's not netted out as part of Retained Value.

    Does anyone know how to reconcile the Balance Sheet with the Retained Value?

    The real answer that I am after is:
    - What is the true 20-year retained value after "everything"
    - How is it evolving on a quarterly basis
    - How is it evolving on a quarterly basis "per share" (to account for equity dilution)
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    wow, current install cost of less than $2.50/W. Wish I could get that directly.
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    That is what I got directly just by shopping around and maybe you can too, especially in CA where you have a lot of choice.
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    If I am reading the info right.

    I compared from the end of year report last year to the numbers as of Jun 30th because that is what was used in the 10-Q which is where I am getting my "all in number" for debt and accounting for stock dilution (I think but I would love to have someone double check this)

    The retained value after 20 years considering a 0 percent renewal rate is 1.245 billion as of Jun 30th. In December it was 660 million so it has almost doubled in 6 months. [Increase of 585 million ]

    The retained value after 20 years considering a 90 percent renewal rate (which is what SCTY uses in their model) is 1.8 billion as of Jun 30th and it was 1.05 billion on Dec 31. [Increase of ~750 million]

    The total liabilities and equity has increased by 333 million during this same time period. If you only look at liabilites it has increased 165 million in this period.

    Its late and I need to do more research on the subject, But I would love anyone else to correct this data or expand on it.

    - - - Updated - - -


    And yes +1 Sbenson that post was awesome Thank You
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    I think there a lot of benefits to offering these bonds to individual investors that have been overlooked thus far. the biggest one is that it lets SolarCity know where to expand next they will now have a map of everyone in the country who was willing to spend at least a thousand bucks in support of solar. This will give them a tremendous advantage compared to their competitors.

    for instance if they had 300 people from Kansas City that had invested in these bonds and they were considering expanding into that areathey would know that there was potential demand from at least those 300 people. I don't think that it was a coincidence that the my power loan and these individual investor Bonds were rolled out at the same time.
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    Those look like pretty good rates...
    �
  • 1/1/2015
    guest
    Bummer. For those of us in the "sunshine state" if florida we cannot buy directly. Only through a broker. Pretty crazy to be the only state in the country demanding we also pay a middleman fee. Time to write our represntatives!
    �
  • 1/1/2015
    guest
    Were you interested in purchasing some? I am very curious how many people are buying these and their reasons for doing so.
    �
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    guest
    Yes.
    �
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    Wondering if anyone has info on bond ratings for these?

    Soon as I get this info, gonna go to my local FL car dealer .... oh I mean broker (you know for consumer protection:confused:) I think it will be a good way to diversify.
    �
  • 1/1/2015
    guest
    These bonds are unrated, junior to existing debt, in the event of default, something like 25% of investors must band together to push for a claim...
    �
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    Just be aware that the article is talking about grid parity of retail electric prices versus retail solar installations (while the picture in the article shows a utility scale solar plant). That's still great news, but don't expect utilities to dump their nat gas power plants in favor of solar anytime soon (unless forced to by mandates) since solar is still 4x the price of nat gas at the utility level.
    �
  • 1/1/2015
    guest
    Baird & Co's Ben Kallo reaffirms his "neutral" recommendation with $83 PT.
    �
  • 1/1/2015
    guest
    how is 65% upside neutral?
    �
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    guest
    very simple. He had also a few "outperform" ratings in the past. However, one should understand some analysts' opinions?
    �
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    guest
    Anyone setting up a play on SCTY earnings? Historically they have been a disappointment and we have had a nice recovery from $45. Time to buy some puts?
    �
  • 1/1/2015
    guest
    Well those puts from yesterday seemed to be a good call... I'm wondering whether to let them ride, or close them out. Any thoughts in the closing minutes?
    �
  • 1/1/2015
    guest
    Weird but why does scty report same day as tesla? Many investors have both and chairman of both in common
    �
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    guest



    Because maybe there will be some big "partnership" type of news?
    �
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    I remember that speculation the last time they did that same day and time report but there was no partnership announced then
    �
  • 1/1/2015
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    Yep , Same thing has been said before. Although there is news that came out recently that next year Tesla will offer battery storage at competitive pricing. It has also been stated that in 2018 (or was it 2017) battery backup will be offered with every SCTY install. I think they could offer some news on more battery storage that is coming next year but I would not count on it in this earnings call.

    I would not rule out a SCTY/TSLA announcement but I would not bet on it (this quarter)

    I think SCTY will follow the market tomorrow and move up after earnings report.
    �
  • 1/1/2015
    guest
    Someone recently shopped SolarCity for a 10 kWh pack from Tesla. The quoted price forna 10 year lease was $1500 down plus $15/month. Discounting at 9%, this has a present value of $2684. If an average of 7.5 kWh is discharged each day, this works out to a levelized cost of about $0.10 per kWh. This strikes me as a pretty reasonable price. The value of having backup when the grid is down may prove to be the tipping point for many.
    �
  • 1/1/2015
    guest
    Well those puts I bought were for protection from a bad ER, but it seems like I'll be closing them early, which is good b/c I don't have to loose IV premium.
    �
  • 1/1/2015
    guest
    Wow, what a brutal morning. Does someone know something I don't? What's going on?
    �
  • 1/1/2015
    guest
    Clearly selling those puts was a bad idea. sold for $5.6, they were $7 last I checked.
    �
  • 1/1/2015
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    I've been staying away from scty for a while. I think that we're taking a beating from the oil issues, and scty tends to drop on earnings (mostly because it runs up prior to earnings). Looks good for tomorrow.
    �
  • 1/1/2015
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    I'd simply look at it as 73.5c/day. What return can you get on it? Maybe more if you live somewhere with poor solar feed-in returns or if you have real-time pricing and can arbitrage the differentials. But over its life maybe only 6.25kWh usable average, so given charging/discharging losses it might be tough to do anything more than stick it to the man.

    What I think is _really_ good about it, is that static storage is a no-lose proposition for Tesla:
    - If current electricity pricing continues, with per-kWh pricing of infrastructural costs, static storage economics are good.
    - If static storage and solar PV forced pricing to adjust to separate fixed infrastructural costs by Amperage or fixed fee, and only fuel costs by kWh then it will make electric cars cheaper to own.
    �
  • 1/1/2015
    guest
    To me it looks like Republicans taking up Senate is a perceived negative for SCTY (and VSLR). The fear is that tax credits will not be extended.
    �
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    I would say, all done SolarCity !

    �
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    Analyst Recommendations Today

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

    And market share really matters. As long as solar market continue to consolidate, with smaller players becoming uncompetitive due to economy of scale there is a tremendous value in being market leader. And there would be a market for residential solar in US, doesn't matter who won election, democrats or republicans.
    �
  • 1/1/2015
    guest
    Maybe, but I would worry a lot, were I an investor in SCTY or any solar stocks, that a change in a retail rate regulation or removal of federal and/or state subsidies could cripple the business. I admit, though, that the solar industry has gotten so big and employs so many people that such changes are increasingly unlikely.
    �
  • 1/1/2015
    guest
    Merrill Lynch confirms PT$95 and "buy" rating. Here's why.

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

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

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

    Does that make more sense?
    �
  • 1/1/2015
    guest
    Roth Capital Partners reaffirms its "buy" recommendation and PT of $98.
    �
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    guest
    Technically the stock looks like a good buy right now bouncing off that hard support at $50 for the 10th time, really doesn't want to go below that number it seems. The financials are a bit confusing to me though, looking at the data from google finance which shows a large minority interest, 50% higher than their revenue, is this from their leasing contracts or? I would like to hear peoples case for owning the stock, what is the revenue per customer, what kind of profit margin can be expected in the future, are they cheaper than competitors?
    �
  • 1/1/2015
    guest
    Could SolarCity install one solar system on the roof of a shopping mall and sell power to each tenant? If so, they could include storage in the package as well. This could lead to really efficient use of system assets.
    �
  • 1/1/2015
    guest
    Thanks for the post FrozenCanuck� Although not 100% convinced, I think you might be right. The Retained Value definition from the slideshow in footnotes says that it is net of bunch of things including depreciation. So it seems the cost of the asset is effectively taken out of the retained value. Do you have any other references that indicate that the cost of the system is already accounted for in the RV calculation?
    �
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    51 days to break 80.... I can dig it :)
    �
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    Canaccord anD Raymond James reiterated their recommendations and price targets.
    �
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    Interesting research paper, but the novel concept in the paper is that any blu-ray disk gives you an easy to use template for photon capture. I believe the photon capture effect was already well known. Whether it is applicable to high efficiency solar panels, well, neither the article or underlying paper addresses that.
    �
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    If I read it correctly, they already have the contract, they just don't quite know where it's going to be built. They just closed on a $400M financing deal with BofA, though, so this particular contract is only 1.5% of that deal, and even less if you consider the total their total power purchase agreement style of installation. So I don't think it is all that big a deal for them. Walmart is much bigger.
    �
  • 1/1/2015
    guest
    Happy New Year to you all,

    any thoughts on current directions of SCTY? I'm not quite sure what to think of the insider sellings - diversification of investment? And just a wild idea from a dream last night: What if Google acquired SolarCity?
    �
  • 1/1/2015
    guest
    Insider selling is typically pre defined timelines. It's not voluntary action.
    �
  • 1/1/2015
    guest

    NO idea about the insider selling, but what seems clear is that the bullish triangle pattern seen by Recognia never happened. They probably thought end of November was going to be a positive breakout but that was clearly untrue. Now the stock has hit the same peak twice while the lows in between have been getting lower. All at low volume.

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

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

    If you guys know SCTY a lot better than me you might be sure that the low oil won't hurt SCTY in the long run and might be confident that the company can keep getting big contracts. If that is the case this looks like a prime buying opportunity. As Buffet said 'Be fearful when others are greedy and greedy when others are fearful'. Well, others look pretty fearful at the moment if you ask me.
    �
  • 1/1/2015
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    guest
    That article inaccurately states that Solar City is "mostly" owned by Elon. He has about 21.5% of the stock and no executive role. I don't see why this issue should stick yo him.
    �
  • 1/1/2015
    guest
    From a commenter on the article, here are the congress members going after solar:

    Last election, Paul A. Gosar received $11,000 from oil and gas as well as $28,000 from electric utilities.
    Last election, Matt Salmon received $30,000 from electric utilities.
    Last election, Lamar Smith received $93,000 from oil and gas.
    Last election, Ted Poe received $79,000 from oil and gas.
    Last election, Jeff Miller received $30,000 from electric utilities.
    Last election, Cynthia Lummis received $91,000 from oil and gas as well as $13,000 from electric utilities.
    Last election, David McKinley received $77,000 from oil and gas as well as $72,000 from electric utilities.
    Last election, Andy Harris received $40,000 from oil and gas.
    Last election, Mo Brooks received $18,000 from electric utilities.
    Last election, Morgan Griffith received $56,000 from oil and gas as well as $61,000 from electric utilities.
    �
  • 1/1/2015
    guest
    Solar Jobs Report Shows Huge Growth

    WASHINGTON -� The solar industry reports job growth 20 times higher than the rest of the U.S. economy, according to a new analysis.
    As of 2014, there were nearly 174,000 jobs in the solar industry, according to the report from the nonprofit Solar Foundation. That represents 86 percent employment growth since the organization began tracking job figures in 2010. By the end of 2015, companies said they expect to hire an additional 36,000 new solar workers.
    �
  • 1/1/2015
    guest

    Yeah right, we should believe Koch Brother's funded organization writing against CleanTech.

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

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

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

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

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


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

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

    In 5 years when SCTY is the top panel producer everyone will say it was always really apparent they would be the top producer :)
    �
  • 1/1/2015
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  • 1/1/2015
    guest
    4Q results available at: SolarCity - Investor Relations (under Events & Presentations heading). I'm still reading, so no commentary, though certain headlines I saw suggest SCTY is down 5% or so after hours.
    �
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    guest
    Bummer for SCTY:(. I was hoping for a short squeeze after earnings.
    �
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    guest
    The earnings report looked good to me. A continuation of growth and growing prospects. The stock had taken a rise a couple of weeks going into earnings; we've lost about half that rise since. Sun Edison's results, with a similar story, caused SUNE to go up. Short term noise.
    �
  • 1/1/2015
    guest
    Yeah, I was pleased with the report too. Just another year doubling the business.

    I thought shorts were simply attacking the price to nullify the news. I put a limit order in at $52.50, thinking shorts would drive the price down again, but I was wrong. So maybe we'll see the price recover soon.
    �
  • 1/1/2015
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    My thinking too. I setup a limit order at 52.01 but I guess I was too low, too late.
    �
  • 1/1/2015
    guest
    Well maybe enough of us had the same idea that the shorts knew it would be costly. They are able to see the order book and guage demand. So for me it's good if the order goes through and good if the price is defended. I've got enough shares already that I'm not worried about missing out.
    �
  • 1/1/2015
    guest
    I thought the quarter went really well too. I am really excited about the commercial jobs gaining momentum because of the new mounting hardware. A 2-3 week installation only takes 2 - 3 days.

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

    iWqlZpL.jpg

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

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

    US-PV-Installer-Market-GTM.png
    �
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    guest
    Google invests $300 million into Solar City and no-one comments on this forum? Interesting observation about what companies investors are not currently paying much attention to.
    �
  • 1/1/2015
    guest
    I agree, with drinker. I expected to hear comments on this forum about the 750 million fund and Google's 300 million addition to it. I don't understand what is in it for Google. As a SCTY holder, I like it though.
    �
  • 1/1/2015
    guest
    Hi all,

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

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

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

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

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

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

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

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

    �
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    guest
    Not sure they have a leg to stand on. $50 a month isn't punitive. Perhaps, though, SRP should have had a tiered rate depending on system size.
    �
  • 1/1/2015
    guest
    SolarCity is wasting its money if it thinks this lawsuit will succeed. The idea of using antitrust statutes is clever, but it can only succeed if SolarCity can demonstrate that the rate structure is not supported by costs. Speaking as someone who has testified about rate design at my state commissions, SRP will have no trouble at all defending this rate design as cost-based.

    What SolarCity might achieve with this lawsuit is sending a message to other ?utilities that they will get into a nasty legal battle if they follow SRP's route.
    �
  • 1/1/2015
    guest
    Is it possible to have a solar + storage system that is off grid in addition to a grid connection? Use your solar + storage whenever possible and use the grid when you run out. In that way the utility doesn't need to know that you have solar, you don't pump anything back to the grid. Excess power is sometimes wasted and you need a large battery. But 50$/month is completely unreasonable. How much power can an average residential solar system produce? 100$/month worth?

    If the utility charges 50$/month to connect that to the grid, it is punitive compared to the 100$ worth of power produced. I can understand the utility paying you a lower rate for your power than they charge to supply you with their power but a flat fee makes no sense. It would make more sense to have the kind of system I described above for the extra 50$/month than paying the utility. Longer term utilities are shooting themselves in the foot if they think they can get away with this.
    �
  • 1/1/2015
    guest
    I don't know about the technicalities, but it rate payers with solar get pissed off enough with the utilities, Tesla and SolarCity will have little difficulty selling home grid storage systems to red blooded Americans. Controversy and showing how punitive the utilities are is really good PR. Think of how much free publicity auto dealers have given Tesla by trying to block their stores. Now we've got a utility in AZ that wants to the rump for solar+storage.

    Any chance this was timed for the unveiling of Tesla's next product?
    �
  • 1/1/2015
    guest
    What about the fact that they are not charging all customers the same rate? Aren't they discriminating against customers with solar because they're not charging the same fee to other residential customers?
    �
  • 1/1/2015
    guest
    I'd have to read the actual tariff filing, but they've probably got that covered. Utilities have long had a "standby usage" tariff for customers who met part or all of their load with on-site generation (e.g. factories that had cogen electric and process steam) but wanted to assure they had power even if their on-site generation failed.
    �
  • 1/1/2015
    guest
    Here is what folks at Bloomberg think:
    **
    SolarCity Powers Up Antitrust Lawsuit Against Salt River Project


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

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


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

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

    I'm tired of utilities arguing that it's not fair to have to provide back up capacity to solar residents who don't need much volume, or to have to pay feed in tariffs. They should give up their monopolies and let some other provider cover the capacity requirements or pay feed in tariffs.
    �
  • 1/1/2015
    guest
    Bloomberg hasn't spent 25 years working in utility regulatory law. I have. I haven't carefully read the complaint, however, so Solar City's lawyer may have come up with a clever angle I haven't considered, but I doubt it.
    �
  • 1/1/2015
    guest
    Standby usage tariffs are common for commercial customers, but for residential they are usually very small or nonexistent. Perhaps you can explain how the utility can get away with a rate structure where one customer without solar doesn't have to pay the tariff while another customer with solar has to pay it, even if they both consume the same amount of electricity each month. There are other reasons why a customer might not use much power in a month, not just solar. I don't think Tesla is complaining about this and is taking an antitrust angle instead.
    �
  • 1/1/2015
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    I am completely unable to value it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The Contrarian Investor

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

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

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

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

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

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

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

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

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

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

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

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

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

    This is "market share" growth.

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

    See the latest presentation at SolarCity - Events Presentations

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

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

    This will continue to play in their favor for a long time into the future.
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    I'm hoping that GridLogic / SolarCity have hired some very good regulatory lawyers. There are aspects of this business plan that look strikingly similar to an electric distribution company (e.g. Southern California Edison)--they own and maintain a power grid for use by the customers, over which they sell power. It's going to be a state-by-state question about how far GridLogic can go without (a) violating the exclusive franchise of the incumbents and/or (b) becoming a rate-regulated utility. This could shape up to be a battle like that Uber is facing. Utilities are much better lawyered-up than the taxi cab companies, though.
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    Interesting indeed. From a bigger perspective it's always interesting to see how disruptive new businesses always seem to touch on and get in trouble with established business model who very often have the benefit of different forms of legal protection. Points in case:
    Uber vs. Taxi companies
    Solar City vs. Utilities
    Tesla vs. Dealers

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

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

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

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

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

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

    - - - Updated - - -

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

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

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

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

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

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

    LeaseIndia.PNG Leasing.PNG

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

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

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

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

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

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


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

    - - - Updated - - -

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

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

    It may time to attack political support for power monopolies.

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

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

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

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

    - - - Updated - - -

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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


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

    This peak demand argument works for both resi and utility.

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

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

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

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

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

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

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

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

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


    I agree with you here completely

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

    Off Grid Solar Power Systems – Off Grid Hawaii - SolarCity

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

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

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


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

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

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

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

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


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

    PIMP VS KARATE MASTER Knock Out! - YouTube

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

    Brad Buss

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

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

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

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

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

    Targeting 180 MW q2 installation which will be a record.

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

    Q&A session.

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

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

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

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

    Commercial IRR will be in the 20 percent range

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

    Brian lee Goldman sachs

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

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

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

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

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

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

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

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

    Questions form roth

    What were MW deployed in q1,

    143, you can always find that in the ~tables

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

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

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

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

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

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

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

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

    Sorry I dont think I understand your question,

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

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

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

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

    question (something about mypower)

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

    q. Robert baird,

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

    This is what I am pretty sure he said:

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

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

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

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

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

    From Bloomberg:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    So yes, while SolarCity is very well positioned and is executing well, it does have some potentially big headwinds ahead.
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    SCTY - NASDAQ

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

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

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

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

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

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

    So default rates are more than adequately already priced in.

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

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

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

    - - - Updated - - -

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

    - - - Updated - - -

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

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

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

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

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

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

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

    - - - Updated - - -

    A sample contract is here:

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

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

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

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

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

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

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

    Not too worried though.
    �
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    The Big Play

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

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

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

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

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

    So let's see if we can dig into this, and figure out when and how this can go down. If we can anticipate this transition, it will be a huge investment play.
    �
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    Excellent write up and analysis jhm. I agree with your general thoughts here and coupled with micro-grid strategy is the incremental step to invert the relationship...
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    Somewhere there is some audio of Lyndon spelling exactly this out. He said there is one (or two) markets that are working on changing policy to allow this and every contract has this ability built into it with a 50/50 split between the homeowner and SolarCity. He also mentioned that the Utilities need this about 50 times a year which is what they 10Kw packs are designed for.
    �
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    Very nice. It would be good to find this clips. The video I reference above has a few statements about grid services but does not really speel this out. Its wonderful to see this is written into contracts. This shows serious forethought.

