SolarCity (SCTY)

[Chickenlittle]

"roof life decreased by mounting the system"

- generally the thought seems to be that systems increase roof life. Also I don't understand why SCTY would payoff the customer or bother to remove the panels. They could just offer to continue the lease at a very reduced rate or sell the system to the homeowner for a very low price that newer systems at that time couldn't compete with. They could remove the system if the customer leases/buys a newer better system from them. Unless there are people of the opinion that when the lease ends, energy will cheaper or no more expensive than today and a cheaper lease offering will be something that the homeowner doesn't want.

yes I can see that happening but when redoing roof (asphalt tiles 20 year life and roofs not new at installation) the home owner maybe upset at paying more to take down system and reinstall BEFORE the lease expires. The roof must be penetrated to attach the panels and any leak at attachment site will reduce lifetime of roof.

You would think company has thought about this but as an example I remember buying an emr (electronic medical record) when they first came out around 2007 and 2 years later decided to change to a new system. The first company had no plans or policy in place as to how a change could be done. They had never considered it.

 

[sleepyhead]

yes I can see that happening but when redoing roof (asphalt tiles 20 year life and roofs not new at installation) the home owner maybe upset at paying more to take down system and reinstall. The roof must be penetrated to attach the panels and any leak at attachment site will reduce lifetime of roof

Panels will not increase roof life, that is a huge fallacy because you are still going to have more than 70% of your roof exposed. Unless you actually cover your whole roof with panels, which no one does because is doesn't make sense to put up northern facing panels.

I asked about this when I installed my system and they said it would cost $500-$1500 to take the panels down and re-install them when I replace my roof.

 

[Chickenlittle]

Panels will not increase roof life, that is a huge fallacy because you are still going to have more than 70% of your roof exposed. Unless you actually cover your whole roof with panels, which no one does because is doesn't make sense to put up northern facing panels.

I asked about this when I installed my system and they said it would cost $500-$1500 to take the panels down and re-install them when I replace my roof.

Thanks for the answer

 

[FluxCap]

Study those incentives closely and make sure to ask a bunch of questions to see how the sales representative responds.

I did a rough calculation yesterday for my SunPower system that I bought two months ago, and I estimated (using a flat $0.16/kWh price for retail electricity over the next 25 years) that I will save over $40,000 because I bought my system. Had I leased from SolarCity, my savings would probably be only 25% of that amount.

Some questions you can ask:

1. What panels are they going to use, and what is the stated watt peak per panel. What type of technology does the panel use (thin film, multi-Si, mono-Si, etc)?
2. What is the maximum system size that will fit on the southern facing portion of the roof?
3. Can you get more efficient mono panels to put in a bigger system and how much more it will cost?
4. What happens when you have to replace your roof 10 years from now?
5. Are the panels certified to be PID resistant?
6. Ask for a bunch of other details such as degradation and guaranteed production rates over 20 years etc.
7. What kind of inverter you will get?

One very important thing in this industry is that all watts are not created equal. All chinese panels have ~3% straight out of the box, while SPWR has 0%. SPWR has 0.13% annual degradation, while Chinese guarantee no more than 0.5%. Some panels work a lot better with low lighting, shading, clouds, etc. Some panels work a lot better in high humidity, temperatures, etc.

I have had my SPWR system for 2 months now and compared it to NREL's great solar calculator on what I should be getting:

http://pvwatts.nrel.gov/pvwatts.php

My panels are actually producing 20% more than what the website says that they should. The reason for this is that Chinese panels simply cannot compete with SPWR panels, which give you a lot more production per Watt peak. I also have 1/3 of my panels facing west (slightly northwest), and I put into the calculator that they all face 100% perfectly south. So if all of my panels did face south then I am sure that I would be getting 25%+ higher production than Chinese panels.

I sent you a PM with a link that will get you a discount on a SunPower solar system. Since you are going to invite a bunch of different companies over for solar quotes, I recommend that you give these guys a try as well. I am curious to hear your feedback.

Cheers and it is great to hear that you are going solar.

Thanks for this, Sleepy. Going to do my homework before the SCTY rep shows up tomorrow morning.

 

[pz1975]

Thanks for this, Sleepy. Going to do my homework before the SCTY rep shows up tomorrow morning.

I feel sorry for him! You will probably have more difficult questions for him than all his other customers combined for a month!

 

[dalalsid]

Study those incentives closely and make sure to ask a bunch of questions to see how the sales representative responds.