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

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

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

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

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

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

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

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

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

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

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

    Residential solar PV system prices for May 2015 - Solar Choice

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

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

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


    Selling or Buying a Home with Solar Panels | SolarCity

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    electracity,

    You are here just to spew nonsense with ZERO research.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

    SolarCity - $21K for 3.06 KW system

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

    here's another:
    IMG_6510[1].JPG

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Historic Apple 1 computer sold at auction - BBC News

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

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

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

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

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

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

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

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

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

    Let me quote you from May 14:

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

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

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

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

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

    - - - Updated - - -

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

    - - - Updated - - -

    token investment:

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

    SolarCity Now

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

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

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

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

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

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

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

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

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

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

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

    This has never happened before.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Only 19 years remaining on the contract.

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

    - - - Updated - - -

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    - - - Updated - - -

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

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

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

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

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

    If SolarCity actually managed to lock themselves in as the lowest-cost provider, they'd be golden, of course. Maybe their new high-efficiency-panel factory and automated racking installation will do that, so that would be a bull case...
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    In the simple sense, this is what the cost of a solarcity install represents to the customer: 1/3 equipment and direct labor, 2/3 everything else. A more mature solar market will squeeze out this inefficiency.
    What solarcity sells is extremely expensive solar financing to people who could get a much lower cost HELOC. They are "rent to own" style finance company selling to the upper middle class. Congrats to the clever marketers who figured out an effective sales pitch, but it won't last.
    Solarcity is efficient at installations, but not as a company. The investor relations person who reads this thread needs to be paid. Someone needs to pay for the CFO 450,000 stock options.
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    It is interesting isn't it? But you have to do a clear comparison of what is offered by Solarcity compared to everyone else. The sum total value of what Solarcity offers is better for a vast amount of people, about 38% of the market thus far.

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

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

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

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

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

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

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

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

    - - - Updated - - -

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

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

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

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

    Cheaper electricity opens up a wider global market which is nearly infinite in annual sales. That's the endgame here.
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    Its funny people are use roofing to Prove that Solar is not viable to go nationwide. The problem with this line of thinking is the largest roofing companies are all national companies. Companies like Aspen Contracting and the other companies that these guys create when they run their roofing name into the ground. Much like Solar City , they install a lot more than the local roofers when hail and hurricanes hit because they go after business and know how to scale. For the most part the people running these roofing companies successfully are not very bright and nowhere near the level of competence that Solar City management has.
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    You unbox your computer and plug it in.

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

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

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

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

    Roofing isn't a comparable business in my opinion.

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

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

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

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

    - - - Updated - - -

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

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

    Putting the money towards a HELOC instead of the electricity bill will pay of a well purchased system in 6-7 years. A much better value than a $20/month savings for a few years. Your argument is that computer companies sell computing power, so ownership is irrelevant. In 1985, a twenty year computing contract at a bit less than current cost would have been a horrible deal for the buyer.

    I wonder how many affluent people with a solarcity PPA will buy green bonds. The irony is wonderful. Making a bad financial deal, and then buying your poor deal back in the form of a solarcity securitized asset. Financial ignorance at its finest.

    The friction created by solarcity and similar will be removed by a maturing market. It always is. They are training up their own employees to be future local competitors. No IP. Small barriers to entry.
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  • 1/1/2015
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    I said nothing of the sort about computers...
    as of last year, 80% of all solar capacity installed was lease/ppa. That's 80% that purchase electricity, not panels.

    People want savings now. If they have to pay hundreds extra per month for a 5-7 year loan, they won't do it. Average home ownership is between 7-9 years, so many won't see a return. Solarcity allows a person to buy the lease out at any time down the road, so they can have the infront savings and the option of ownership of they so choose. That's what the marketplace is clearly indicating by the success of Solarcity, vivint, sunrun, and others with similar business models...
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    Buying calls at this price. Some of the negative arguments are ringing hollow imo.
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    A recently saw a decent Sunrun prepaid lease of $6,000, 3.5kWh, and 20 years. At 4.5%, $112/month pays off in five years. Then fifteen years of $0. No "hundreds per month extra".

    These numbers are the near future. How profitable is solarcity at these numbers?

    No green bonds. No $2/watt "retained earnings". No $5K+ customer acquisition costs will work with the solar prices coming in the next few years.
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    What was the actual cost of the system, and what system would they install? (Is that 3.5kWh a typo?).
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    So that works out to 23.5 c/kWh all paid upfront. If you finance with a loan, that adds the cost of interest. Yes, even Sunrun needs to turn a profit.
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    You are having math problems
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    3.5 system is extremely small. My house is small, 2200 sq ft, and needs a 10kWh system.
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    Ok, going by this agreement, the purchaser agrees to pay the greater of 14 cents or 10% less than the utility average price per kWh. The initial payments of $500 and $5500 are prepayments against the per kWh rate. There is also performance guarantee that reimburses just a fraction of the kWh rate if the system fails to delivery the guaranteed amount of energy.

    I fail to see how this contract is better than SolarCity's PPA at 13 c/kWh plus small fixed escalator, with no upfront payment at all.
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    I'm not sure it is better, but it is a serious contract from a major competitor that can is simple enough to be deconstructed. It is a contract that indicates June competitive conditions in the bay area.

    Solarcity claims $2/watt retained earnings. Solarcity claims $2500 customer acquisition cost. Some analysts say it is $5K+.
    Neither of these numbers are remotely possible on the amount of this contract ($6K + ITC).


    The last California Solarcity contract with a purchase option I saw was $5.19/watt. About triple the Sunrun offer. At $5.19/watt there probably is room for $2 of retained earnings and a large sales commision.

    How can solarcity maintain even its current profitability?

    - - - Updated - - -

    This person is probably buying a small system to just remove the top PG&E tiers, which is ~$.28-$.34.

    Without the tier pricing, small systems don't seem to usually make a lot of sense.
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    Again, insulting forum members is not a good way to behave here. I think you need to step back and re-evaluate your approach to interacting with forum members.

    Now you're quoting ppas? I thought you were all about ownership? Your position against Solarcity is confusing. Please clarify in a respectful way.

    secondly, Solarcity has many different options for consumers from ppa to loans. The underlining theme is price per kWh of electricity the consumer will pay with no up front investment, production guarenteed and insurance. Compare that to current utilities, and you have a new solarcity energy customer.

    Solarcity solar bonds return is better then treasuries and CDs. So an investor in bonds will be very interested in solar bonds... And that is a bottomless capital market for Solarcity to tap into. In addition, solar bonds are the lowest cost of capital along with ABS offerings. That means Solarcity is getting cheaper capital then all the competition. Cheaper capital means lower all in costs to produce electricity which funnels down to a lower price per kWh for a solar customer which expands the market by billions for every cent shaved.
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    He was having math problems, as his later work showed.

    I'm not promoting leasing. I'm examining a solarcity competitor and the current market prices for leases/PPA. This is an investment thread.

    Another point from the solarcity PPA contract:

    "SolarCity agrees to sell you the power generated by the System for 20 years"

    They have NOT agreed to provide power the house at their stated rate (15 cents or so), as far as I can tell. What happens when net metering goes away?
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    thats interesting you mention net metering since anyone under the current system is grandfathered for 20 years if net metering went away forever. Homes with grandfathered net metering agreements are seeing higher home values in California and Arizona already. Secondly, net metering has recently increased to 44 states in the United States. It will be quite some time before the current net metering regime will be gone. In addition, net metering will most likely never go away, but rather will evolve into a different system where each solar system will be seen as power supplier the utility will pay to use... Which will turn out to be compensation similar if not more then today's many current net metering rates. As storage gets integrated into the PV system, Solarcity will have aggregating capability to assist traditional utilities in peak/load management which save hundreds of millions in peak load capacity requirements. As I've said before, Solarcity has already written in their contracts a 50/50 revenue sharing clause relating to this scenario.
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    guest

    Right. Solar prices falling. The wholesale price for electricity produced from solar staying the same or rising. The magic of solarcity.

    Austin TX just had a utility scale solar project bid at $.04/kwh. So 50/50 revenue sharing is 2 cents, while paying 13-15 cents?

    Home storage will likely never be competitive per kwh with grid storage. The powerwall cost more per kwh than the powerpack. The utility should be better off paying for grid storage rather than paying solarcity a higher price that covers the cost of the home powerwall.

    The trouble with claiming possible future revenue from grid ancillary services, such as voltage support, is that everyone with devices on the grid is going after that function. What home storage is likely to be used for is time shifting usage in the home and backup power only.

    Musk has deliberately dampened expectations of powerwall sales. Probably in response to overstatement by his younger cousins at solarcity.
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    guest
    No, not wholesale. Whole sale would mean the utility incurs the cost for transmission and distribution. However, distributed solar is on site or near the site of demand. Therefore, those transmission and distribution costs are incurred by the distributed solar provider. Also, the resposiveness of distributed solar is far greater then centralized peaked power plants and far less expensive. All those values cost money to provide the utility. Therefore, aggregated distributed solar will receive far more then wholesale, not to mention epa/clean air/carbon reduction values as well. That fee/compensation is what Solarcity will split 50/50. Totally different then whole sale.

    No, utilities are not going to deal with each individual home owner. The utilities will deal with the aggregator. That aggregator is Solarcity. The power of aggregation is in the numbers. That exactly what Solarcity is doing currently. So, when a person becomes a customer of Solarcity, they are a piece of the aggregation which brings additional value to a Solarcity contract that is unavailable to the completion at the moment.

    lastly, Elon was speaking before a utitliy conference. The comment was made to placate them and to assure them the power pack is an attractive buy for them. If you remember, the whole issue with Solarcity stemmed from a click bait article that spliced a quote from johnathan bass of Solarcity stating the lack of savings available in the United States for purchasers of the 7kwh powerwall. Then an analyst quoted the click bait article on the last tesla conference call which confused Elon and JB since it was the first time they heard of it. Once clarified, Elon made a statement claiming the article misrepresented bass's statement. Secondly, Solarcity is chasing the low lying fruit first, which is the home back up power market. This market is substantial and ready for sales immediately. But make no mistake, Elon and Lyndon are firmly on the same page on aggregating distributed solar assets. Power pack is just as important to transform the utility scale as is powerwall is on the distributed side. It's a matter of how to get the light bulb to go off in the fossil fuel centric traditional utility mind. The sooner that light bulb goes off the more time and effort is saved in transforming the grid. The best warriors win the fight before a single shot is ever fired. Although this may not happen here, it's clear Elon is attempting to ease the utilities into the future in a less confrontational way then has to be done. My impression after watching the utility conference talk you reference is that's what he was trying to do with his comments about speaking to Solarcity about their ideas of distributed storage.
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    Actually my math was fine. Your inputs were faulty.
    6,000�3.5�365�20
    =0.2348336595

    Problem one is that $6000 is not the purchase price of the system. Problem two is that this is not a 3.5 kWh per day system.

    Note that under the contract, the customer is obligated to pay more than 14 c/kWh upto the guaranteed output. If the buyer wants to get out of this, they have just a few opportunities to buy the system at Fair Market Value as determined by a Sunrun appointed appraiser. Even if this is truly fair, it means that the cost to get out is based on the average price of a system adjusted for aging. Thus, Sunrun is definitely not providing the lowest cost system.
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    A residential neighborhood with high demand means solar electricity is likely being used in the home where it is generated. That use may have the local grid benefit of demand reduction, but that benefit isn't monetized beyond the cost savings of purchasing more expensive electricity.

    The larger scenario is a solarcity investor relations person's fairy tale. There are no 7kwh powerwalls installed. The chance that a significant number being retrofitted into existing PPA customers before well into the next decade is slim to none. This decade, installing into an existing system is probably a minimum cost of $4-5K. A revenue stream returning a decent ROI on that upfront expense is unlikely. The powerwall only hold a couple dollars worth of electricity.

    Even if one is installed, the capacity of existing panels is insufficient to support home demand plus supply grid power.

    Batteries distributed at substations where needed is a realistic scenario. It just doesn't involve solarcity.

    - - - Updated - - -

    First, the minimum kwh are part of the contract (at the top). So "nope" again. Your numbers represent lower production, which would require Sunrun to write a check. Divide total kwh by cost, which gives the minimum benefit under the contract.

    Second, I'm NOT recommending this contract! I don't know why anyone would sign a twenty year contract with a corporation unless it was absolutely necessary, like a mortgage.

    What I'm doing is examining solarcity's primary competitor. They are offering a non-ridiculous number in a prepaid lease, unlike solarcity's purchase offers. So I'm taking Sunrun's simple numbers and asking questions.

    Solarcity offers "retained value" as the primary metric of forward profitability from past sales. With their PPA's and exotic accounting, their numbers are opaque.
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    Electracity, my first calculation was based on the information you provided, not the information in the actual contract. You presented the idea that it was posible to get a 3.5 kWh system for 20 years for $6000. If you look carefully at the actual contract this is not at all what they are offering. I'm afraid that your misunderstanding of the contract may in fact be a error that many buyers may be falling into. It is simply too good to be true that you can buy a contract worth 102,724 kWh for a mere $6000. That's just 5.84 c/kWh. Apparently you fell for this because you wanted to tout this as evidence that SolarCity is overpriced. In fact this is a contract to buy 102,724 kWh at 14+ c/kWh, which is at least $14,381, but the rate is actual pegged at 90% of the local utility rate which very well may increase a percent or two each year. The total payments for power could be more like $16,500. If this is actually a 3.5 kW system (not 3.5 kWh), then it probably costs Sunrun $7k to $10k to install and maintain, after ITC, about $5k to $7k net cost. Thus, Sunrun stands to make about $9k in gross profit. Now we also see why Sunrun charges $6k in upfront payments as this essentially covers the net cost of goods, minimizing the need for heavy financing as built into SolarCity's business model. Essentially, Sunrun is getting it's customers to finance a longterm lease for them so they do not need to go to the bond markets. In fact, I suspect that many Sunrun customers may be taking out loans to cover this upfront payment, thus incurring additional financing costs on behalf of Sunrun.

    Whether this constitutes a bad deal or not, I will leave to Sunrun customers to decide for themselves. But I would point out that compared with SolarCity, Sunrun may be paying an extra 1 c/kWh, while SolarCity is providing real financing. That is, SolarCity is going to the bond markets and other investors for the capital needed to offer electricity at a rate about 3 c/kWh below the utility. By contrast, Sunrun is going to the customer for capital and lock customers into a contract that only saves about 10% off utility rates. I think many of the criticism that you have leveled against SolarCity seem to apply much more aptly to Sunrun's business model. Specifically, if one can come up with $6k upfront, why not buy such a system for $10k to $14k, offset this with the ITC of $3k to $5k, and finance the rest? Of course, you may not be getting the guarantees, insurance, monitoring and maintenance that Sunrun is packaging, but you also avoid the vulnerable situation of having to pay some appraiser's idea of FMV to get out of the 20 contract, even if you just need to sell your house. By contrast, SolarCity offers a free exit and removal of system, if you sell your home. Clearly, it is hard to compare these different packages, and in time consumers will become savvy to which deals are better than others. There may well be other advantages to Sunrun that I am overlooking. But for me the biggest difference is that SolarCity is offering real financing to customers using its access to capital markets, while Sunrun is pushing much of the burden of raising capital back onto its customers.

    As someone who works in banking, I believe that financing creates real value for customers and would not trivialize what SolarCity is doing in this space. In fact, I believe that solar systems are complex enough that only a specialist can offer the best financing posible in this space. Banks are generalists, and they simply do not have the specialized capabilities to assure that solar systems are well designed, properly installed and maintained. The sort of business controls needed to do this are not easily developed and are not present in banks. So banks like Goldman Sachs and Bank of America can lend their expertise directly to companies like SolarCity, which then offer specialized financing to solar customers. This is really the smartest way for banks to participate in solar financing. In fact, the mortgage crisis has raised serious questions about the ability of banks to handle mortgage defaults. Many banks still have REO properties that have sat vacant for years. The foreclosure business is very messy, and banks are not well suited for physically managing foreclosed properties. It could be much better for mortgage lenders to pre-negotiate contracts with REITs to handle the contingencies of real estate as collateral. Banks have core competencies in financing, not real estate. And banks have even less competency for handling distributed energy assets. I'd also point out that utilities lack competency in managing distributed energy assets too, though some are trying to evolve in this space. But financing and managing distributed solar assets is exactly what SolarCity specializes in. They have core competencies here that neither banks nor utilities possess. This is why SolarCity exists, and this is why they will continue to exist within this rapidly evolving space. Consider the possibility that distribute solar may come to generate about a third of all power. Should there not be companies that serve as specialists to optimize the value of these resources? If you start to think about how do you capture all the economic potential of distributed solar and batteries, you'll see that it will take strong innovation, financial and operational capabilities. It's not as simple as installing a roof or hot water heater. These things only create value for use in a single building or home. Rather the electricity produced on someone's roof has the potential to power many homes and business. So the exchange of power between multiple parties is key to unlocking the full economic potential. We are just beginning to tap into that potential, but as this evolves it will lower the cost of energy everywhere. By analogy, it's not enough to put personal computers and telephones into homes that can afford these. Much greater economic power has been released by networking computer, forming the internet, and dropping land lines and a good number of computers for smartphones and many other Internet connected devices. Networking solar systems, batteries and other devices will create possibilities that few of us can imagine at this point. There is nothing conventional about bring energy into the internet age. If utilities, electricians and bankers knew how to do this, they would have already. We need more specialists like SolarCity to make pioneering leaps into this new space. As Lyndon Rive has said, "Going off grid is a really bad policy outcome." He says this because he understands that much greater things can happen as solar resources become part of an interconnected web of energy and information. This is where SolarCity is going.
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    Thank you JHM, your last paragraph above was a very informative and thoughtful read. I think I'll hold on to my 1,500 scty shares a while longer. I started buying at $9 way back when.
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    Great insight there jhm. SCTY's strengths and competitive edge comes from, as you point out, their golden position as the middle man between the finance market and the end customer.

    I would add that their current large market share and obvious great access to credit in the financial markets is allowing them to, in addition to the above, seek to establish one more substantial advantage over the competition: reductions in costs from developing their own panels (note their purchase of a panel manufacturing company), development of better and more cost effective mounting systems, synergies in distributed networks as well as of course economies of scale (from being large and growing rapidly).
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    What happens when the roof you are installing these on needs to get replaced? Do we as homeowners pay for uninstall and re-install?
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    Normally yes. The standard advice is to always repair the roof first.
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    i replaced my roof in spring 1999 before i got my PV system. (which is shading the roof underneath and lessening ageing) kinda obvious.
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    The issue of financing solar is non-trivial. I'm putting together a community solar project in Portland, Maine, and it's not trivial figuring out the financing for buying a share of a solar project that is not located on your house (but out in a field). In theory this is easy: there's a physical asset to secure the loan. In practice, banks here haven't seen anything like this and most are not inclined to take the time to figure it out.
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    I wonder if SolarCity could help with that. Recently they announced a community solar project in Minnesota. Otherwise I don't think they do any business in that state, and some other company is doing the actual installation. So I think SolarCity's contribution may be focused on financing.
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    Solarcity said something interesting in the last conference call. They said they are two companies in one: a development company and an energy company. So, I'm thinking the Minnesota deal is Solarcity will act as the energy company and the Minnesota developer will take on the development piece. Overall, the ability to raise the 200mln is a significant leverage point to lock in best rates as well as big volume, economies of scale advantage. The Minnesota community solar is a $200mln project, largest community solar project in the country as I remember. They are clearly taking advantage of community solar policy there, however Xcel is definitely trying to slow this project down right now. I think Solarcity is branching into two separate companies to take advantage of possible REIT or yield co possibilities down the road. They masters at seeing all avenues of capital raising available to them. Next year they are going to have to raise over $5billion to keep up current growth rates so I wouldn't put it past them to uncover another way to tap the capital markets.

    Maine is interesting. It's in the middle of a big revision of net metering and the "value of solar." The governor veto was just overrides by majority vote in state congress so not the most favorable conditions for Solarcity right now. Not sure if solar will have a big foothold in Maine while policy is in flux.
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    Selling 20 % of my holdings @ $149.00 Staying with the rest!
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    Outstanding post.
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    Dude! Another "nope".

    But lets do some more maths anyways.

    I believe Solarcity has said that 80% of PPA's so far have been transferred to new owners when a house is sold. Does that mean 20% have had to pay off Solarcity for the remainder of the lease? If that is true, even the claimed ten percent PPA saving is wiped out. Here is what I came up with.

    C = current cost of electricity for 20 years.
    .9C is the sometimes claimed cost improvement with a PPA

    If the average home is sold in eight years, 20% of PPA owners pay 60% of total contract value as a penalty. The expected average cost of a PPA:

    .9C + .2*.6*.9C = 1.008C

    The expected value in the real world wipes out the 10% savings, assuming the monthly 10% lower electricity bill was actually achieved.
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  • 1/1/2015
    guest
    98% of agreements are transferred to the new owners, not 80%. See FAQ here:

    http://www.solarcity.com/residential/solar-energy-faqs/buying-selling-solar-homes
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    What will be the transfer rate in eight years when owning a new solar system is very inexpensive? How many of the 98% of sellers had to make concessions to the buyer? How many house sellers lost sales from the many financially astute people who have no interest of having such a contract.

    There is no real estate agent who thinks having a solar lease contract attached to the property is helpful in a sale.

    Why leased solar panels may not be an asset when a house is up for sale

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    Those are all deflections to other arguments I have no wish to participate in. I was simply correcting your erroneous assumption.
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    You are invested in the wrong company if Musk is your thing. A recent Musk tweet:

    Credit for SolarCity is really due to Rive bros; great team there. My contribution is fairly small.

    - - - Updated - - -

    I would not either if I had signed a PPA contract.
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    Again with the faulty assumptions.
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    In eight years SCTY will be installing over 20gigs per year and even if more people do start defaulting it will matter little

    - - - Updated - - -



    One of his recent "very small" contributions was convincing the Rive brothers to become the largest Panel Manufacturer in the world. In musk's world that is a small contribution. In the world the rest of us live in it is a monumental contribution.
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    Their earnings are poor with claimed $2/watt retained earning.

    How will they have $2/watt retained earnings when systems can be purchased for less than $2/watt? How will they have $1/watt retained earnings? even 50 cents?

    We are at the edge of an era where people are purchasing systems that can be paid off in five years for $100-200 a month. Who is going to be signing these long term PPA contracts?

    Musk suggested his kid cousins start a company to sell solar. That business wasn't particularly profitable, as there is no significant IP and few barriers to entry in the solar installation biz. So in the great tradition of American capitalism, they switched to complex financial products that allow sufficient ambiguity to game customers out of the benefit that is derived from installing solar to the home.

    Why isn't Musk using his stature to sell solarcity to potential buyers? All he does is the occasional "use solarcity" shoutout. Why won't he take a more visible position? People like Musk don't get to where they are by signing long term contracts like solar PPAs. He knows that solarcity may hurt his reputation.
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    Electracity, you are trying my patience.

    Are you aware that Elon Musk is the largest shareholder in SolarCity with 20,681,528 shares, worth over $1B of the $5B market cap? I'm sure that if Musk had any doubts about the direction of SolarCity, he could find better places to invest $1B. For example, he recently sold a 10% share of SpaceX to Google for $1B. He's not exactly running out of ideas for new enterprises!
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    These are excellent points. I think this community project merits some special attention because it shows SolarCity evolving into a new business model and bringing their capabilities to bear in a new market. This goes well beyond the PPA lease model.

    I'm not sure I want to see SolarCity spin off a yield co. We should have that discussion.
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    Can't have the 4th of July on TMC without some fireworks!

    There seems to be a strange thing happening here: some people don't support Solarcity, but love Tesla as an investment. I've been very curious as to why since most people(maybe all) that post on TMC really think Elon is a special businessman with vision that can execute on big ideas. Elon owns 21%+ of Solarcity. He is the chairman of the board. He was the initial investor in Solarcity, he bought millions in common stock, and has continued to invest in solarcity reference SpaceX with over $150mln in Solar Bonds. SpaceX Headquarters has a Solarcity system on top of it. Tesla Design Center supercharger has a Solarcity canopy over it, as well Tejon Ranch and plans for others. Elon was at Lyndon's side at the IPO in New York. Elon was with Lyndon at the announcement of the Silevo acquisition, where Elon even said he envisions Tesla energy production being co located at future 5-10GW Solarcity factories. Solarcity helped to design the two man lift handles on powerwall. Elon even goes as far as saying Solarcity plays a fundamental part in his master plan of help establish a renewable production(solarcity) and consumption(Tesla) energy economy. With that said, Elon is pretty much all in with Solarcity.

    So how can someone believe in Elon, but be so adamantly against Solarcity? My answer is that those that work or have worked with utilities love... love... electric cars, but don't like revenue snatching solar companies, specifically solarcity. I have a feeling there are a few current/former utility employees that may frequent here and make this abundantly clear in various posts. Lets be real: electric cars consume grid electricity. They increase revenue for the traditional utility. Heck yeah, go Tesla! Solar companies reduce revenue to the traditional utility. Heck no, go home solar! See the friction around Elon? On one hand, he's putting new dollars in utility's pockets, but on the other hand, he's taking dollars away. It makes perfect sense to have people hating solarcity here, but yet love Tesla. Thus, we hear repetitive and consistent arguments that say Solarcity is a bad business and Tesla is a masterful business... and both arguments said in the same breath most of the time. Invest in one, but not the other. I feel we'll have this repetitive argument appear here regardless of Solarcity success or not. Just going to have to live with it, I guess. Doesn't mean we have to respond to them. Best policy is to ignore and drive on with keeping the debate moving forward with those that want real dialogue and knowledge about Solarcity as an investment.

    To add, those that follow the short interest and now being at record high levels.... my belief is that the more money Solarcity pulls in from tax equity investors as well as any capital raising deals done with the big banks is that they hedge their release of capital with SHORT BETS. All these big money players not only have given solarcity money, but they are placing short bets to hedge. Solarcity has taken in more capital over the past year then they have in their entire history of their company's existence. We're talking $300mln-$1bln a pop now. That requires a lot of mitigation on behalf of the big banks. So, to me, much of the short interest has nothing to do with fundamental shifts in the business success. It has a lot to do with capital risk management. A company doubling year over year accumulating massive levels of revenue generating assets and long term revenue streams is hardly a start up internet company on the brink of collapse every quarter earnings report. Sometimes we all just have to honest with ourselves and delve deeper into why somethings don't make sense, especially with short interest. Contrary to what some of us believe on this thread, Solarcity is a pretty solid company with continued strong growth ahead of itself.
    - - - Updated - - -

    jhm,

    Yeah, from what the CFO was saying at the last conference call, I don't think the yield co will be an option for the foreseeable future. The way he was talking, the solar bonds and abs are more cost effective options for capital.

    update:
    A Solar Revolution

    solarcity now has 12k employees. they've hired 1500 people over q2. That's pretty impressive.

    also, they now have 100k solar ambassadors. Last I checked, that's 65k more than last quarter. Again, impressive. It boggles the mind that some people actually think Solarcity is a bad investment with these type of human capital growth numbers.

    ... Solar for life sweepstakes promotion too... Wonder how big that ambassador program gonna get now...
    �
  • 1/1/2015
    guest
    At the risk of jumping into a firestorm, for me Tesla is doing things no other company in the world is doing while SolarCity is doing what hundreds of other companies are going. The only difference there is that SolarCity is national and the other companies are local. In my local market, there are dozens of local companies and SolarCity ended up being about halfway down the list when I went comparison shopping a couple years ago.
    �
  • 1/1/2015
    guest
    Well since you jumped in. .. there are way to many differences between solar city and the local competition. ..if you read the last 5 to 10 pages they are for the most part now covered pretty well in this thread. . Or better yet. . Listen to an earnings call or two.

    You currently sound like people who say when the
    Big 3 decide to get into electric cars they will smash tsla. You are on this subject uneducated my friend. I highly respect your tsla knowledge and highly encourage you to dig a little deeper into what seperates scty from everyone else.

    If you do I suspect your opinion will change.
    �
  • 1/1/2015
    guest
    Very good info, wish I'd said all that!
    �
  • 1/1/2015
    guest
    When getting quotes, be sure and check independent installers for a system purchase. I recently was quoted $3.85/watt for a 25KW system with a fairly complicated installation.
    �
  • 1/1/2015
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    From the last conference call:

    __________________________________

    Brian Lee (Analyst - Goldman Sachs):Hey, guys, thanks for taking the questions. Will echo Patrick's sentiment on the kudos for the new disclosures. On the Q1 deployments being $1.07 per watt here, Brad, how should we expect that number to trend in 2015 and even into 2016, given pricing mix, cost assumptions? I know there's a lot of moving parts there.
    ________________________

    The are installing a 5kw system for $5,350 direct cost, and pricing it at $25,950 ($5.19/kwh) in a business with no IP and no barriers to entry.

    Here is solarcity's fundamental long term problem. They are not making money with high margins and ITC. They can't maintain high margins as potential customers become sophisticated.
    Lots of nonsense in the last conference call. Customer's with batteries will self consume the power they produce.
    �
  • 1/1/2015
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    Moderator's Note

    I've moved some posts off to snippiness; apologies for not being on top of this forum during the holiday weekend.

    The snippiness started NOT with @electracity but with those who shifted from rebutting his quantitative analysis with facts and just went straight to ad hominem arguments. You may not like what @electracity is saying, but flaming him isn't appropriate here.

    Bears and skeptics serve an extremely valuable role in helping tighten up our investment thesis. Read carefully what these people say, challenging their facts and logic, so that you can reach your own conclusion as to their merit and whether it has any bearing on your investment decisions. Dismiss them out-of-hand at your financial peril.
    �
  • 1/1/2015
    guest
    Well said, Robert. Those calling for bans based solely on disagreement, replying with ad hominem attacks, etc do no service to anyone here.
    �
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    guest

    At first 98% sounded pretty good to me. While this percentage means 1 in 50 customers have written solarcity a check for presumably $10,000+, the percent is low so far. But here is a chart of cumulative customer. They have acquired a large majority of customers in the last three years. So 2% of a very new customer base has already had to pay of their contract off. This is a timebomb of future customer dissatisfaction.

    solarcity-scty-customers-q1-2015_large.png
    �
  • 1/1/2015
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    Might I reiterate Solarcity has 100k solar ambassadors. That's up 65k people over the last quarter. Solar ambassadors are not employees. They are advocates for Solarcity. The receive referral fees for referrals that lead to installs. That's right, referrals are only paid once install is contracted. So, to me, they are not a dissatisfied customer base. They are actively promoting Solarcity on their own free will. Solarcity also has the highest rating you can achieve from the BBB.

    also, I reiterate Solarcity now employs 12k people. That's up from 10250 in Q1. This is a clear indication people want to work for solarcity, and falls in line with Lyndon's rating as one of America's most liked CEO to work for.
    �
  • 1/1/2015
    guest
    tick....tick...tick
    �
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    guest
    I believe that Brian Lee is referring to the NPV of $1.07/W as on page 11 of the investor presentation deck for Q1 2015. So this is value created for equity, $147M for that quarter. It is not the direct cost, which is $2.95/W, but what is netted for sharholders. So customers got $407M of installed equipment, while sharholders will get over the next 30 years $147M NPV at 6% discount rate.

    I would encourage everyone to read the investor presentation. It really is quite informative.
    �
  • 1/1/2015
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    Robert.Boston... And this post above is high quality quantitative analysis? I appreciate you stepping in, but it might be appropriate to review his/her posts in there entirety. The above type of post is clearly not analysis nor appropriate tone/attitude for constructive pro or con contributions to this thread.

    Please consider the complaints from multiple forum members in this regard. The frustration of inaction on their behalf is what generates "snippy" comments, not the fact the above poster is a "bear."
    �
  • 1/1/2015
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    This is a faulty arguement. The 98% transfer rate only applies to customers who have sold their home, not to the entire base of customer. It does not matter how big or how recent the installed base is. These factors do not impact the transfer rate.

    Additionally, it is faulty to suggest that 2% of home sellers not transferring are writing of the contract. Non-transferring customers have the option to move their system to their new home and some elect this option. Owners of solar systems would have this same option too.
    �
  • 1/1/2015
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    What is that supposed to mean? Is it some type of scare tactic designed to appeal to emotion rather than reason?
    �
  • 1/1/2015
    guest
    More on batteries from the Q1 conference call:



    cousin Peter:
    Our solar battery backup system will sell for $5,000 as an add-on to a lease or a PPA, which is comparable to other backup generator option. It's important to note that the Tesla price of $3,500 doesn't include the inverter, permitting, the installation, management software and electrical equipment to wire out the circuits that need to be backed up.........


    �....Our product, and by that I mean the contract as well as the management software is grid services ready. And as these markets develop, there's a 50-50 revenue share model embedded in the contract that we have with our customers.


    We're not in a position to estimate what these revenues could be, but it's interesting to note that in California, it's currently estimated to cost $190 per kilowatt per year to meet new peak load. The other strategic options that batteries make available to us are hedges against bad policy outcome, with examples being changes in net-metering and solar penalties like high fixed charges.

    Let's unpack this. They are going to sell, not lease, the 10kwh powerwall as an add on. In other words, the is no room to game the powerwall sale into high IRR situation for solarcity, so we will just get the money up front. Perhaps in the future we can sell some power from that battery, but we are really not sure.

    The 10kwh powerwall can not be cycled daily, so as a revenue generator, it can only be used a few times a month. And again, no battery IP, no protection from competition. The powerwall isn't unique to solarcity. They are selling this storage at $500/kWh.

    This new product is completely consistent with Solarcity's approach of a sales process that presents the illusion of value to naive customers. Tick Tick Tick.
    �
  • 1/1/2015
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    Is your name Ron by any chance?
    �
  • 1/1/2015
    guest
    Nope, who is Ron?

    - - - Updated - - -

    I made an earlier reference that the 2% contract payoff rate was a customer dissatisfaction timebomb waiting to explode. The response to my comment was about current solarcity conditions. My tick tick tick comment was saying that I wasn't talking about current conditions.

    Although one in fifty people needing to buy solarcity out of a contract that was sold to them as a money saver is a pretty bad current condition.
    �
  • 1/1/2015
    guest
    Who is Ron?
    �
  • 1/1/2015
    guest
    Solar prices are going down. Solarcity contracts have escalators. The rate these contracts will need to be bought out to make a home sale will increase every year. Lots of people will he hatin' on solarcity. But great revenue for solarcity in the contract buyouts!!! Woohoo.
    �
  • 1/1/2015
    guest
    SolarCity adds Tesla battery to its new solar-plus-storage home product | Utility Dive
    solarcity is including powerwall in $0 down business model beating local utility electricity prices/kWh. Solarcity owns the OS software IP.

    interest in Solarcity/powerwall product has been extremely high according to the CFO. And according to Johnathan Bass, the number of calls/requests for powerwall after Elon's presentation were the most interest in a Solarcity product in the company's history.

    The "naive customer" argument has been espoused by a few bears for literally years, specifically about two years on this thread/associated threads. Over those last two years, Solarcity has gone from about 70k to 218k customers. A tripling of customers over the period the sirens have blared in warning from bears and Solarcity competitors that Solarcity is borderline "scam" and "illusion of value." With all these warnings over the years, Solarciry still has managed to triple in customer base. Over the last couple years, Solarcity has managed to achieve the highest rating from the Better Business Bureau of America. And over these past couple years, they have managed to amass an100k strong advocacy group, not employees, to advocate for Solarcity as an energy company to friends, family, and neighbors... That's then highly coveted "word of mouth" marketing that all businesses wish they could generate, and now Solarcity seems to be growing it in spades.

    It might be advatangous to a bear argument to adjust assumptions as facts have come in over time. Each day the out of tune sirens toot, a little more aware people become of its lack of fidelity.
    �
  • 1/1/2015
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    It will be interesting to see how SolarCity packages Powerwalls. Peter Rive seems to be anticipating the potential to split revenue with customers as SolarCity aggregates storage as a grid service. He considers the standby rate of $190/kW per year. Suppose SolarCity could get a deal a fraction of that, say $100/kW per year. So on a 10kWh / 5kW Powerwall. That would generate $500/year from the grid. Over a ten year contract, that covers the $5000 cost of the Powerwall add-on. But the Powerwall also creates the benefit of backup power to the customer in addition to the value created to the grid. There is at least a $1B addressable market for home backup generators. So SolarCity has the potential to package this in such a way as there is only a trivial net cost to the customer for in home back up power. Again we'll need to see how the details work out, but if SolarCity can leverage it's scale to get a solid deal with utilities, this could be a big win for both SolarCity and Tesla. Also I suspect that SolarEdge figures into this as they work closely with SolarCity and are developing an inverter customized to work with Powerwall.
    �
  • 1/1/2015
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    The pool of naive buyers isn't empty yet. Get 'em while they are ignorant. A portion always will be deceived, I suppose, but those people won't be as reliable payers as the current crop of more upscale PPA buyers.
    �
  • 1/1/2015
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    I use this chart as an honesty factor, whats going on with PV Numbers are in terawatt hours
    Terawatt-hours200020012002200320042005200620072008200920102011201220132014
    US0.50.50.60.50.60.60.50.60.90.91.21.84.49.118.5
    Europe and Eurasia0.10.20.30.50.71.52.63.87.514.223.246.772.186.599.7
    Asia/Pacific/China/Japan0.40.50.71.01.21.61.92.32.83.96.410.918.236.062.6
    total world1.01.31.62.02.63.75.06.811.419.331.460.696.7134.5185.9
    note specifically: planetary production doubles 2000 - 2003, doubles 2003 - 2005, doubles 2004 - 2006, triples 2007 - 2009, triples 2008 - 2010, triples 2009 - 2011, triples 2010 - 2012, then slows to ONLY doubling
    this data is from bp-statistical review of world energy 2015 workbook excel spreadsheet (free download) this is one reason I have a few hundred shares SCTY among others.
    I hate using the trite phrase "paradigm shift" but thats what seems to be happening to utilities (and those with no utilities for micro grids)
    my philosophy of trading this stock, SCTY (and TSLA and others) is buy and hold using dollar cost averaging. (MY ASi PV system went active in April 1999)(very inefficient, but works)
    I would also reccomend, as I have earlier "the economics of LOAD defection" from RMI. I investigated a PbA battery system, killed 2 very expensive ones for my lead sled EV's. I need items like a power wall and everytime I get off plane in Florida, there are items on the wall "Hurricane Charlie destroys power to 384,000 homes." and such. a 21-30kWh power wall would be handy for a radio and fridge. In DC area I had the ONLY street light as it was a cheap LED PV street light for 2 days.
    I dislike the "negativity" and what I regard as trollishness of some, but it gives me messages/writers to autoskip
    anyway, i enjoy these threads
    �
  • 1/1/2015
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    He's a solar system installer who it seems is having his cake eaten by SolarCity and takes every chance to post on various forums, news websites etc. under various different synonyms with the same arguments as electracity here.

    P.S. Some typical comments that are like that ron guy:
    "The pool of naive buyers isn't empty yet. Get 'em while they are ignorant."
    "    They can't maintain high margins as potential customers become sophisticated."
    "    business with no IP and no barriers to entry"
    �
  • 1/1/2015
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    Looks like Foghat just scooped me on the new announcement of SolarCity offering a package with storage. The article came out today. That's how damn fast this industry is moving.
    �
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    I like this guy
    �
  • 1/1/2015
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    winfield, thanks for the chart and insight. I think solar specifically is now considered a real competitor to traditional utilities which operate under a legal monopoly system. This legal monoply system the utilities operate under is devised to encourage competition to participate when competition develops. Solar now is a viable competitor so the grid has to be available to them to reach customers. Many people don't understand this. They only assume utilities have exclusive rights to the grid but they don't. This is why anti-trust laws are now being "activated" by Solarcity. Legal history is clearly on the side of competition and dismantling monopolies when competition is viable.
    �
  • 1/1/2015
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    Yeah, this is good. I'd also point out that SolarCity is very selective about which geographical markets to enter. They are even moving employees out of Arizona because the damaging monopoly power those utilities have exerted. So they are only certain markets with the US. If you look at the US figures in your chart, you'll see that solar has been doubling every year for the last three years. SolarCity is gaining market share in a national market that is doubling. That is an awesome combination.