I did a rough calculation yesterday for my SunPower system that I bought two months ago, and I estimated (using a flat $0.16/kWh price for retail electricity over the next 25 years) that I will save over $40,000 because I bought my system. Had I leased from SolarCity, my savings would probably be only 25% of that amount.

Some questions you can ask:

1. What panels are they going to use, and what is the stated watt peak per panel. What type of technology does the panel use (thin film, multi-Si, mono-Si, etc)?
2. What is the maximum system size that will fit on the southern facing portion of the roof?
3. Can you get more efficient mono panels to put in a bigger system and how much more it will cost?
4. What happens when you have to replace your roof 10 years from now?
5. Are the panels certified to be PID resistant?
6. Ask for a bunch of other details such as degradation and guaranteed production rates over 20 years etc.
7. What kind of inverter you will get?

One very important thing in this industry is that all watts are not created equal. All chinese panels have ~3% straight out of the box, while SPWR has 0%. SPWR has 0.13% annual degradation, while Chinese guarantee no more than 0.5%. Some panels work a lot better with low lighting, shading, clouds, etc. Some panels work a lot better in high humidity, temperatures, etc.

I have had my SPWR system for 2 months now and compared it to NREL's great solar calculator on what I should be getting:

http://pvwatts.nrel.gov/pvwatts.php

My panels are actually producing 20% more than what the website says that they should. The reason for this is that Chinese panels simply cannot compete with SPWR panels, which give you a lot more production per Watt peak. I also have 1/3 of my panels facing west (slightly northwest), and I put into the calculator that they all face 100% perfectly south. So if all of my panels did face south then I am sure that I would be getting 25%+ higher production than Chinese panels.

I sent you a PM with a link that will get you a discount on a SunPower solar system. Since you are going to invite a bunch of different companies over for solar quotes, I recommend that you give these guys a try as well. I am curious to hear your feedback.

Cheers and it is great to hear that you are going solar.

Hey, about the comparison to pvwatts, I've had my JASO panel system up for just about 2 months and am easily beating the PVWatts estimate. With about 2 days of downtime in both March and April thanks to inverter issues, in March I got exactly PVWatts estimate and April I got way more.
Solar Production Tracker | S1dd.com

How much more did sunpower cost compared to Chinese panels?

 

[smorgasbord]

I recommend reading this article. I did not write this article, but share the exact same views:

http://seekingalpha.com/article/221...ed-customers-and-investors?source=marketwatch

Regardless of what the customer profile is, we believe that no sane customer is likely to renew the existing PPAs/leases at 90% of the going rate, as SolarCity management claims. The optimistic case for SolarCity management is renewal at a rate that is about 30% initial contract value (i.e. around $0.05 to $0.06 per KWH).Even that may be doubtful. A savvy customer could actually ask SolarCity to pay money to keep the system on the house when the lease expires. It would be cheaper for SolarCity to pay off the customer and leave the system on the roof than incur the expense of removing and transporting what is likely to be a highly inefficient system with very little market value. In other words, the retained value at the end of 20 years could actually turn negative.
Investors who buy a company's story without doing due diligence on the company's retained value shenanigans are in for a rude surprise.
If and when SolarCity makes a more rational set of assumptions in its retained value, the company's financial results will not look pretty, but as a public company, its management needs to make a better set of assumptions for its business plan and share them with the stockholders.

Are you agreeing with the whole article, substantively, or just the Retained Value aspect? I agree that a 20 year old solar panel system isn't worth the money it costs to remove it - a few solar company reps I talked with said that they would remove panels at the end of 20 years if I insisted, but that they'd probably offer to leave the panels up and working for free at the end of 20 years.

But, the article has other points that don't seem right to me. For instance, the escalation clauses all seem reasonable to me in light of past history of electric rates, and having those locked down even in the face of inflation is not a bad thing.

 

[kenliles]

Are you agreeing with the whole article, substantively, or just the Retained Value aspect? I agree that a 20 year old solar panel system isn't worth the money it costs to remove it - a few solar company reps I talked with said that they would remove panels at the end of 20 years if I insisted, but that they'd probably offer to leave the panels up and working for free at the end of 20 years.

But, the article has other points that don't seem right to me. For instance, the escalation clauses all seem reasonable to me in light of past history of electric rates, and having those locked down even in the face of inflation is not a bad thing.

agree those escalation rates were historically reasonable. The big unknown is what will they do in the face of Solar disruption. They may in fact compress- I don't hold that view, I think most utilities will attempt to raise rates to compensate for fixed cost with less revenue (because they won't adapt quickly enough). But I can see the risk of that being wrong and rate taking a widely different path than historical data leads.