    BTW, I do expect SolarCity will return to Arizona once they have an off-grid package to deliver. The utilities may be able to get political protection for a while, but they will lose once ratepayers are given a choice.
    �
  • 1/1/2015
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    Hit the nail on the head. As an investor, this is clearly where my radar is pointed. Just look at Warenn Buffet's reaction(PURPA rebuke)and you'll see this is some serious revenue potential for Solarcity. The utilities are already trying to fight this battle tooth and nail right now...
    �
  • 1/1/2015
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    Moderator's Note

    "tick...tick...tick" does not even come closing to being snippy. I read it as a reference back to the "time bomb" @electracity discussed in some detail just a few posts before, a bomb that no one has defused since. By way of rebuttal, it was offered how many customers SolarCity has willing to accept cash to refer their neighbors, a point that doesn't speak to a potentially growing base of people who are coming out on the wrong side of the lease/buy decision, nor to @electracity's point that, as solar prices fall, these older lease prices are going to be potential liabilities.

    @electracity has as much right as anyone to post his analyses and thoughts, and to remind us when rebuttals are not on point. Keep the conversation civil, and if you prefer not to see @electracity's posts, put him on your personal ignore list. Though I still think you'd be better off reading his posts; if you disagree, move on.
    �
  • 1/1/2015
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    go to this link Statistical Review downloads | About BP | BP Global
    it has energy data from 1965. they update the excel sheet once a year, in june it seems. sheet ?54? has PV, sheet 50 has hydro electric, sheet 56 has wind, all in terawatt hours.
    note:Germany, Spain, Italy China, Japan and the US are huge consumers of PV. additionally, Ireland, Denmark, UK, portugal, sweden and Turkey like wind turbines. It gives you an overview sense of whats going on where
    glad it's useful (as a VERY obscure reference, I've liked PV every since I read about the "Douglas/Martin sunscreens" long ago)
    �
  • 1/1/2015
    guest
    Why do you think that SCTY will not package the Powerwall into a lease/PPA in the future at least in high electricity price markets like HI? And more and more markets will come into that fold unless you see utilities stagnating or dropping electricity rates? Why is 5000$ for the powerwall installed an illusion of value? Can you get something similar cheaper?
    �
  • 1/1/2015
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    Then I guess this would be a good number to track. Is the rate of buyout increasing or decreasing? Why would they need to be bought out at increasing frequency given lower solar prices? Wouldn't a system that is currently on a roof, and producing electricity cheaper than the utility still be attractive? It might not be the best possible deal, but still worth having.

    I'd think as people become more comfortable with solar, that the buyout rate would decrease as home-buyers would value taking over a contract that provides electricity cheaper than the utility instead of being scared by solar. It's also assuming that the home-seller views the buy-out as a negative. It's possible a paid off solar system increases the value of the home or makes it a more attractive purchase.
    �
  • 1/1/2015
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    So you, as a moderator, are a "bear" on Solarcity as an investment. It gives me this impression when you feel it necessary to defend his posts. My response was to show the evidence points to a potential massive majority of "satisfied" customers down the line, where electracity was noting the opposite. In addition, jhm pointed out his own misinformation discrepancies in electracity's post, yet you failed to note that in your comment that electracity's post was not responded to in kind. It was electracity who did not respond in kind, but with a non informative and unproductive response of "tick... tick... tick..." which seems to be how he responds to all rebuttals to his comments.

    Many forum members have tried to engage in civil debates, however electracity does not seem to want to debate but rather incite anger and incendiary responses from other posters. If you can refer back to his very first post in this thread, we can see the inciting theme within dozens of posts later. Again, many have tried to engage in civil debate, but yet he/she does not seem it necessary to be respectful nor add to the pro/con argument when challenged.

    It is not a matter of "allowing" electracity to post, it is a matter of keeping the thread civil in debate and being even in judgement on the content and context of posts here. Many people have noted a disrespectful tone and approach by electracity. It is only fair to the many members that have noted this to address the issue. Not one person is arguing against his "bear" case to be expressed here in this thread. But most are offended and discouraged to participate because of his combative tone and disrespect for others opinions.
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  • 1/1/2015
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    Here's the falsehood of the solarcity pitch. The competition isn't the utility, it is the customer's ability to produce his own power. In ten years I don't want you old solacity PPA that is now at $.18. I want my own system that produces solar ar $.08. You want me to buy your house? Either remove the lease, or cut your home's sales price.

    A PPA contract has effectively sold the solar rights to the house for twenty years. That is only is a good deal in the beginning. The retained value solarcity boasts about is because of the poor value to the homeowner by the end of this decade, well before the contract is even half over.

    As people become more comfortable with solar they won't want PPAs and leases. You can't even add a battery to a solarcity system except on their terms.
    �
  • 1/1/2015
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    Moderator's Note

    @Foghat, I have no position on SolarCity, financially or intellectually. I'm reading his posts and have failed to find anything that requires moderation (at least until @atang got personal). I explained why I thought the "tick...tick...tick" post was reasonable, and it remains in the thread. If you disagree with me, please report the posts you find objectionable and ask the head moderator, Doug, to review them. My explanation of my reasoning wasn't intended to agree (or disagree) with @electracity's post, but rather to point out that the posts that intended to rebut his "time bomb" argument had not.

    This forum is not a fan-boy site for Tesla or SolarCity. Opinions on both bull and bear hypotheses are welcome.
    �
  • 1/1/2015
    guest
    Agree
    �
  • 1/1/2015
    guest
    By saying fan-boy you clearly stating your bias. The many of us ARE investors that have done due diligence before we even started posting here. Many of us investors come here to discuss solarcity as investment to judge long term holdings. Elon and Tesla are a SIGNIFICANT piece to the success and an integral part to solarcity business today and in the future. I've been following this forum for a long time before I decided to be a member. I know that Curt started a solarcity thread nearly two years ago that someone(anti-solarcity advocate/utililty employee) deemed fit to change into the alternative energy thread. Why? Why couldn't someone just start an alternative energy thread. Curt then had to start another solarcity thread in order to keep the discussion on solarcity. Why? Why is it when someone starts posting disrespectful comments as well as repetitive comments that state a "bear" case do they get to literally have total freedom to say what they want. It is another form of bullying and "snuffing out" of solarcity investors opinions that I thought was not tolerated on TMC. But, many of former members posting positive comments on solarcity are either banned, given the red bar of death, or stopped posting completely. Just read the threads from start to finish and look who got effectively "snuffed out" and who didn't.

    As far as complaining to other moderators... you all read what I would say to him... there really is no true objective opinion that would be decided. It's been done before and nothing came of it as I still see a bias against solarcity investors here. Anyone just need to read the alternative energy thread as well as this solarcity investor thread from the start to see it. Don't forget to read the "snipped" comments as well.

    I hoping you would take the time to address the complaints of many members that participate here, instead, more of the same in my opinion.
    �
  • 1/1/2015
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    First, I'm mostly just amused that they are selling a battery to put on a leased system. Those crazy guys.
    The first battery to be sold by them is for backup, so the purchase can't really be valued economically. Early adopters of the battery aren't trying to save money.

    The long term question is whether Solarcity, as an aggregating intermediary, can provide more value than the homeowner who owns his own equipment and time shifts with a battery. I don't see how solarcity can create enough value to skim off 50%. The economics of home storage work even better at larger scale. If some peak rates are very high, everyone has access to the technology to get those rates.

    It's unlikely future homes will be putting battery power out to the grid. What will happen is homeowners being paid for demand response by switching to battery power when requested by the utility. No one needs solarcity to do that function, unless they made the unfortunate choice of signing a PPA and don't control the equipment in their home.
    �
  • 1/1/2015
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    Actually...SolarCity or some other entity is required in this transaction. A household is too small to engage in wholesale market transactions, and in most of the country (including California), the distribution utilities don't run the grid; federally regulated Regional Transmission Operators (RTOs) do. Entities like SolarCity (collectively, demand response aggregators) are necessary to bundle up enough customers to bring the transaction to commercial scale (typically at least 100 kW). The RTO then gives signals to the demand response aggregator, who in turn activates the underlying resources.

    So, without a demand response aggregator like SolarCity, most households can't sell anything back to the grid on a real-time basis.

    Even then, it's unclear whether even this aggregation is allowed. The DC Circuit Court found, in EPSA v FERC, that retail customers can't participate in PJM's wholesale markets, even through an aggregator. That decision will be reviewed by the SCOTUS in its next term, and most of us in the industry are hoping that SCOTUS reverses the breadth of the circuit court's finding. (FYI, the DC Circuit Court is the court of first review for all federal agencies, including FERC, and it's the only circuit court whose findings are binding nationwide.)
    �
  • 1/1/2015
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    The proposed CASIO rules don't require a certain type of aggregator. But I'm talking about demand response. "Stop using power for 15 minutes". No reason the inverter can't respond like a water heater.
    �
  • 1/1/2015
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    Signal from whom? The distribution utility? In most of SolarCity's markets, the utility doesn't have any real-time function. The utility could act, in effect, as the aggregator to offer its customers's capacity to the RTO, but now we're just talking about who gets to take a piece of the action, the utility or SolarCity.
    �
  • 1/1/2015
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    Historical decisions have favored competition over monopoly. Since distributed solar is growing significantly and become a player in the retail electricity market and a viable choice for electricity consumers, the utilities must, according to law, not impede access to that viable choice on its grid. In addition, current utility legal provisions require traditional utilities to PURCHASE electricity from energy providers(i.e. solarcity DG energy) when it leads to LOWER COSTS to retail electricity consumers. Therefore, Solarcity and others look to have a strong legal case. Aggregation looks to be a "GO" from historical standpoint and thus as an investor should be aware of the impact of this revenue source/development over the medium-long term.
    �
  • 1/1/2015
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    The PPA is for buying electricity from solar panels.
    The (10kW) Powerwall is a back up system.
    There's a natural synergy between solar and storage, but they aren't dependent on each other.
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    Thanks again winfield. Will take a closer look.

    My personal cross hairs are on Africa right now, specifically Nigeria and Tanzania. Everyone has a cell phone, but there are millions of homes without electricity. They have to go into town to charge their phones and use kerosine to light their houses at night. The significant point here is that DIGITAL CURRENCY like M-pesa and bitcoin are used by almost all cell phone owners. The significants of this perfect storm, is that solar installs for those without electricity are cheaper then paying to get their cell phone charged town as well as buying/maintaining kerosine lighting at the home. What brings it all together is that they can pay-as-they-go through their phones using the digital currency. Once they pay for the electricity, they type in the text messaged code in their system and solar power(and battery) is turned on. Right now there are over 10 million homes in Tanazia/Nigeria alone that would benefit from this type of solar set up alone.

    This is a testing ground for what might mostly spread across the world with DG. The implications are mind boggling. Interestingly, Solarcity bought a piece of a solar company in Tanzania last year that eerily has a similar solarcity business model and goal of reaching 1 million customers in the coming few years.

    You just have to start looking at the global numbers on cell phones, digital currency, and lack of electricity to homes, and you will see a massive "low lying fruit" market ready for DG solar. Just India alone has approximately 300 million people without electricity, but yet there are nearly 1 BILLION cell phones in use right now.

    I'm sniffing Solarcity already has developments brewing in this area as I write this. My "ear is on the track" as they say....
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    All hybrid inverter manufacturers are implementing this technology, including solaredge independent of solarcity. Anyone could be the aggregator. If the utilities don't have real time functionality yet, the inverters will respond to IP commands. Solarcity won't be unique.

    The only way solarcity can leverage their installed base is to get the leasee to a install battery. I think this is actually a disadvantage for them compared to the likelihood of solar owners installing batteries.
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    Solar City is working directly with new home builders, and numerous partners to significantly reduce the cost of Solar Panels and battery storage. Solar City is also partnering with other companies to significantly reduce customer acquisition and installation costs.

    For many people, installing Solar Panels and battery storage with Solar City is cost effective. It is true that Solar City is not the most cost effective option for everyone. However, things to consider when choosing what company to go with, include factors beyond any "up front costs", and the amount you pay per month.

    For many customers, Solar City is the best and most cost competitive option. For many customers, with different needs, cheaper and more expensive options exist.

    For most people, the main concern is that the technology works are described. Most people who have cable aren't concerned with how the technology works, wouldn't know the first thing about installing their own system, and would rather leave any system management to an expert.

    Most people would rather call a plumber than try to fix the problem themselves.
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    All Solarcity contracts come with 50/50 revenue share on "aggregation" capability. Utilities won't deal with individual DG home energy providers. They will deal with aggregators that have a substantial capability to produce and control many individual DG electricity producers. Not everyone can be aggregators. Again, Solarcity already has it in their contracts when aggregation capability is active, they will share in 50/50 in revenues. Currently there are over 400 solarcity pv+tesla battery systems actively producing/storing electricity right now. Starting in October it will grow into the thousands.

    There is no other DG solar company going to be even close to Solarcity numbers for awhile. The likelihood Solarcity will have first mover advantage in DG aggregation is extremely high.
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    I think there are some sort of regulations, requiring utilities to contract out battery storage, and Solar Panel installations. Anyone know more about this?

    http://acee.princeton.edu/distillates/files/2014/06/Andlinger-Energy-Tech-Distillate-Storage-Article-7.pdf
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    I think you are right. Here's a shocker on the NPV of $1.07:

    Tyler Frank (Analyst - Robert W. Baird &amp; Co):Hi, guys. Thank you for taking the question. I apologize if these have already been asked. I've also been bouncing around. It looks like a large portion of the $1.07 per watt is coming from cash flows from the renewal years, years 20 to 30. Can you break down the $1.07 on the original 20-year contract versus the renewal?

    Brad Buss (CFO):It's not a number we are looking to split out right now, but it's, I would say, roughly two-thirds, one-third, just in that ballpark area. That's about as far as we want to go.

    Tyler Frank (Analyst - Robert W. Baird &amp; Co):Two-thirds coming from the -- from years 20 to 30?

    Brad Buss (CFO):Correct. Yes.

    Aaron Chew (VP of IR):Don't think 20, 30. Contracted versus non, because keep in mind MyPower is a 30-year contract. There's no renewal assumption with MyPower. So roughly two-thirds contracted, one-third renewal.
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    Public Utility Regulatory Policies Act - Wikipedia, the free encyclopedia
    "PURPA was the only existing federal law that requires competition in the utility industry and the only law that encourages renewables, if it is cost competitive with conventional polluting resources."

    Buffet's recent PURPA reform:
    Buffett's Berkshire Hathaway Energy pushing for PURPA reform | Utility Dive

    Not surprising, Buffet subsidiary fighting PUPPA solar in Idaho:
    http://www.mtexpress.com/news/blaine_county/solar-project-in-jeopardy-over-idaho-power-co-request/article_283a0f34-15f4-11e5-bd61-0f32584111a4.html

    PURPA surge in Utah (funny I saw a tweet for a Solarcity job post opening up there last week):
    The Utah Solar Boomlet: PURPA Lives! Breaking Energy - Energy industry news, analysis, and commentary
    [FONT=proxima_nova_rgregular]�Twenty years fixed at that price, in our view, that�s a screaming good deal for ratepayers,� Wright said. The utility disagrees. It continues to fight to defang PURPA."[/FONT]
    PURPA coming alive in Colorado:
    In Coloado, a door squeaks open for rural energy independence | SummitDaily.com

    JD Supra legal point of view a recent PURPA case:
    FERC Confirms Distribution Cooperatives Must Purchase QF Output | Sutherland Asbill & Brennan LLP - JDSupra

    Bottomline, looks like Solarcity will get paid for putting its solar energy onto the grid whether net metering exists or not in the future....
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    Its worth noting that Solar City as well as all of the bears and most of the analyst foresee Loans continuing to gain ground over the PPA/Lease model. Have you checked the NPV for the MyPower loan? I believe it was over 3.00 in the last quarter.

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    Since this post I have checked Solar City now nearly every day and have not seen 6 GWh since lol.

    I think the other number really is astounding for the amount that people will save on the electricity in their first year. The nation is saving over 200k a year for every day the Solar City sales force is out there. Pretty amazing stuff.
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    Can you link us to Buffet's reaction? That could be interesting.
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    That's right. If you look at the numbers on page 11, you can work this split out exactly. Essentially, the initial term, 20 years, must cover the cost of the system. The next 10 years is gravy. My expectation is that to get those renewal terms, SolarCity will have to back off on the price per kWh. In twenty years, new solar may well be a third or less the cost of current systems. Moreover, that is long enough to break down utility rates. At some point, utilities will be forced to reduce residential rates or face mass defections. Imagine getting rooftop solar at 5 c/kWh plus storage for 5 c/kWh, for an average cost around 8 c/kWh. At these prices, neither SolarCity nor utilities will be able to hold customers at 12 c/kWh. FWIW, I am not a fan of escalators either, which would push the price upto something like 18 c/kWh in 20 years time. Of course, if SolarCity keeps doubling every couple of years for the next 20 years, this won't matter much. The 20 year old leases will be such a small fraction of their book, they'd be able to reduce rates to retain customers. The loss against pro forma assumptions will not be material. So the key thing is to keep growing and keep applying pressure on utilities till they crack. This is what the whole distributed solar industry will do.

    Here's another curiosity. Notice that SolarCity's gross retained value for leases is $1.86/W vs. $3.66/W for MyPower loans. Thus, SolarCity has nearly twice the incentive to push loans over PPAs. The longterm value for loans, say 20 years out, is much better. While someone in year 20 on a PPA may start shopping for a new system, the borrower is locked into paying off the debt regardless. That is, the borrower owns the residual value of the system, while the lessor has the option to walk away. This is true of auto loans and leases as well. So one way that rational consumers mitigate the risk of obsolescence undermining residual values is to lease. This is why many corporations lease laptops for their employees rather than buying them. They don't want to get stuck with the risk of owning four-year-old laptops. Likewise a rational solar consumer may opt for a lease over a loan precisely because they do not want to get stuck with owning a 20-year-old solar system. They would prefer the likes of SolarCity to absorb that risk. So why again would SolarCity want to push customers into leases over loans? I would argue that they don't, but that is not the end of the story. What is critical to SolarCity is the value of the customer relationship. It trust that when the time comes SolarCity will reduce rates, not because they are forced to, but because preserving relationships longterm will be key creating sustainable value. SolarCity will fight just as hard to retain customer as they did to acquire them.

    The problem for the utilities is that they think they can exert monopoly power over ratepayers. They really do not know how to compete to retain customers because they never had to. So right now is the golden opportunity for SolarCity to steal marketshare from the utilities. Once utilities have taken a big enough beating, they will change their strategy, and some are just beginning to do that. Once we truly have a competitive market for retail electricity, strategies will change. So they question is, how much marketshare can SolarCity capture before utilities become competitive? In 2014 in the US, all solar generated 18.5 TWh, and over the last 4 quarters SolarCity generated 1 TWh. So already, SolarCity has over 5% marketshare of the US solar market. Within 30 years time, solar could come to provide 50% of the entire energy market, including transportation and heating, which combined is about 3 times the size of today's electricity market. So if SolarCity can grab and hold 10% of that expanded energy market that would be huge. So why can't they double their share of the solar market and continue to grow with it from their? They key issue is the velocity at which they seize market share from utilities. This is why they are willing to lead with leases when loans would give them more retained value with less residual value risk. It's all about grabbing customers quickly.

    Another thing we should watch is that SolarCity will be improving it's capital structure so that it can offer MyPower loans at a lower interest rate. Currently it offers 4.5% financing, but if they can reduce that to 4% or 3.5% that would be a tremendous win for SolarCity. They would be able to attract more customers to MyPower loans and retain greater value than with leases. One more thing. I would not be surprised if SolarCity were to begin to offer mortgage financing products. Think about it.
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    im not sure if this is apropo, but about 3 years ago thre was a white paper, I think from EESI or EPRI moaning about the utilities losing 1% of their steady, stable revenue stream to renewables, specifically wind and Solar (PV). about a year ago Rocky mountain Institute (Amory Lovins) came out with a paper "The economics of GRID defection" then recently "The economics of LOAD defection" the load defection paper analyzes in 5 differant areas, Hawaii, Newyork, SW US , 2 others using -> photovoltaics and lithium batteries <- "In general, grid-connected self-consuming solar will become economic for nearly all customers imminently, with grid-connected solar plus-battery systems following soon after" AND "This load defection will essentially relegate the grid to a backup-power-only role for customers that adopt these systems. ..... our key findings are: Solar-plus-Battery Systems Rapidly Become Cost Effective Distributed solar first and then solar-plus-battery systems covering only a portion of a customer�s load will have compelling economics without the support of incentives or feed-in compensation in many important markets within 15 years" You can download hte executive summary or the whole pdf (free) there are a lot of brain hours that went into the analysis The Economics of Load Defection
     SCTY seems to be at the present forefront of these "changewinds" of distributed generation
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    MyPower is a 30 year term. Can there really be that many buyers in the world?

    Whether 20 or 30 years, most of these agreements will not run to conclusion. Solarcity will be paid off to go away. That's your shareholder value.

    Prices of purchased system in Australia in June ($AUD):

    Solar-Choice-High-Low-Average-System-Prices-June-2015.jpg
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    Component cost? Installed Cost? includes incentives?
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    But *after* generous subsidies are included:
    Of course, SolarCity's lease rate is also after ITC incentives, but it's not necessarily apples-to-apples.
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    I wonder if an Australian customer asked for a 20/30 year labor included warranty on all components, online monitoring, power production guarantee etc. that SCTY provides, what the increase in cost would be. I paid prices not too far off from Australian prices after federal rebate for my system. But I have none of that stuff. I also don't know if SCTY is using solaredge on all installs now or not. That would add some cost and also something I don't have.

    In any case, comparisons to SCTY can never be apples to apples with small installers because of this.
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    The Aussie STC looks less than the ITC, but it is pretty close after adding in the U.S. panel tariff. The table is also Australian dollars with is .74 to USD today. I don't believe there is a Australian solar panel or inverter industry. They import from China like solarcity.

    20%-30% cost variance on the Australian numbers doesn't matter. Solarcity and many other large and small high overhead installers can't be profitable in a mature solar market. Solarcity provides the numbers to prove their untenable position.

    It's the wrong long term business model. The competition is tradesmen seeking a good wage.

    - - - Updated - - -

    Here is part of the myth making. The expensive hardware pieces have manufacturers warranties. All installers, including solarcity, have no intention of keeping your system fine tuned. If a panel goes out on a medium to large system, it probably won't be noticed by the owner. Solarcity or any other installer is not coming out to figure out why production dropped a bit unless asked. And that will probably require repeated asking.

    As far as the inverter, an owner probably wants to replace it after 10-15 years. The new models will be more efficient with more features. There may be batteries added. More panels may be added. The whole system should be inspected. Solarcity will do none of this. They will replaced a failed inverter with an inexpensive oldschool version of the current model to keep their costs at an absolute minimum.

    A solar system is about as reliable as a refrigerator. I know it's more reliable than my fancy front load washer. Yet I wouldn't consider signing a twenty year lease on a front load washer.

    Anyone placing a very high premium on ease of use shouldn't lease or buy solar anyways. Just use grid power.
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    Actually SolarCity wants MyPower customers to pay back early. The customer saves on interest at 4.5%. Meanwhile , SolarCity values this loan using a 6% discount. So prepayment increases retained value. The 30 year term is simply there to give the customer the greatest flexibility in making monthly payments. You make it out as if this is some sort of entrapment. It is not. The customer chooses SolarCity to install a system for no money down, the customer gets a very flexible loan at 4.5% interest. And the customer pays off the loan as quickly as they like. Additionally the customer receives the ITC tax benefit and can elect to apply this to pay down their loan once they get their tax return. Of course the customer must repay the principle, but the amount of interest payment is entirely at their discretion. There is nothing underhanded in this set up.

    Apparently you know you have lost this debate because you have pivoted to the irrelevant topic of the price of solar in Australia. Redirection is a really lame rhetorical device. You have argued that loans are better customers than leases. I have pointed out that SolarCity also has an interest in steering into loans rather than lease. Your response is to bemoan the fact that borrowers are expected to pay back their debt and to pivot to the price of systems in some other market. Your next step will be to rationalize the relevance of your pivot and make a few snark comments about how stupid SolarCity's customers must be. In all this you are attributing malevolent motives to SolarCity. This is essentially an ad hominem attack on the character of a corporation. I often find that people who attribute false motives, contempt and hatred to others are in fact projecting what is in their hearts. I have argued that SolarCity's best interests lie in offering the very best service, products and financing they can muster. I regard SolarCity as a highly ethical company. If you want to continue to impune the character of SolarCity, that is your choice.
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    FWIW, the best local solar installer here in Portland (Maine), ReVision Energy, has arranged with a local bank for 2.99% APR fixed-rate 12-year financing, which helps make their systems very affordable to buy.
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    That's really great. It's really good for local installers to team up with community banks. I would expect these are secured loans.

    The term is good. I suspect that SolarCity could share 50 to 100 basis points off the MyPower loan simply by offering at 10 to 15 year term option. I noted that in their solar bond offerings the are offering 5.75% and 5% yeilds on 15 and 10 year bonds. With a shorter term MyPower loan they would not get so much exposure to longterm rates. Their solar bonds are quite comparable to CDs but offer much higher interest than most banks. I suppose much of the may be teaser rates to build up a base of investors. But what they pay on the bonds limits what they can offer on the loans. Banks are ahead of them in this regard and have the benefit of FDIC insurance on CDs. But SolarCity avoids a mountain of regulation by not being a bank, so there are pros and cons to both.
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    There are. The local competition is *consistently* cheaper. The local competition *consistently* does a better and more professional job. On the other hand, Solar City typically has more financing options.

    Solar City *is not in the solar power business*. They're in the financing business. This may be a good business, it can be highly profitable, but it's really hard to tell. Financing companies are very tricky to evaluate. They can go belly-up overnight.

    Elon Musk is in SolarCity... but Elon doesn't really care, long-term, whether his companies make money, remember? Even if Solar City goes dramatically belly-up in 15 years, they will have sharply accelerated the adoption of solar panels, so Mission Accomplished from Elon's point of view. The mission is to get solar panels on the roofs of people who don't have the cash to buy them. SolarCity could be a huge success from Elon's point of view *and still go bankrupt*.

    Frankly, so could Tesla -- Elon's been very clear on this, he'd be happy if all the major carmakers switched to nothing but electric cars and drove Tesla out of business that way -- but I think that there are other reasons to believe that it won't, which I've explained elsewhere.

    - - - Updated - - -

    And this is, basically, the bull case for SolarCity.

    But I don't invest in financial stocks for the most part, because I don't feel comfortable with them.
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    Totally agree!
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    While I disagree with many of your points the fact that Elon has not given away the patents for this gives me some comfort. I have no doubt Tesla will do amazing from here and I see 2000 a share within 10 years as very possible. That being said I have a little long term unease with Tesla because of the Patent Giveaway. With Elon and Company Focused I dont see anyone catching them but as someone who invested in TSLA primarily to make money it did unnerve me a little.

    The good news is I think there will be plenty of time to see if anyone is catching up to TSLA and make adjustments as needed.

    That being said all of Elon's companies experience insane highs and lows that come on very quick. For me Solar City is more undervalued than Tesla currently so that is where most of my eggs are but I feel very exposed not being exposed to TSLA like I have been for most of my investing career.

    Edit: I should note that I dont really see GM or Ford or any legacy auto as a threat to Tesla but am more concerned with Apple possible teaming up with an automaker.
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    I am guessing you posted in SCTY thread to show that utility solar is far more competitive than residential solar, especially SCTY-solar. And thus SCTY will be left in the dust in the long run.

    The way I think about it, SCTY is doing what ever it is doing because that's what provides highest long term shareholder value. FSLR shareholders didn't get much out of that deal. Only Berkshire benefited.

    If the opportunity disappears in residential, SCTY can just as easily switch to commercial/utility projects. In that case maybe SCTY wont become a $50Bil company but will stay as a $5B company. Not much to lose but has a tremendous potential upside (if residential market continues to behave the same way). Not a shabby investment!
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    In fact this is a brilliant post: there is obvious and certain value in the future commercial solar market (it's showing here and now with $/kWh and $/MV prices being published). This is SCTY's fallback and puts an almost certain floor on the stock value (face it: the worst SCTY could do is grow like a boring, uninnovative, commercial bread-and-butter installation firm) while the upside may be spectacular if home solar takes off globally and ends up making the best financial sense to people.
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    That price is crazy low. No way money is being made there. See discussion here:First Solar (FSLR) | Page 12 | The Contrarian Investor Discussion Board
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    What makes solarcity a profitable commercial/utility installer?

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    Why would there be good money on installing stuff to a house? There never has been, except under unusual market conditions.
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    SCTY could likely swap their operations quite easily in to a commercial/utility installer.

    Why solar is different is because it can provide freedom from the grid and that the concept of producing the electricity at the point of usage makes so much basic sense, even if right now it doesn't yet make complete technical or economic sense (except as you say under unusual market conditions - read: government incentives). What in investment is about though, is seeing in to the future where it might make a lot of more sense in the most ordinary of market conditions.

    See where I'm going with this: people in the 1940's probably said "why would anyone want to have such an expensive and technically complicated device as a television in their home? No, people will want to pay-per-view in large scale facilities where they don't have to interact with the technical machine (called a cinema)." If TVs had remained what they were technically and economically in the 1940's this would still hold true. However, TVs have evolved to a point where most people can afford one easily as well as operate one, and everyone wants to have them. And I'm sure there were good investments to be done in the early years of TV manufacturing if you could grasp the importance of the concept early on.
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    More possible unfortunate news for solarcity. The solaredge solarstor inverter uses power optimizers to install the powerwall on a common DC bus. Solarcity probably doesn't have systems installed that can charge the powerwall from solar panels. Their solution probably is from AC and independent from the panels.

    SE Powerwall.png
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    Q. What makes solarcity a profitable commercial/utility installer?

    A. They were the largest Commercial Installer last year and every project they take on shows a profit. They have not gone into Utility yet because the margins there suck.

    Q. Why would there be good money on installing stuff to a house? There never has been, except under unusual market conditions.

    A. This statement is just false in my world. I have worked in the Roofing and Guttering industry for most of my life and have seen plenty of Roofers make what almost everyone would consider "good money". I know of multiple people that have made over 1 million in profit in the first year of a company. To be fair they were very driven people with a decent amount of knowledge. On the other hand, None of them seemed overtly bright to me...
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    The key difference Buffet is just buying power. Buffet still needs to transmit and distribute. The cost of electricity will not change for the end user. That's the beauty of cost plus system. They boost margins by getting cheaper electricity since they don't lower end cost (they get rate increases from the commission as we all know).

    Solarcity creates electricity at the place of need. No distribution needed. Solarcity has absorbed those costs. They are making the end user price for electricity cheaper.

    Bottomline, the only way the end user will get cheaper electricity is through the distributed solar option. Period.

    ps... Solarcity is already the #1 commercial DG installer in the U.S.
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    Really bad analogy, especially since SolarCity is the big johnny-come-lately gorilla in the solar panel installation space.
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    The analogy probably is terrible, Does not change the rest of it. Solar city was founded less than 10 years ago and installs about the same as the next 50 competitors combined ...and for 10 years people have been saying it will never work ... why are there no nationwide roofers if a nationwide Solar company is such a good idea?

    Much like Tesla people will complain that Solar City is overvalued for years and years to come. They complain now at 50 a share and next year at 100 a share it will still be too high :)
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    When is the roofing and gutter IPO? There won't be, of course, because this sort of work isn't managed efficiently at a national level. The owner needs to be closely connected to the work to be profitable. If roofing and gutters were a new type of business that was not well understood, a national company with a good sales pitch could have high sales for awhile. Especially with subsidies. But as the market matured, this industry would become what it is today.

    Solarcity is nothing like Tesla or SpaceX. No IP, no barriers to entry. Scale beyond a point adds overhead relative to smaller competitors. No small competitors when building cars or rockets.

    Big companies can work with no IP when their scale has efficiency their competitors lack. That sure isn't solarcity.
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    SolarCity has the same advantages as WalMart: a brand name and buying power. I'd be stunned to learn that SolarCity isn't getting better pricing from its equipment suppliers than local installers. And never underestimate the value of a brand name: even if the trust isn't warranted by anything factual, most people feel it's less risky to buy from a big-name firm. Take a look, e.g., at the hotel industry, where the vast percentage of new hotels are branded under one of the majors. Likewise, McDonalds doesn't make a particularly good hamburger, but it can still out-compete local hamburger joints.
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    Solarcity is unquestionably getting significant lower equipment costs than their small competitors. But as I have said before, there are no analogous national companies doing custom home installs of anything, even those these economies of scale are available. A national HVAC company would fail due to inefficiencies of management.

    McDonalds are locally owned because nationally owned restaurants are unsuccessful. It is profitable for Mcdonald's to give up the franchise percentage to have a local owner who often has all his wealth riding on his restaurants. Walmart is profitable on product purchasing power and the ability to make a capital investment in a huge store that can't be matched by local merchants. The Walmart brand is valuable because of lack of customer alternatives for selection and price.

    Solarcity equipment cost on average is less than 1/3 of their selling price. If equipment was 2/3 of the price of solar, then the industry would consolidate to a few major companies. But when the manufacturers are producing most of the value, the modern approach is to squeeze the profit out of the middleman. (e.g. Tesla direct sales)

    Solarcity also has little business methodology to franchise. They install near commodity equipment that produces a commodity. No Big Mac. No Model S.
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    You realize they bought Silevo HE panel manufacturing process, already own the Zep system tech, and are building their own panel manufacturing plant in Buffalo right? That will be their own Big Mac or Model S product.

    Also, your comment about national business HVAC is wildly inaccurate as their are many such companies competing today.

    HVAC Repair & Maintenance – National HVAC Service | Johnson Controls Inc.
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    Starbucks and Chipotle don't have franchises.
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    Silevo builds a functional commodity (price per watt), it is no Big Mac. If the price performance is good, that business will be valuable. More panel manufacturing startups fail than succeed, so that venture probably doesn't add a lot to the stock price at this point. People playing the hardware side are probably making other simpler investments.

    Did you follow your own link, and look at where the Johnson Control truck is parked? Do they have any residential business? Is Johnson Control not in the HVAC business, but rather the provider of hot and cold air with no money down?

    List what was installed by a national company in your own house. Even carpeting bought at a national department store chain is installed by a sub.

    - - - Updated - - -

    True, and Chipotle is an interesting exception to the franchise rule.

    But comparing solarcity to food chains with extreme repeat business is getting lost in the weeds. Everyone understands why we personally repeatedly use the most successful of these businesses.

    Solarcity installs a home appliance that provides a function. There are many good business analogies to examine. Even going with "solarcity is a power company" can be examined by analogy.
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    Solar companies say NV Energy misled them on cap limit - Las Vegas Sun News

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    Solarcity does do business in Maine... They actually have the largest installation in the entire state at Bowdoin college interestingly enough...

    How the REV initiative is changing the way New York utilities do business | Utility Dive
    looks like New York utilities are looking to work with DG companies like Solarcity on new way of doing business. It's funny how Warren buffet can say it's a cost shift onto customers but yet New York and California are already making efforts to accept the fact DG is a benefit and develop new business models as such. Buffet and his subsidiaries in Washington, Utah, Idaho, and yes, Arizona and going to left in the dust if they continue to the anti- DG stance. There will be serious consequences of anti trusts suits go to court.

    What could Elon Musk's SolarCity (SCTY) Be Hiding? - TheStreet
    Its clear this individual has a short play because this sure was a lame attempt at scaring traders away today. It's funny how Solarcity has literally grown 600% since the federal investigation was initiated in 2012. That means the government has forked over a lot of ITC (and pre itc) credits during that time without issue. Secondly, the author failed to point out the courts have set a court date for 2016, so everyone knows it's not confidential material. It's a public court case going to be settle next year. Other then that, it's pure speculation as to why the CTs recently. If we're going to speculate, I'd say Solarcity has made an offer to Verengo for the west coast operation. As far as I understand it, NRG didn't buy it, so maybe Solarcity is picking it up. Wouldn't hurt to pick up #3 installer in California in my mind, but again, this is pure spec just as the article is.
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    Why would think this isn't good news for SolarCity? Who do you think will install the majority of these specialized inverters in the US? I believe SolarEdge is already a supplier to SolarCity. Moreover, SolarEdge seems to have a cozy relationship with Tesla. It is plausible that Tesla declined to put a bidirectional inverter in the Powerwall, as originally conceived, because Tesla wanted to leave an opening for this and other innovations. I read this as a very good development for both SolarCity and Tesla. I'm even thinking about investing in SolarEdge as part of the Musk ecosystem.
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    The Rapid Growth Of Community #Solar Gardens - thecherrycreeknews.com

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    Solarcity is over 20% of ALL solaredge business... I think we have to get things in the right perspective... Elon has nothing to do with solaredge. Powerwall was NEVER designed for solaredge or any other inverter company. Powerwall was designed to be PLUG AND PLAY with any PV system . So it made no sense what so ever to design anything around any inverter company or anything outside of Tesla energy tech.

    Solarcity has been doing emery storage pilot with tesla since 2009. Six years they've been piloting energy storage with Solarcity PV systems. There is no two ways about it... Tesla storage is designed to optimize Solarcity business first, everyone else that wants powerwall will need to work around that design intent, everyone else with have to implement what Solarcity is setting up as optimal.

    solarcity is really the lead on DG storage, not tesla. Tesla has taken all the cues from Solarcity on how this will work best in the field.

    So, solaredge is only working with tesla because of solarcity's approval as well as future plans for their products. Lyndon said they are choosing partners with the best tech as well as the ability to keep up with their aggressive growth projections. I think in this case, more credit goes to Lyndon then Elon here. We have to remember, Lyndon started a million dollar company in high school and also sold his first software company for over $200mln to dell by his early 20's. I'd say he pretty close to as business genius as Elon as one can get. Don't rule him (and his brother) out as building a parallel empire.
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    its funny, the clouds here in Southern California (LA) rolled in on July 1st and have been rolling in every morning through mid day ever since. Not sure if it's the same state wide right now, but clearly have lowered the overall MWhs produced. I'm seeing consistently are 5-5.5GWh per day with the SoCal cloud cover. El Ni�o is in effect through early 2016 they say.

    However, still seeing some phenomenal bookings happening everyday. I'm feeling another record breaking quarter in the booking category for sure again.

    - - - Updated - - -

    Buffet's reaction:
    http://www.utilitydive.com/news/buffetts-berkshire-hathaway-energy-pushing-for-purpa-reform/398767/

    i think ink buffet made a big bet on the traditional utility business and is in deep. He's obviously a man who does not like to lose or experience risk in his investments. I learning quick he's not this great oracle for his altruistic ways. His good old aw shucks persona is a masterful schitck in my opinion. He's does not like DG solar and it is very clear by which states are giving DG a hard time: all his utility states. Remember, he loves utitliy level solar because he still makes a crap load of guarenteed returns approved by te commission in monopolist system. It is estimated that only about 20% of the cost of getting electricity to the end user is the generation of electricity. All the cost is in infrastructure, transmission and distribution. Those are all where the "cost plus" system allows buffet to get away with raising the rates on consumers.

    DG reduces the bill for end users and that's not profitable for buffet. Make no mistake either, he wants DG dead or made irrelivent for his profit to keep being predictable.
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    Well, that is just fantasy. What solaredge is showing at Intersolar next week is in direct competition with solarcity's plan to sell aggregated service. Sunrun even announced yesterday they will be using solaredge.

    What is likely is that solarcity is only selling the 10kWh powerwall because they are only able to install a simple AC based battery system at this time. The solaredge solution announced this week charges the battery with direct DC from the panels. That system requires power optimizers, of which solarcity has an installed base of probably zero.