 

[sleepyhead]

Are you agreeing with the whole article, substantively, or just the Retained Value aspect? I agree that a 20 year old solar panel system isn't worth the money it costs to remove it - a few solar company reps I talked with said that they would remove panels at the end of 20 years if I insisted, but that they'd probably offer to leave the panels up and working for free at the end of 20 years.

But, the article has other points that don't seem right to me. For instance, the escalation clauses all seem reasonable to me in light of past history of electric rates, and having those locked down even in the face of inflation is not a bad thing.

I agree with almost everything in the article. He does exaggerate a few things, and some of the risks might never materialize; but he makes a great point to bring them up.

I disagree with both you and kenliles on escalation clauses:

I (got a smoking good deal on a SPWR system at $2.50/W, so to answer dalalsid's question I doubt that I could get a better deal on Chinese panels and wouldn't install them unless I could get them installed for $1/W) and calculated that after rebate and tax credit will be producing electricity for the next 25 years at a $0.05/kWh flat rate with no escalation. I think my system will run for 40+ years (with only relatively cheap inverter replacements), so the rate I will pay is a lot lower than $0.05.

SCTY said in their recent presentation that their average rate is $0.141/kWh. So if you have an escalation clause then you might end up paying $0.18 in year 10. Now if you are trying to sell your house, then someone might not want to buy the house to pay $0.18/kWh, when they will be able to get a system for $0.03-$0.07/kWh. So the seller will be stuck pre-paying the rest of the lease and that is a liability.

I also disagree that utilities will be raising rates to compensate for their losses as solar really accelerates and grows. They will not be able to raise rates, because more people will go solar and lead to a utility death spiral. Another reason they cannot raise rates is because utilities sell at LMP's a.k.a. marginal cost. So if utilities get stuck with stranded assets, they will sell energy at cost of production in order to keep them running to pay bills. As load falls off as more people go solar, wholesale electricity prices will plummet and utilities will start going bankrupt, and only those with the most efficient power plants will survive. There is nothing they can do.

So even though I suspect that ulitility prices will continue going up for the next decade or two. As solar picks up, utility rates will actually start going down IMO. Just look at the situation in Germany. Their wholesale electricity prices are crashing due to solar. And utilities are losing money. They will go out of business one by one as solar, wind, biomass, etc. expand.

IMO the expansion of solar will cause lower utility rates and not higher rates...

 

[kenliles]

I agree with almost everything in the article. He does exaggerate a few things, and some of the risks might never materialize; but he makes a great point to bring them up.

I disagree with both you and kenliles on escalation clauses:

I (got a smoking good deal on a SPWR system at $2.50/W, so to answer dalalsid's question I doubt that I could get a better deal on Chinese panels and wouldn't install them unless I could get them installed for $1/W) and calculated that after rebate and tax credit will be producing electricity for the next 25 years at a $0.05/kWh flat rate with no escalation. I think my system will run for 40+ years (with only relatively cheap inverter replacements), so the rate I will pay is a lot lower than $0.05.

SCTY said in their recent presentation that their average rate is $0.141/kWh. So if you have an escalation clause then you might end up paying $0.18 in year 10. Now if you are trying to sell your house, then someone might not want to buy the house to pay $0.18/kWh, when they will be able to get a system for $0.03-$0.07/kWh. So the seller will be stuck pre-paying the rest of the lease and that is a liability.

I also disagree that utilities will be raising rates to compensate for their losses as solar really accelerates and grows. They will not be able to raise rates, because more people will go solar and lead to a utility death spiral. Another reason they cannot raise rates is because utilities sell at LMP's a.k.a. marginal cost. So if utilities get stuck with stranded assets, they will sell energy at cost of production in order to keep them running to pay bills. As load falls off as more people go solar, wholesale electricity prices will plummet and utilities will start going bankrupt, and only those with the most efficient power plants will survive. There is nothing they can do.

So even though I suspect that ulitility prices will continue going up for the next decade or two. As solar picks up, utility rates will actually start going down IMO. Just look at the situation in Germany. Their wholesale electricity prices are crashing due to solar. And utilities are losing money. They will go out of business one by one as solar, wind, biomass, etc. expand.