    What solarcity probably means by being "already powerwall compatible" is likely only an AC connection in the lower section on the inverter boxes they have installed. If that is true, no one is going to want to do daily cycling from inefficient AC.
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    Foghat, I don't understand your point here. I am well aware that SolarCity was deeply involved with developing Powerwall. So naturally there will be design choices that favor SolarCity's approach.

    But where I lose you is that SolarCity does not produce or design inverters. They have been sourcing inverters from suppliers. Tesla made the choice not to package a specific inverter with the Powerwall, rather Powerwall is inverter agnostic. This gives installers the freedom to choice the most fitting inverter for each specific application. This also gives inverter designers like SolarEdge the opportunity to design custom inverters. If they have succeeded in a DC direct solution optimized for self-consumption from PV panels, then I see no reason why SolarCity would not want to source it. Now if SolarCity wants to use a bidirectional inverter so that power from the grid can be used to charge a Powerwall, that would be another use case, and SolarEdge's StorEdge might not be optimal for that use case. However, the self-consumption of solar is a very good use case too and seems worthy of consideration. SolarCity has no vested interest in one inverter over another except to deliver good performance to customers at a good price. If there is something I am overlooking, please let me know. But I do not see how a DC direct inverter is any sort of threat or compromise to SolarCity.
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    My point was more for the post you were responding to... I agree with you. Tesla is inverter agnostic. Solarcity is inverter agnostic. Solarcity has a deal with solaredge, which constitutes 20% of all solaredge production(major buyer). Again, pointed toward the comment you responded to, Solarcity could care less who solaredge sells to as long as solaredge meets Solarcity product orders. Solarcity has been running pilot programs with tesla energy storage for 6 years now, so no one should be unclear who where Solarcity and tesla stand in their "partnership" in all of this. Solarcity and tesla are full steam ahead for the long haul whether solaredge is in the mix or not.

    it is a stretch at best for the poster you are responding to base a bear case on solaredge selling inverters to sunrun or trying to insinuate tesla is somehow developing its products with solaredge in mind and not Solarcity. As we can he he/she is just plain looking for all and any reason to protest Solarcity success and proliferation. If truly a bear, an investment thesis is clear and pointed toward a major flaw. Rather, what we see here is someone throwing mud against the wall to see if anything sticks. I really don't think this individual has any interest in actually putting any money on the line against Solarcity. They are here for argument's sake. It's truly boring conversation. I just hate to see others here actually engaging and taking what they say with any kind of seriousness.
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    Foghat, we're on the same page. Thanks for clarifying.

    I think what SolarEdge is doing is really great. Their core products are aimed at optimizing rooftop installation where shading and differences in orientation would otherwise compromise performance of the whole system. This is important for squeezing out an extra kW or two per installation. So adding 20% to a typical rooftop is huge deal for SolarCity. So now optimizing Powerwall integration is very smart. It's the sort of company I could see SolarCity acquiring, a fine complement to Zep Solar (bracketing hardware for efficient installation) and Silevo (high efficiency panels at standard prices). So all three of these companies are aimed at optimizing rooftop installations by addressing the components of inverters, brackets and panels. I'd also mention that SolarEdge has grown gross profit 280% y/y and are building a manufacturing facility in the US to handle NA demand. So clearly they must be bringing good things to market.
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    The important metrics of the powerwall are only cost per kwh, and the warranty. The functional external characteristics are important for implementation, but not complicated. It's a 400V DC system. It takes a documented set of commands to turn charge or power the buss, and it reports its status to the inverter. The inverter determines the flow of electricity. The inverter controls the battery discharge rate. The magic in the powerwall is price, not unique functional IP.

    Once implemented, the important functional characteristics are usable capacity and efficiency.

    What is solarcity's plan here? 1) They have a large customer base, which have low cost systems apparently missing the key hardware piece (power optimizers) needed to efficiently use the 7kwh as a daily cycler with solaredge inverters. 2) They have sold "no upfront cost" PPA. Are they now expecting to go back to their customers and talk them into buying a battery to put on their leased system, and then do revenue sharing? 3) Going forward, will they be selling more expensive battery capable systems, or the low cost string inverter systems?

    This explains why solarcity is said they are selling only the 10kwh powerwall. A daily cycling 7kwh powerwall doesn't fit with their primary business model of installing the least expensive system that will provide power. Meanwhile, knowledgeable homeowners who select and purchase a properly configured solar system can take advantage of the 7kwh daily cycling battery using solaredge software. Once solaredge has enough installs, they can aggregate service. So can all other inverter manufacturers who have implemented batteries.

    Solarcity will sell 10kwh batteries to their confused customers. But even with the sale, Musk has forced them into installing these batteries at a low margin. When U.S. utilities properly incentive solar users with detailed TOU pricing, many of these owners will realize they have the wrong system, with the wrong contract, and the wrong battery.

    Solarcity may be able to aggregated non-customers along with their own contracts. But if that can happen, the aggregators would be competing for solar owners, which would make it a lower margin business for all companies seeking this business.

    Everything solarcity does eventually leads to a low margin business because they lack meaningful IP. Complex financial products have perhaps provided a nest egg from early solar adopters, but they will soon need to be competitively efficient at actually selling and installing solar systems.
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    "This explains why solarcity is said they are selling only the 10kwh powerwall. A daily cycling 7kwh powerwall doesn't fit with their primary business model of installing the least expensive system that will provide power. Meanwhile, knowledgeable homeowners who select and purchase a properly configured solar system can take advantage of the 7kwh daily cycling battery using solaredge software. Once solaredge has enough installs, they can aggregate service. So can all other inverter manufacturers who have implemented batteries."


    The reason they are selling the 10kWh systems as the utilities tend to need peaker plants about ... wait for it .... 50 times a year ... which is what the 10kWh Powerwall was designed for. The 7kWh system was designed for Europe where today it makes lots of sense for rate arbitrage on a daily basis. It will also be used in the off grid systems I am assuming but we really wont know until the first systems go into Hawaii

    I am beginning to think you really just dont know about Solar City's business model and might even be willing to smarten up to the reality. Hopefully your time here trying to convince others to short will help you educate yourself to their business model.

    One word of warning. The only reason they are so undervalued is people don't understand the company (see above poster). Every quarter since he came on Brad Buss has done a great job of making things easier to understand. That combined with their stellar business model/execution/free factory will cause this thing to blow through ATH's before long so shape up quick bud. Save yourself some money.
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    There is no reason solarcity would have an advantage over a competitor for more than a year or two. After that time, they are at a disadvantage with less flexible, less efficient system. Every hybrid inverter maker is a competitor.

    So once again Solarcity will imply long term customer benefits on battery payback that will not materialize. They do have a customer base who falls for their pitch, so that a plus. But with no barriers to entry, the margins become small.

    Off grid in Hawaii can't be done with the 10kwh powerwall without voiding the warranty. They will use an off grid hybrid inverter, when available, with the 7kwh powerwall.

    Solarcity is in the business of stripping value from the homeowner. They will do it again with the 10kwh powerwall. Sell it for backup, with the implication of paying for a significant portion of the cost through grid services. Hype it in their usual way to gain the interest of the technologically and financially confused.

    People in Germany and Australia didn't fall for this nonsense of PPA and leases, and pay a lot less for solar. They will probably make better battery decisions too.
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    Here is an example of the difference between buffet solar and Solarcity solar:

    http://m.pressrepublican.com/news/local_news/town-of-plattsburgh-solar-project-progressing/article_497cae92-d2f2-5216-9104-f925f66064b2.html?mode=jqm

    Solarcity DECREASES end user prices(you and me).

    Buffet solar INCREASES prices to end users(you and me) during rate reviews with commissions while Decreasing his costs/increasing his profit by implementing utility scale solar. They can get utility solar down to 3 cents per kWh, still not going to lower the price to us end user in Buffet's world. He likes a fixed game it appears. The biggest subsidy this country has ever seen is government backed GUARANTEED PROFIT. This is exactly why buffet loves traditional utitliy and dislikes competitive market DG. It ef's up his fixed game.
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    Residential solar race

    The Battle for Third Place in the US Residential Solar Installer Race : Greentech Media

    Sunrun coming up third in the US residential solar installation market. It turns out Sunrun does 25% of its own installs and partners do the other 75%. Sunrun also provides financing for Sungevity, which only seems to exist to be a sales channel. Sunrun and Sungevity combined get about 5% marketshare, while Vivint Solar and SolarCity take in 11% and 34% of the market respectively.

    It looks like Sunrun really wants to be the financial umbrella for smaller installers. This could be a winning stategy. While small installers may be losing marketshare to SolarCity and Vivint, Sunrun provides a national brand name, lead generation, sales and financing services to help level the playing field, that is if an independent installer is willing to partner.

    I wish good luck to Sunrun and all their partners. Grabbing share from utilities is the name of the game.
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    Thanks for link. I have really grown to like greentech media. Has anyone seen this article about the secret SEC documents?

    What could Elon Musk's SolarCity (SCTY) Be Hiding? - TheStreet

    While the article is written to be clickbait it does peak my curiosity about what they are filing secretly
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  • 1/1/2015
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    Yeah, this is nonsense. SolarCity has been filing these CTs since 2012. They redact things like critical FICO score levels and the names of tax equity investors from their 10-K and 10-Q reports. Look at any of them and you will see "[***]" or "[reserved]" where things have been filed with the SEC, but withheld from the public. While it is possible that a management could abuse Confidential Treatment to hide things from investors, the rationale for CT is to protect the shareholder for release of information that may impair the company. Note also that the confidentiality is granted until a predetermined date. If a company were to abuse this privileged, it would become common knowledge. For example, one table granted CT in 2013 had an expiration date of June 7, 2015. I could not find this exhibit, but I bet if it was juicy at all, the SC bears would have made something of it already. So I suspect there is nothing to see here.
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    Awesome I figured as much but thanks for shedding some light on it jhm!
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    With all the BS floating around I missed this legitimate post, thanks for addressing that article .. it was a thorn in my side for a bit. Im about to go to sleep 10:30 mountain time but I see SCTY got very close to 6 Gig today :)

    and more impressively had a huge booking day at almost 400k in first year savings .. highest I have seen
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    1st free APS-owned rooftop solar installed in Phoenix

    Two El Paso Wal-Marts go solar with big SolarCity systems - El Paso Times

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    A system just got turned on in Ft. Worth Texas that is not saving the customer any money. A friend of mine received a sales call from SCTY who lives in Texas and it was the same story .. would cost him more to go with it ... interesting to see people are still going for it without monetary savings.
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    Why do you assume selling to Walmart is particularly profitable? Solarcity was the low bidder. If installing solar at Walmart is substantially profitable, what are the barriers to keep other vendors from entering that business? Installing solar is not a complicated undertaking.

    In this busy time leading up to the ITC expiration, a well bid commercial job should be moderately profitable. But nothing like a $.18 residential PPA with a 2.5% escalation. Those were the golden days of capturing the value of solar.
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    I was hoping you'd say that. I'll let other people explain in detail why your view is very flawed.
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    We all have again and again. It is clear that he or she is not interested in any actual debate or willing to change his opinion on Solar City.

    My bet is he has a large (for him) short position and during the next 6-9 months as Solar City shoots up to ATH's he fades away from the board bitter to never return.

    Solar City currently at 6.3 GWh ! pretty awesome, I wonder what the all time record is? Sure looks like it could be surpassed today !
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    Where can I find this number? Their site isn't much help.
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    SolarCity Now
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    So what? That's the typical business of finance companies. (Pro tip: buy your house in cash; the mortgage lender is in the business of stripping value from the homeowner.) It's often very profitable. For very long periods. It may be extremely profitable. For decades.

    Look, both the bull and bear cases on SolarCity are consistent here: SolarCity is a finance company. Analyzing it as a finance company... well, I don't feel competent to do that, bluntly. Keeping information like credit ratings confidential makes it harder to evaluate.

    See, I can't evaluate Sunrun *either*. It's also a financing company!

    Or is it? Chasing market share can be extremely dangerous if you're in the financing business. It's a classic method of getting overextended with lowered lending quality.

    The first key measurement for all these businesses is *loan quality*. The second key number is the effective interest rate received. I can get a sense of the latter, though it's hard; I have no sense of the former.

    *Sigh* I'd love to see a serious evaluation of SolarCity, SunRun, and the rest from someone who normally analyzes BANKS.

    - - - Updated - - -

    If I believed this, I'd invest. But this isn't the worst case scenario.

    Actually, they could be faced with major losses on bad loans. With worthless collateral if the solar panels are too many generations behind.

    *I don't know how to analyze this risk*. I've tried. I would really like to see a proper analysis of it.

    Anyone remember the blowups of GMAC and GE Capital?
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    Financing is only one aspect of what Solar City does. I agree there is a lot of the details about Solar City that are very hard to understand. The good news is each quarter it is getting a little easier to understand. Remember that Solar City is hiring around 350 people a month and building a distribution center/warehouse every 45 days. They are in the business of installing lots of solar panels. They are also in the business of financing lots of solar panel installations. There really is a lot to this company. The most exciting thing to me is they are about to be in the business of manufacturing a whole lot of solar panels too. With a factory being paid for by New York, This will add substantial value to the shareholders.

    *one of the pioneers of internet banking is the largest shareholder :)

    Here is the best bear case I have heard yet .. http://rt.com/news/273169-solar-cycle-ice-age/ Claims that by 2030 the suns activity will fall by 60 percent.
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    You do have to look at the likelihood Solarcity can continue to sell profitable finance. Consider two identical home for sale in California. Home A has a Solarcity PPA at the state average $.18 with a 2.9% escalator. Home B has no solar. What's the relative value of these homes?

    PPA's in California have fallen to $.13 and 1%. Still not a good deal for solar, but allows us to easily compare value.

    Home A, the typical Solarcity home, is worth $5K - $10K less than home B with no solar. The loss is the discounted present value of the cash flow penalty required by the more expense $.18 PPA. As solar prices continue to fall, this loss of home equity increases.
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    Yeah right, eventually the house will be worthless, zip zilch nada , cause solar drags you way down .
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    Solarcity and similar drags you down. You don't like my math, lets see yours.
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    Ok here we go ! You finally brought numbers into it. This should help clear things up for you. The highest penetration in all metro areas in the nation after Hawaii goes to San Diego with 14.6 Solar Systems installed per 1000 people which equates to about 1 out of every 60 homes. (Source 1)

    In your example you compared House A and House B that both had Solar Systems installed. For those two homes there is about 118 homes without solar installed in the area that has the second highest penetration in the whole nation.

    The other 118 homes all pay more for electricity then either of your examples. Sure, the one that recently got solar might be a better deal as will the ones that are signed a couple of years from now. What your missing is both of the homes are a huge benefit to any home buyer because they pay less for electricity than almost everyone else.

    As solar gets cheaper and cheaper Utility rates will most likely continue to rise making every house with Solar more competitive not less (source 2)

    Eagerly awaiting your rebuttal using math.


    Source 1 = Portland ranks in the middle for solar penetration

    Source 2 = California regulators approve higher electricity rates for most residents - LA Times
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    To be honest his example had House B have no solar. His reasoning basically rests on the fact that House B has WAITED to install solar, and the buyer could to it and presumably get a cheaper yet newer and better solar system than House A which is tied by contract with an older system that is basically "on a down payment plan" i.e. the Power Purchasing Agreement with SCTY.

    This is basically like arguing: always wait to buy a new computer because next year you can get a better one for less money. This however is not how people reason for the most part (if there was never profit for the computer makers they wouldn't exist and "the next, better and cheaper" computer would never be developed.
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    It's not a math issue, it's a thinking issue . Nobody is present valuing anything especially the arbitrage
    difference between one power source or another, as if the common person knew the rate differential.
    or for that matter compute the arithmetic.

    Blue hydrangeas might be a better reason why one property is preferable to another and commands a higher value.
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    Yes, it is a thinking issue. Two identical houses with two different long term electricity costs from long term contracts. Add up the precisely defined values, and compare. The problem with the contracts is known by more "common people" everyday.

    Anyone can understand a rate comparison of $.18 compared to $.13. Soon the $.13 PPA holder will be underwater on their contracted electricity too.
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    Underwater compared to new Solar PPA's maybe but they are still ahead of the vast majority without solar ... and they don't have to deal with the process of having it installed.

    Another Day over 6 Gigs ... Love it! I have to ask has it been Sunny in CA the yesterday and today? Less clouds rolling in? SolarCity Now
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    As one who made a lot of money with SCTY, and who just had a PPA system from SolarCity installed on our home, I feel great about our decision. Our average electric bill prior to the install was less than $65.00 a month so savings was not top on our list. "Owning"a solar system was. We did not have a down payment saved, so the PPA was the way to go. I like the fact that our contract allows us to purchase the system in the future if we want to or roll it over to anyone who purchases our home in the future. Solar City was our only choice because it seemed silly to have owned/supported Solar City thru stock ownership and currently owning TSLA to go with anyone else. Call me uninformed or whatever, but We believe in what Elon and Co are doing and will/want to support in any small way we can.
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    Ke6jph, thanks so much for sharing your experience. What I sense from your remarks is that brand played a huge roll. Naturally as a shareholder you may experience the brand differently than nonshareholder, but it is still a brand that one wants to be a part of. One thought that I have had personally about installing solar is that my power bill really is not that expensive anyway. So saving 10 to 20 percent really would not be a huge factor for me. Perhaps if I lived on a tighter income I might care more, but honestly I don't. What I would want is an extremely convenient installation and maintenance plan. While I could get competitive quotes from six different installers, I really do not have the patience for that. So if a company I can believe in offers me a reasonable package, that would suffice. This is the power of a brand. Consumers use a company's brand for a proxy for trust. Competitors without a strong brand have to work much harder to get noticed and to build trust. Consequently, if you have a weak brand, you often have to compete by offering lower prices. I used to work in marketing in the auto insurance industry, and this was a big concern to us. The strong brands like Allstate, StateFarm, USAA and Progressive did not have to compete very hard on price. Even though all these companies would like you to think they've got the lowest premiums, they don't. They have fair and acurate rates, but you can be insured for less by a no name company that you hardly trust. And there's the problem, you have to be able to trust that when you need to make a claim, you will be treated fairly. We'll if I'm put solar on my roof and have it insured and maintained by the installer, I need to trust that solar provider. If they are willing to absorb the risk of over estimating performance by offering a guarantee, that helps. But I also need to know that the company is not going to go out of business, and I need to know that they care about their reputation. So basically if I'm not concerned about huge savings, but I want convenience and peice of mind, I'm going to go with a solar provider with a strong brand who offers a fair price and solid service. I think this is how SolarCity is positioning its brand. It's the big, fair and reliable brand that homeowners and businesses can trust. This is a real middle market brand, like Progeessive. There is room for a low cost leader brand to emerge, like GEICO. There is absolutely room for both in any market. The advantage of a strong low cost leader brand is that a consumer looking for low prices will have the confidence that they need not look further. Consumers are inherently lazy and will often substitute brand for doing extensive price shopping. Think, when was the last time you got a competitive quote on auto insurance, how many providers did you shop, and were you willing to go with the lowest premium whether you knew the name of the provider or not? If you are like most people, not recently, not very many, and not bloody likely. Brand matters.

    And don't anybody give me nonsense about how Musk does not think brand matters. Musk strongly believes that delivering a superior product, with superior service at a fair price is super important. This is the essence of what a brand is. It is the promise to deliver a good customer experience. What Musk dismisses is a empty brand which is just pretty wrapping on a poor customer experience. That is what we call a weak brand. What Musk instinctively strives to delivery is a very strong brand. Tesla, SolarCity and SpaceX are all very strong brands in their respective segments.

    - - - Updated - - -

    Hey, Blake, I like that you're following the daily production. Last quarter, SolarCity announced they had generated 1 TWh in the last 12 months ending with March. For 2014, all solar in the US hit 18.5 TWh, so SolarCity has at least 5% of the solar market already. So when will SolarCity report generating 2 TWh in a 12 month span? I guess 2016Q1 would be most likely, but perhaps earlier. I would expect them to announce when they hit it.
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    Unlike computers, solar doesn't increase utility. There no difference in the electrons from a solar panel compared to the grid. Your comparison would only be valid for people lacking electricity before installing solar.

    PPA buyers lock themselves into a rising commodity costs when the cost of producing electricity from solar is falling fast. The correct computer analogy would be signing a twenty year computer lease with an escalating price. As with a PPA, this deal makes no sense for the buyer.

    Solarcity has captured a lot of value by selling PPA to date. But it appears that residential PPA prices are dropping considerably faster than their cost of installation. A survey of PPA prices from this year would be interesting.
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    "SunSpec PV Finance Conference and Solar Asset Symposium, held in conjunction with Intersolar North America 2015, is the key forum addressing cross-cutting PV technology-, asset- and finance topics. For the 5th consecutive year, key leaders will gather to interact with participants and gain fresh finance insights needed to tackle next year�s finance opportunities beyond policy and securitization."

    SunSpec Presents PV Finance Conference and Solar Asset Symposium at Intersolar SunSpec Alliance

    image.jpg
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    Moderator's Note

    Some posts moved to Snippiness.

    Please remember that this is a moderated forum; instead of starting personal attacks on someone posting, please report the post.
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    What specific data are you looking at? I'd like to see this for myself.
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    The last California quote I saw was 13.8 cents and 1% escalation. I don't know if that is typical now. But it is ~2/3 of the discounted present value of the cash flow they were getting for PPAs early last year. AFAIK, no one is surveying PPA prices. Knowing competitive conditions, especially in the hot markets, would be interesting. Going back just a couple years the PPA sellers weren't really competing against each other, but the utility. They just took the utility price and cut off 10-15%. At 13 cents their pricing is being influenced by solar competitors.

    A well purchased system today with the ITC will yield about a 7-8 cent LCOE over 30 years. So the premium the PPA sellers get for providing their financing still seems significant. Although solarcity has a problem with their retained earnings including substantial revenue in years 20-30, as they project 2/3 of PPA customers will renew their contract. The typical PPA California customer from today will be paying solarcity $.30/kWh at the end of their contract, and it is hard to imagine 2/3 being happy enough with solarcity to renew.
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    For the first time SolarCity showed up on my Interactive Brokers hardest to borrow list. For whatever that's worth, it appears there are very few shares left to short
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    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
    0.5 0.6 0.5 0.6 0.6 0.5 0.6 0.9 0.9 1.2 1.8 4.4 9.1 18.5
    (in terawatt hours, US only)(note the doubling starting in 2011)(consumption total)(PV)
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    Yeah, it would be nice if someone collected stats on this. I would expect quite a bit of variability.

    For example, just looking at SolarCity, they reported an average price of 13 c/kWh, but there is variability from one customer to another. There are at least three sources of variability. 1) Specific installations vary in how many kWh/kW per year can be guaranteed. So it you have a shady roof with poor orientation, SolarCity may need to charge more per kWh to assure financial soundness. So adjacent neighborhoods need not get identical quotes, much less different states. 2) State and local incentives may vary. 3) SolarCity tries to position itself about 3 c/kWh below the local utility. Thus, if a utility has a low enough rate, it will choose not to market in that service district.

    This last point is particularly important to understand. Currently, SolarCity is able to offer an average PPA of 13 c/kWh. This limits their addressable market to utility service areas with residential rates at or above 16 c/kWh. This is an addressable market worth $60B in retail electricity sales. SolarCity is trying to cut its cost from $2.95/W to $2.50 by 2017. This should enable them to drop their average rate down to 11 c/kWh. At this price, their addressable market grows to $110B. SolarCity aims to keep doubling every year, so to facilitate this rate of growth it is important to double its addressable market in about 2 years. So cutting cost is essential to their strategy as it enables them to penetration more deeply within their established footprint while expanding that footprint. Suppose they quote someone 15c/kWh this year because of poor roofline and did not make the sale. If they can drive the cost down, perhaps they could follow up next year with a 14 c/kWh rate and all the other financing options a little cheaper too. Perhaps at that price, they convert a sale. If not, they could follow up the next year at 13c/kWh. At some point, the prospect converts or is picked up by another solar provider. So its a race to cut prices. The key thing that a utility must do to defend its market share is offer lower rates, but utilities are not likely to do this until they have lost substantial share, and at that point they may not have the financial means to do so. So year after year SolarCity and all the other solar providers will nip away at the utilities' customer bases.

    So here's an interesting math problem. Suppose you currently pay 20 c/kWh and consume 10k kWh per year. You can get a 6 kW system guaranteed to yield 9000 kWh per year for $24,000 this year. Or you can wait and install when prices are lower. If the price of this system falls by 10% per year and the utility price is constant, how long do you wait to buy such a system? How would your answer change if you thought utility prices would increase 4% per year? How would your answer change if you though that solar prices would only fall by 8% per year? I'll leave this as an open question. The essential thing one needs to wrestle with is when to lock in a long term commitment when you believe prices will continue to fall. By no means a trivial question.
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    since 2003 the utility rates in the areas that Solar City operates has more than doubled, The current projected capex (of utilities) and likely rising interest rates will likely mean more of the same.
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    In at least one interview, I remember Lyndon Rive stating that the renewal contract won't be the same price as the original, so the final escalated price (not all SolarCity contracts have escalators btw) won't necessarily be reflected in the renewal.
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    This is good to know. You may be asked for citation. :)

    It is important to understand the optionality built into the leases. The customer has the option to renew, upgrade, or remove the system. So SolarCity will not be in a position to force the customer to pay any arbitrary rate. If they ask for too high a rate, the customer can ask SolarCity to remove the system. SolarCity would then incur the cost of removal and the old equipment may be entirely worthless for anything but recycling. So SolarCity had better offer a really low rate or a really good upgrade. I'd also point out that the renewal terms are a significant portion of retained value. So this is the weakest point in the lease proforma. The huge advantage that the MyPower loan has over the leases is that it locks in this renewal value from the outset. This is good for SolarCity, but it also gives the customer the option to prepay the loan. Is the bad for SolarCity? Actually, no. It accelerates the revenue stream in a way that increases the present value retained value. So MyPower is a win-win for both customer and company. Indeed, MyPower retained value is almost twice that of leases.

    So how can SolarCity lock in the renewal value of its lease customers and avoid optionality in those contracts? It's rather simple. SolarCity can offer lease customers to option to refinance into MyPower loans. This would be a natural remedy for any customer who may become impatient with slow lease payments. So it is good for customers, but it would also increase the retained value SolarCity has on the books.

    So I would expect SolarCity to start promoting refinancing into MyPower loans in the coming years. They are presently working on trying to reduce their interest rate on those loans. So they may want to wait until they can offer better rates, but this could prove a very good way to build retained value without having to send out an installation crew.
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    I'm not familiar with confidential treatment order SEC filings...What could be in something like that?

    SolarCity - SEC Filings
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    So far, the best I can offer is this, from a few pages back:
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    When to go solar

    What, no takers on my math puzzle? Well, I guess not everyone is math obsessive like me. So, here's the solution I'm playing with. There are certainly other ways to frame this, but see if this makes sense.

    Problem. You are considering buying a solar power system at price P today, but believe it will fall in cost at a rate of d per year. So you think you might do better to wait until t years from now when the price is just P(1-d)^t. However, the system is expected to produce H kWh per year, and for every year you delay purchasing your solar system, you will buy H kWh from your utility that you would otherwise avoid once you get the system. Suppose the utility charges you rate of R per kWh now, but this will be increased at a rate of I per year. Thus, in year t you pay the utility HR(1+I)^t for another year waiting to install. Waiting t years to install will accumulate HR((1+i)^t - 1)/i if i does not 0, or HRt if i =0. We can now put these two cost together, the cost of the system after waiting and the cost of paying for utility power while waiting, to get a total cost of electrical service under the plan of installing in year t.

    C(t) = HR((1+i)^t - 1)/i + P(1-d)^t

    So we may elect to install the system in the year which minimizes the total cost C(t). For those, who know calculus, this amount to taking first derivative of C and solving for t where this derivative equals zero. The non-calculus version is as follows. Consider the difference in cost as we go from t to t+1:

    ChgC(t) = C(t+1) - C(t)

    If this change in cost is negative, then we are saving month by waiting another 12 months. But eventually it becomes positive, meaning we are now wasting money by waiting any longer. How much? Well, after a little algebra, I get

    ChgC(t) = HR(1+i)^t - dP(1-d)^t

    So the question is when does this change go from negative to positive. So we want to solve for t such that ChgC(t) = 0, and know that it is optimal to install within 12 months of that critical value of t. Thus, we solve

    HR(1+i)^t = dP(1-d)^t
    HR/dP = ((1-d)/(1+i))^t
    t = log(HR/dP) / log((1-d)/(1+i))

    So there you have it. Suppose P = $24000, H = 9000 kWh, R = $0.2/kWh, d = 10% and I = 3%. Then waiting until, cost you HR = $1800, but saves you dP = $2400 on your system. ChgC(0) = -$600, so you actually reduce energy cost by waiting at least one year. The critical value is t = log (1800/2400) / log (0.9/1.03) = 2.1323. So want to install in about 2.6 years, midway between 2.1322 and 3.1322.

    What happens if you expect utility rates to rise faster, say 4% per year? The critical t is 1.99, so you don't want to wait 3 or more years. So if utilities raise rates more quickly, they can expect their ratepayers to go solar sooner.

    What happens it expectations around the rate of decline in solar prices change? Suppose d = 8% and i = 3%. Then critical t is 0.5714. This is about 1.56 years sooner than our base case with d = 10%. We see here a great degree of sensitivity. As declining price expectation moderate, consumers will be more eager to buy. We see this in an extreme with the possibility of losing ITC. If it goes down, solar sales will rise in anticipation. Most people understand this at an intuitive level. But what about a more moderate reduction in the rate of decline? This too can motivate buyers not to delay. Some people envision the possibility that PV panel supply might tighten in a few years. Under this scenario, panel prices moderate their descent or even increase, and this could throw customers into motion. If SolarCity has their Gigafactory online by the time this scenario plays out, they would be extremely well positioned for massive installations. Also in terms of marketing messaging, we see that it is good to say that solar is now quite affordable, but not to says that it will keep getting cheaper every year. An installer does not want to encourage shoppers to wait for a better price.

    A final lesson from this model is that it is not economically wise to put off buying solar for too long. Some have argued that if you buy now or lock yourself into a lease now, you may come to regret it psychologically as prices continue to fall. You may indeed regret it, but that does not mean that you would have been better off in networth waiting the whole time. There is a clear cost of waiting, and you should not delay once the cost of waiting is higher than the money you expect to save by waiting. One should not hesitate to install and lock in financing when the time has come to do that.
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    will be interesting to see where all the variables end up. I guess The sun has been shining bright now because SCTY has cranked out quite a few 6+ GWh days including today :). Looking forward for this earnings call and to see what Brad Buss does with the next investor presentation. I am expecting about 180 million of value creation for the quarter.
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    It would be good for us to start anticipating quarterly results. There may be some nice trading opportunities in it.

    Value creation was $157M in Q1, so I guess $175M would be q/q growth on pace with doubling annually. But SolarCity is deeply seasonal, So $180M is more likely what they need to hit.

    What factors would we want to look at to anticipate value creation?

    Another key metric I think we should follow is the cost per Watt. It came down to $2.95 fir all of 2014, but Q1 is a tough quarter to keep costs down with so much snow in the north east. So it was $2.95, up a little from H2 of 2014. They are targeting $2.50 in 2017, but I think this is sandbagging a bit. They've been driving cost down 14%pa for the last two years. At that pace, they could hit $2.54 in all of 2015. Per my discussion in the previous post, SolarCity has an interest in keeping price reduction expectations low. They don't want prospects to delay installation holding out for a better price. So while cost may decline 14% per year, they may not want to reduce pricing so quickly. The difference of course is higher profitability, which is good so long as the pace of growth is not hindered. This is where it matters that they are primarily competing with big, slow, and expensive utilities. There's no need for installers as an industry to compete with each other on price so long as they can all steal market share from utilities as fast as they can scale operations. I digress, but this is the game for the next 5 years. Investors should watch cost per Watt carefully.
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    As we are now in the second half of the year It will be very exciting to watch the factory build out come to its conclusion. If they have a successful ramp up they should blow through their cost reduction targets. They have had those targets in place for a lot longer than they have been planning on being a panel manufacturer. If they truly are the lowest cost/watt manufacturer like they think they will be it is hard to model what that will do to their cost structure but you could hear a smile in Lyndon's voice when he talked about a couple quarters ago.

    They are planning to start hiring plant managers and engineers this fall and it will be exciting to hear those details over the next couple of earnings calls.

    I agree cost/watt is a very important metric and I think most of the world has missed what the (free-ish) Silevo factory can do this metric :)
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    Very strange movement over the past few weeks. Feels like some large holders had to sell when the overall market experienced a brief hiccup, and quiet accumulation is currently happening. Volume has been extremely low for the past few days. The spike in the morning looks like it was caused by a buy order of 23,000 shares, and the overall market opening strong. The chart is looking more and more like a slingshot, that's about to see a huge move in one direction.

    Has anyone seen or read any updates about the estimated completion date or expected output of Solar City's Factory?

    This was announced today, and could be significant.

    Governor Cuomo Announces Expanded Access to Renewable Energy For Millions Of New Yorkers | Governor Andrew M. Cuomo
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    The Riverbend, SolarCity's Gigawatt Factory, will have 1 GW annual capacity. They will begin manufacturing next year and should be at full capacity in 2017. They have a 10-year lease from the City of Buffalo for the plant and equipment. They are expected to spend upto $6B over this term, including operating costs and salaries. They will hire about 5000 employees. Local suppliers will also create jobs and share in this $6B revenue stream.

    It sounds like the $6B figure is one of these all in figures meant to impress politicians on the size of the deal. If so, this may be an indication that SolarCity is planning to make 10 GW on a budget of $6B. This implies a cost of $0.6/W or less. More over Silevo is targeting 24% efficiency panels at a price comparable to standard panels at 18% to 19% efficiency. This is enough to cut 25% of the cost out of many of the components of total installed cost. Already Silevo is producing panels at 21% efficiency.

    As promising as all this may sound, Riverbend will not even come close to satify SolarCity's demand for solar panels. In 2015, SolarCity intends to install 0.92 to 1 GW, and it should grow by 80% to 100% per year. Thus, SolarCity will need 3 to 4 GW in 2017 when Riverbend hits full 1GW capacity. It is no surprise that that Lyndon Rive would like to set up a 5 GW factory next.
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    Its worth noting that solar city has the option to extend the 10 year lease for another 10 years with the same terms. Its also worth noting that New York gets the right to make a "first offer" for the 5-10 gig plant that has been mentioned in the past. Also of note is right now Solar City is at 6.6051 GWh production which I am pretty sure is a record !! Crazy how we did not break 6 for over a week and then it shoots up closer to 7
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    0.60/W is not very competitive.
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    It is if you're offering 24% efficiency. That means much lower installation costs, and much smaller footprint. Today's most efficient panels from SunPower are at approx $1.40/W
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    Utility Solar May Cost Less, But Its Also Worth Less | Institute for Local Self-Reliance

    As Solarcity becomes more widespread, you're going to see the attacks become more frequent and intense. Solarcity is obviously an emerging power house since some big utilities are doing everything they can to slow DG solar. Again, end user cost is lower then any other utility level energy source.

    primary utility boiler plate/talking point message to slow Solarcity:

    *shift cost onto non solar ratepayers (what happens when most go solar?)
    *subsidized industry that is getting hand out with net metering (what happens if DG improves the grid and lowers EVERYONES costs?)
    *utilties can provide cheaper Rooftop solar then a free market competitive industry (what do you think's going to happen with this one?)

    they also will will try to disrupt within DG industry by:

    *buying is better(because leasing/ppa 80% of all solar installs)
    *your house won't sell if you have lease/ppa
    *you will need to buy a new system in 10 years, so stupid to lease/ppa.

    The above arguments will play over and over again like automated clockwork no matter how wrong they are in reality. It's best to recognize it as a sign of desperation and overwhelming success of Solarcity and DG right now.
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    Thanks, foghat, that's a nice link and I think your own critique is right on. While I have a strong bias for distributed solar, including community solar, I am also a First Solar investor. It is frustrating to me to see First Solar become polemical within the solar community. Naturally, their low efficiency thin film technology is not we suited for rooftop and other distributed installations where surface area is limited, but their is no reason why they cannot be a strong player in community and commercial solar. Yet they seem to be falling in with the utilities in opposition to distributed solar. It is frustrating to see this sort of split within the solar industry because the real challenge is to displace fossil generators. The problem I have with utility solar is that is mostly that it is put to the service of propping up utility monopolies.

    Of course there is the argument that utility solar requires the maintenance of heavy grid infrasructure. Distributed energy resources of all sorts reduce the need to invest in and maintain so much infrastructure. Currently transmission and distribution accounts for 31% and 11% respectively of the retail price of electricity. But most of this T&D infrastructure would not be needed if most energy were produced near the point of use. So it is a self-serving to argue that distributed solar is not paying its fair share of the cost for infrastructure need to bring remote power generation to market. This is a bit like saying that a local farmer is not paying her fair share of the cost to ship produce from South America to the US. The more produce is locally grown and consumed, the less need their is for shipping infrastructure to import foods. So it is with electricity. The more that is produced and consumed, the less copper and capital must be tied up in transmission and distribution assets. The problem that utilities have with solar is not that it adds infrastructural cost, but that it leave prior investments T&D and generation assets under utilized and deprived of expected revenue. This fact is made perfectly clear when utilities try to compete with solar by installing their own solar. Specifically, the problem has little to do with intermittency because, if so, they would not want to expose their business to the intermittency of utility solar. Rather, grid solar is the form of solar which seems to fit the utilities' infrastructure and business model the best. So let's be clear utilities will embrace utility solar only if it enables their monopolistic business model. To say that utility solar will "win" is ultimately to say that the monopolistic utility business model will maintain its control of the energy market. I do not believe this will be the case, and as a ratepayer with very few alternatives, I do not desire these monopolies to preserve their status. I sincerely believe that monopolistic utilities have outlived their economic usefulness. They presently stand more as a barrier to economic progress than as an engine of the economy.

    All this is well and good, but how well does utility solar compete economically with distributed solar? I would actually be pleased to see utilities use solar to compete economically. If you know anything about SolarCity's business model, you know that they only operate in certain markets were they can offer PPA leases about 3 cents per kWh below the residential rate the local utility charges. Currently, they offer power at 13c/kWh and only where utilities charge ratepayers in excess of 16c/kWh. The national average is only 12c/kWh. So SolarCity is stealing market share from utilities well above nation prices. They sure strategy for any utility that does not wish to lose market share to SolarCity and a host of other installers is simply lower their residential rates to the national average. It is a painfully simple strategy, but one that old monopolies may not used to. Basically they need to compete for market share. So if utilities can use wind as low as 2.5c/kWh, solar solar as low as 3.9c/kWh, battery storage as low as 5.0c/kWh and even combined cycle natural gas as low as 6.1c/kWh all to deliver retail power at below 12c/kWh, then they had better get on with it. But it they really want to play regulatory ratepayer cost recapture game and charge over 16c/kWh, they they will lose and should be allowed to fail. If they need to divest or write down assets that are no longer economically competitive, then they need to get on with it an not expect ratepayers to compensate them for their losses. Utility shareholders and even bondholders need to absorb these losses as this will afford these companies the greatest chance of survival. And if utilities need to change their business models and begin to do deals with new players like SolarCity, then they had better get on with it. Petty sort of regulatory games aimed at stalling distributed solar will not win on economics. They only breed ill will and bad politics. Simply put, the utilities need to compete, cooperate or die. Until utilities demonstrate that they can deploy solar in such a way that brings all residential rates below the cost of distributed solar, they will lose market share and as consequence so will utility solar.
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    http://m.themonitor.com/news/local/h-e-b-unveils-rooftop-panels-in-weslaco-hails-installation/article_bbc6d7bc-2cf3-11e5-8dac-43d8cf880188.html?mode=jqm

    solarcity installs a 1.2MW system, the largest rooftop solar installation in the state of Texas, in just 3 weeks. This was finished in June 30th, so should count for q2 numbers. The q2 conference call is earlier this year then last year, so might be an indication of a smooth quarter, hopefully at the high end of expectations.

    jhm,
    I'm interested in utility level solar as well. Just don't like when utility solar is fighting for monoploy utility over distributed solar. I guess they lose big if they bite the hand that feeds. Utility solar is really just a cost reducer for them, not a rate payer benefit since utilities continue to raise rates every year as allowed by utility commisions. I think utility solar is far less risky because policy is fairly clear and uncontested. The utility is in full control of utility level sat, but not in distributed solar. The risk investment is 100% on distributed solar, however, the biggest reward is in distributed solar. I'm of the opinion distributed solar will eventually win the policy battle and transform the electricity business in general. Utilty level solar is mistaken to support old utitliy structure because ultimately they will be working with distributed solar on the new energy model that shifts traditional utilties into being service distribution and transmission companies.
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    The fixed costs per installation are high enough that the intall cost per watt is not that much lower with slightly more efficient panels. A bigger value will come from being able to sell a larger system to some customers who are limited by roof size. Your cost pricing for SunPower panels is way off. They don't sell any mature products that cost them .60/W to make.
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    We're on the same page regarding utility solar. The business models will change as installers gain in scale and capability.

    I really think there is some excellent information to mine from your link. The thing that stumps me is that 3000 panels provide 1.2 MW. That's 400 W per panel. Where are they getting 400W panels? At standard size, 1.76 m2, this implies 24% efficiency. When SolarCity acquired Silevo they mentioned that Silevo had a 340W panel and was working toward a 24% efficiency panel. Has Silevo now achieved this? Or are they buying from SunPower? Any other source?
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    a short comment, then back to lurking. in 1999 i installed 32 ASi (amorphous silicon thin film) mfgd by BP solar (yes that BP) in about 1995-1997 from their Towanda Virginia facility, 277sq ft, 1.375kW system, ~3.8% efficient. they are now down below 3% efficient (lost about 30% of their output) (as measured by peak output). the 32 panels could be replaced by 5-6 present ones (except i'm moving and the house will be bulldozed why I havent replaced. I really like SCTY (and TSLA) It's nice finally seeing PV becoming ubiquitous, and doubling and tripling over the last decade (184 terawatt (million million hours generated in 2014!! planetary is phenominal)
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    I think the article was making a generalized statement by saying "over 3,000" panels. To me, that could mean anything over 3000, so not to specific. Not sure silevo panels used, but possible.

    In other news, Solarcity now has offices in Ohio. They also are doing business in the UK through silevo.
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    That is very intriguing on the 3000 panel and the implications if that is near correct, I believe the UK expansion has to do with the zep mounting hardware not their silevo acquisition
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    If 340W panels had been used for the 1.2MW installation, that would have required 3529 panel. I would think a PR person or journalist would say this is "over 3500" rather than "over 3000." Both would be correct, but 3500 is a really compelling number for a right up like this.

    So we can't rule out simple inaccuracy in reporting, but this really is an intriguing possibility. If SolarCity / Silevo really does have a 400W panel, this should come out this ER or earlier. Once the market is properly informed, I think this could substantially move the stock price. Certainly it is a big deal for long-term investors. The investment in the Riverbend factory becomes a much bigger winner making 400W panels instead of 340W panels. It increases output by 17% and reduces total installed cost/W in many other ways. It is also a product that con compete with SunPower on the panel market, if SolarCity so chooses. The Silevo acquisition was a bet that they could deliver this. So if they have already won the bet, it should be a big deal for investors.

    So what to do before an official announcement? I've been meaning to pick up a few more shares for a while. Given the possibility of this coming to light within a month, I'm thinking I might not want to put this off. Do others see this as a tradable event?
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    Doesn't sunpower make 400w+ panels that are not the regular size as everyone else?
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    If local suppliers revenue is included in the 6 billion figure than the cost to Solar City will be much lower. Essentially those cost are being counted twice if they are included in that 6 billion figure. Also worth noting that it is "up to" 6 billion.
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    Yeah, SunPower does make 400+ W high efficiency panels. Also if they are not standard sizes, that could be a problem using Zep hardware. But my impression is that SolarCity does not use SunPower panels. Of course, I could be mistaken. It would be nice if someone could confirm either way.

    - - - Updated - - -

    Yeah, those numbers tend to be pretty fluffy. So I see this as only an upper bound. Also 1GW output is a conservative estimate. I suspect the estimate is based on 21% efficiency panels rather than 24%. If so, then 24% could boost capacity by 17%.
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    What energy shortage? | Global Development Professionals Network | The Guardian

    centralized traditional utilties lose 60% of its energy from generation through to end user. So, it gets more clear to me that Solarcity and distributed solar is much more efficient deliverer of energy to a home owner or business. The writing is on the wall and our policies will have no choice but to support distributed energy going forward. If you look at the increased levels of utility capex projected going forward the price of retail electricity is only going to go up while the price of Solarcity and other DG companies are going to go down. Just using the first solar record breaking utility solar cost, the end user only gets 40% of that energy so NV Energy has to buy 60% more energy just to equal what Solarcity proves to a home owner on a kWh per kWh basis... and that's just on efficiency costs not including transmission and distribution maintenance and build out costs.

    It appears very clear Solarcity is going to continue massive growth in the foreseeable future in my opinion whether utility solar and resistent utilties like it or not.

    since we're having to live with the presidential crazy season much earlier this cycle, if a candidate can get a handle on the energy transformation and develop a smart energy platform as their PRIMARY campaign platform, he/she could really crush it at the polls and get America to levels unknown before. If we're worried about national security, jobs, new manufacturing coming back, exportation increasing, and an overall heathier country and world... then a smart energy economy platform as the PRIMARY campaign platform is a no brainer and has my unbridled support.

    and just read Elon loves and is currently reading the book "Excession." What is interesting about this book is that a primitive culture is presented a more advanced tech or way of existence, but fails to pass the test as they say and the new tech disappears till they are ready. Wild to think that Elon might be reading fiction in order to do mental gaming of how to approach the public/long entrenched energy stake holders on his grid transformation ideas(and automobile & rocket & banking/currency industry stake holders as well).

    update:

    new hour long "fireside chat" interview with Solarcity CEO Lyndon Rive...
    http://www.youtube.com/playlist?list=PLUrqcWVF3ueknKHCQJtFreSkwKEtcmQsO
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  • 1/1/2015
    guest
    Thanks for the links and I agree about the next presidential race. Without getting too deep into politics, I'm afraid the only one that could do this would be Bernie Sanders, which I'm ok with because I like him out of everyone else so far.
    �
  • 1/1/2015
    guest
    Very excited about fire side chat, also like that sun Edison bought Vivant at a 50 percent premium :)
    �
  • 1/1/2015
    guest
    interesting. did not realize how water usage intensive electric generation by utilities is
    �
  • 1/1/2015
    guest
    Is there any immediate reason for the nice upward movement in the stock price today?
    �
  • 1/1/2015
    guest
    Dang, I should have kept quiet about 400W panels. I was hoping to buy more shares today.

    Stock up over 7% right now.
    �
  • 1/1/2015
    guest
    Vivint acquisition by SUNE
    �
  • 1/1/2015
    guest
    thx, woah - nice! Didn't catch that for some reason. Should have diversified more. SCTY is the only solar stock in my portfolio. Vivint and SUNE should've been there, too. ...I'm such a EM fanboy... geez
    �
  • 1/1/2015
    guest
    Solar is luck of the draw. I have SPWR, CSIQ, JASO, JKS, TSL, SCTY and almost everything is red since my buying. SUNE and VSLR are not on my list but I'm not entirely sure how to value SUNE. Almost make me wish I had just stuck with Tesla for all my money.
    �
  • 1/1/2015
    guest
    Yep, same here. So going back and forth on the merits of SolarCity as a company is fine, but they must be doing something right because they are the only ones with their stock rising.....
    �
  • 1/1/2015
    guest
    that depends on the time frame. So far each of the three buys I've done has been at a lower price point than the previous one.
    �
  • 1/1/2015
    guest
    Ditto here!
    �
  • 1/1/2015
    guest
    Does anyone have valuation comparisons between SCTY and VSLR? Retained Value, Growth etc.

    I can look up but if anyone has it readily that would be useful.
    �
  • 1/1/2015
    guest
    I've seen comments at Seeking Alpha about retained value comparison putting SCTY at 112$ based on Q1 numbers. No idea about other stuff.
    �
  • 1/1/2015
    guest
    FWIW, just now heard that Raymond James put out a note saying theoretically SCTY would be $100 based on VSLR buyout price. Looks like they are primarily basing it on Retained Value multiple.

    - - - Updated - - -

    SUNE's purchase of VSLR provides quite a validation of residential solar.

    If residential solar is as stupid as bears make it out to be, why would SUNE, which is primarily in solar-farm business buy VSLR at a steep multiple to retained value?

    Take this electracity!
    �
  • 1/1/2015
    guest
    If you're interested in Sun Edison (SUNE), who just bought Vivint, listen to their CEO interviewed on this recent podcast: SunEdison CEO Ahmad Chatila on Megatrends Changing the Energy Business : Greentech Media. He sounds super-smart, friendly, and comes across as someone I'm happy to invest with.

    SUNE's accounting is a complex beast, with Terra Power (TERP) holding a bunch of their assets and emitting dividends. There's no way I personally could provide a valuation, but I like the person, I like the industry, and I like their success.
    �
  • 1/1/2015
    guest
    Vivint solar currently has 1.2 billion of contracted payments remaining after q1. Solar City added 1.2 billion in contracted payments in q1. Only Solar City has a 1 gigawatt factory that someone else is paying to build ;)
    �
  • 1/1/2015
    guest
    Well, I'm sure Buffalo and the state of New York is over the moon to receive the billions in new tax base dollars from new residents and well paid employees and ancillary businesses making more taxable income. Solarcity may single handedly rejuvinate a city that has not seen this much economic activity in nearly 40 years.

    To me, Buffalo seems to be the one winning this investment by far. The success of New York's investment will bring many states to Solarcity's doorsteps with incentives to build 5-10GW factories.

    i laugh every time I hear people say tesla and Solarcity get hand outs, but at the same time enjoy the bounty of new long term jobs and new roads, better schools, higher quality of life, Solarcity and tesla employee tax dollars have brought and continues to bring to their communities. I think between tesla and Solarcity, they now employ 25k people and counting...

    My challenge to those nay sayers is who is doing the same right now in American industry?
    �
  • 1/1/2015
    guest
    After watching these, I have to say it again - I love listening to Lyndon speak. His passion and knowledge is infectious and can see him inspiring people that are in their 20s and younger to make sure the shift continues with their generation.
    �
  • 1/1/2015
    guest
    Here's a quick comparison. Vivint is now worth $1.66B on $1.2B in contracted payments. That's a ratio of 1.38. SolarCity is currently at $5.4B on $6.1B in contracted payments. At Vivint's ratio, SolarCity could be worth $8.44B, which is 56% above current stock price.

    This very simple comparison does not account for other assets SolarCity holds, Zep, Silevo, and Riverbend. So this 56% upside is likely quite conservative.
    �
  • 1/1/2015
    guest
    Don't mean to be a party-pooper but even after a big rise today, in my view there is a lot of money left on the table.

    SCTY hit 52.77 on 5/20/13. That is more than 2 years ago!

    Think of all the progress that has been made over the last two years. Yet, the stock didn't move much at all.

    The average analyst price target is 82.20 with the highest at 99 (by Credit Suisse).

    I have been worrying, given the price trend, sooner or later the retained value will overtake the market cap and some PE firm or Buffet or whoever else will come over and take the company private, pretty much taking away all the future growth from us... I really hope the stock price will rise in synch with the company growth to avoid that situation.
    �
  • 1/1/2015
    guest
    That's why I bought back in the other week at $57 before the recent drop. I sold out at $55 in 2013. To see it there today with all the good that has happened made me want to get back in.
    �
  • 1/1/2015
    guest
    Jim,
    SunEdison bought Vivint for $2.2bln, so much higher ratio. Solarcity is worth 5X that right now. Keep an eye out for what happens in q4 and throughout 2016 when Powerwall installs start to ramp up. California ISO just put out that they are going to accept aggregated distributed energy at market prices. So when we see 10k Powerwall+Solarcity pv installs come on line by the end of the first quarter 2016 and each storage+pv homeowner getting the lowest cost per kWh on the block, there is no way anyone could compete on solarcity's level no matter how much consolidation.

    elon proved Friday battery tech is going to make 5% and more improvements every year moving forward so, this is only going to drive Solarcity costs down further and at the same time increase sales many times over. The point of no return will be when homeowners see their bill after aggregation of solar+pv in California starting next year, in my opinion. The 10k nest thermostat giveaway is just a glimpse at what Solarcity is going combine with it and value add along the way.

    solarcity and tesla have been planning this for nearly a decade. It is paying and will continue to pay to be a visionary brand that sticks to its independence along with it first mover market position compared to the rest.

    sbenson,
    yeah it's been frustrating with the volatility, but expected somewhat given the completely new entrance of DG solar as rising powerhouse within the energy sector. No one really knows much about it so when oil goes down some investors freak out, or when utiltiies propose ending net metering or any type of policy change is proposed, they hit the sell button. The other factor is the hedging by being done by those that have given large amounts of capital thus far.

    to me, the fundamental shift is clear and no matter how bumpy the road may get along the way, Solarcity is reaching the rare air one way or another...sooner or later... Those big valuations can run, but never hide...
    �
  • 1/1/2015
    guest
    This 56% upside takes the stock to $87. Other analysts are doing a more careful job and getting to $100. For me, the 56% upside was enough to motivate me to buy some J16 calls. I expect the market to price most of this upside in pretty fast.

    My view is the Vivint acquisition will change the way the market will value distributed solar and disruption in the utilities. I suspect that other installers smaller than SolarCity will become acquisition targets. Utilities need their expertise immediately. I do think that SolarCity is too big for acquisition and doubt that Musk would sell his 20% share. So the utilities will need to cut deals with SolarCity if they want to survive. The more pressure Vivint and all the other installers put on utilities, the more willing they will be to cut deals. So all this is a new day for distributed solar.
    �
  • 1/1/2015
    guest
    Ah on such a glorious day as this where TSLA is inching up towards an ATH and we're finally seeing some big moves in the distributed solar business... Where's electracity?
    �
  • 1/1/2015
    guest
    solarcity will never sell. They probably won't do yeidcos for the next 30 years either. Solarcity will be much bigger the local utilties. Solarcity will be a global brand. Solarcity already has possible entries being established in Japan, Australia, Kenya, Tanzania, and the UK as I write this. They are already starting international micro grid pilots using Bitcoin-type payment mechanisms for a pay as you go business model. They are operating 10 years ahead of where they currently are working and already are the #1 residential AND commercial distributed solar energy provider in America. they are developing the biggest community solar in the country, the most micro grid projects in the country, as well as produced the most distributed rooftop solar electricity as a single company on earth.

    why would they even remotely want/need to sell?

    this acquisition today is a learning moment for the market as to the true value of "retained value" and distributed assets to an energy portfolio. It actually serves more to legitimize(as you've said) Solarcity as the real deal in the energy sector then to give SunEdison any competitive leg up.
    �
  • 1/1/2015
    guest
    There is this concept of hostile takeovers.

    Lets suppose the net-retained-value reaches $10B but market cap stays $5B. Then Carl Icahn can come in offer 100% premium and take the company private and put it under his control. Even worse he will finance the purchase putting the company as collateral!

    Then what happens to all the future growth? that's simply taken away from us for free.

    In my view that's the biggest risk for long term shareholders who want to see a multi-bagger out of SCTY. The stock price better keep up with the company growth or else it can get taken out.
    �
  • 1/1/2015
    guest
    so any thoughts on the sudden use of a small amount Si in the battery?
    �
  • 1/1/2015
    guest
    Foghat, you're right. Using Vivint's market cap is probably over conservative. I do think that SolarCity continues to be hugely undervalued. So I am hope even for a rather conservative valuation to get the stock price over $80.

    - - - Updated - - -

    Nobody is going to strangle this goose while it is laying golden eggs. Musk, who owns 20%, is certainly not going to let that happen. SolarCity is undervalued, and now the market knows that. I am not worried about a hostile takeover.
    �
  • 1/1/2015
    guest
    That is more than a little deceptive. About 54 percentage points of that "60%" is in the conversion from the theoretical heat content of fossil fuels into electricity. Transmission and distribution losses are only about 6% of generated power. By this standard, solar loses about 75% of its energy from the get-go, because typical residential solar panels are only about 25% efficient, plus inverter losses.
    �
  • 1/1/2015
    guest
    Only if enough shareholders accept the 100% premium to the share price and tender their shares. You could vote no in that instance. And there are some big individual share holders with a mission - would they accept that price in a hostile takeover? Would the board recommend for or against acceptance of a 100% premium, and how much of the owner base would be swayed by the input and argument that the Board would make in that instance?

    I barely follow Solarcity, but I suspect the answer is that any friendly or hostile takeover that doesn't have the full backing of Elon and the Rives is dead, however that backing is achieved. And I don't think that a purely monetary offer, absent silliness, can get it done (and a good chance that an offer with nothing for it but money, even at silly levels, also fails).
    �
  • 1/1/2015
    guest
  • 1/1/2015
    guest
  • 1/1/2015
    guest
    I am hopeful that SolarCity may post some growth in the commercial segment. It has not been growing for several years, while overshadowed by more than annual doubling in the residential segment. I think Zep has made some big advances in hardware to reduce the installed cost of commercial installations. Last ER they mentioned a flat roof that would ordinarily require 20 days to install being completed in 3 days. So hopefully these efficiency gains are translating into more commercial work.

    We may even be able to track large installations in the media. A few days ago HEB got 1.2MW and now Burton is posting 1.8MW.

    Of course, the big project will be the Gigafactory, which could be over 100 MW just on the roof.
    �
  • 1/1/2015
    guest
    SunEdison boosts Australia presence as it targets global oil giants : Renew Economy
    SunEdison aspires to grow by acquisition.
    sunedison-utilities.jpg
    How SunEdison views their standing amongst peers.

    SunEdison aspires to add 1GW of renewable assets per quarter. They recently acquired Vivint Solar for $2.2B and First Wind for $2.1B. They also created TerraForm to serve as a yeildco. So their acquisition strategy seems to be rather horizontal. They want a large, diverse portfolio of renewable energy assets. SunEdison wants to play on both the utility and distributed energy side.

    SolarCity should add about 1GW for all of 2015, but doubling every year leads to 1GW per quarter in 2017. This is organic growth, not growth by acquisition. SolarCitySolarCity's acquisition strategy is quite vertical. All the components facilitate delivering distributed solar energy.

    SunEdison's market cap stands at $8.0B, but once the acquisition is complete the combined company may be worth $10B. SolarCity's market cap stands at $5.44B. If properly valued relative to the Vivint acquisition, it may be worth in excess of $10B. It will be interesting to compare how these two contenders grow in the coming years. My money is on SolarCity, but there is plenty of incumbent market share for both to feast upon in the coming decades. Supermajors? Not yet.
    �
  • 1/1/2015
    guest

    I read Lyndon Rive's comment on the acquisition and couldn't agree more... Sunedison now will contribute to the political/policy fight against Anti-DG utilties with deep pockets.

    Hawaii appears to be in the midst of determine the value of solar and net metering compensation moving forward. Sunedison support could be some added ammo in the fight. Here's an article out today on it:
    Inside Hawaii's landmark regulatory proceeding to value distributed resources | Utility Dive

    solarcity is growing nearly 100% organically. A big difference with Sunedison. Solarcity has a singular mission under one singular brand. Sunedison is a mix of different brands and organizations. I feel Solarcity will dominate the DG game where Sunedison may not want to be that focused.
    �
  • 1/1/2015
    guest
    Where was this quote from Lyndon?

    So does this acquisition basically represent an interest aligned with the utility business model capturing significant competition to that model? So a 52% premium is what it costs to buyout competition. Sunrun may become the next on the list. Might not be a bad play to buy Sunrun before it gets acquired.
    �
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