IMO the expansion of solar will cause lower utility rates and not higher rates...

well actually given the scenario you painted you actually AGREE with me not disagree. The escalation rates are in fact accurate based on historical escalation. What you're describing is what the disruption of Solar does to that going forward, which was the risk I was pointing out. However, I think we might have different views on current Utilities. Most (not all) current utilities I believe will seek and be granted rate increases to compensate for costs (largely because they will remain on coal/oil/nat gas for essentially forever)- those costs will absolutely increase and govt commissions will be obliged to grant the increases or raise taxes to cover the loss (not likely on that front). I think where our disagreement lies, is I don't believe the current Utilities will implement Solar (with a few exceptions of course) sufficient to lower costs- They will instead take the easy way out and simply request rate hikes to stay even. My opinion is the current utilities (again with a few exceptions) will instead be replaced by new ones formed by the Solar companies themselves (HoldCos) and/or new entities holding these assets. The current crop of utilities will become commoditized pseudo govt entities largely responsible for grid maintenance with some load sink storage for balancing. I think this will happen because Solar disruption will occur much faster than the time constant required for 70% of current Utilities to adapt. If so, that's why rates from current utilities will go up from here, only coming down as they are replaced and not responsible for generation of power but can only justify grid maintenance costs. That's going to take a while of course, but that's the way I see things playing out (I'm probably wrong- I'm just offering my current thinking on the matter). If you do the numbers, it's actually not to long that the total Solar deployments by individuals and businesses exceed the entire demand profile of the US. The current Utilities, built for power generation are simply not equipped to deal with that change- they will become network operators and exact a fee for that. But that transition is what has to occur to bring the the 'Utility' rate in line with Solar production- before that time (I would estimate perhaps 10 years) the Utility rate will go up driving more and more local Solar deployment... going to be a blast watching this play out whatever happens. Maybe I'll be surprised and the Global warming pressures on politicians and regulatory agencies will force the Utilities to adapt faster- but that's what I don't currently have faith in. The decisions will come from bottom up, by individuals and businesses much faster than top down- especially since we have (nearly)reached grid parity costs.

 

[Curt Renz]

SolarCity currently does not serve Illinois. Commonwealth Edison (ComEd), which provides electricity to Chicago and the rest of Northern Illinois, will raise rates by an average of 21% on June 1st.

Here’s a link to a related Chicago Tribune article and video: http://www.chicagotribune.com/business/breaking/chi-comed-price-increases-20140507,0,7376954.story

I provided a heads-up to the contact box in the SolarCity website. Here is the response I received:

“Thank you so much for the information. I will be sure to forward your email over to our expansion team to review and look into the great opportunity this presents.”

Addendum: ComEd offers net metering and Illinois provides rebates to people with solar power installations.

 

[dalalsid]

That is your loss, because mine are covered for "everthing" for 25 years. Another reason to get SPWR panels on your roof. BTW, I paid out of pocket (after rebates and tax credit) about $1.15/W.

So at $1.15/W all of a sudden going off the grid becomes a lot cheaper. And note that I used $2/W in my calculations above.

Wow that's a fantastic deal for Sunpower panels. The only rebate I get is the federal. Paid 1.75/W after rebate. Plus power here is only 11c/kWh but luckily (got into some limited time program) for the 1st 5 years I get paid 15c/kWh for solar power and then after that net metering. Payoff about 10 years.

 

[Curt Renz]

I don't know what the solar situation is in Illinois, but SCTY doesn't go where electricity rates are high. SCTY enters markets where there is net metering and HIGH rebates.

ComEd, the electric utility for Chicagoland and the rest of northern Illinois, does offer customers net metering: https://www.comed.com/customer-service/rates-pricing/interconnection/pages/net-metering.aspx

 

[sleepyhead]

ComEd, the electric utility for Chicagoland and the rest of northern Illinois, does offer customers net metering: https://www.comed.com/customer-service/rates-pricing/interconnection/pages/net-metering.aspx

But are any rebates offered? I clearly wrote that SCTY goes where there are high rebates AND net metering. 43 states in the country have net metering laws in place, and SCTY only operates in 30% of those states.

They only go where the rebates are high, so they can pocket the cash at the customer's cost.

They will get to Illinois eventually, when they start running out of options with high rebate states. They don't care if you are paying $0.18/kWh in Illinois. They will go to certain places in Texas where electricity is offered at $0.12/kWh, because the TDSP offers generous rebates that are meant for the customer; but SCTY pockets them instead.

 

[Curt Renz]

But are any rebates offered? I clearly wrote that SCTY goes where there are high rebates AND net metering.

Indeed, Illinois gives rebates for erecting solar power systems: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=IL05F

 

[Robert.Boston]

Moderator's Note: I've moved my post and a discussion that followed about the general economics of solar over to Alternative Energy Investor Discussions (formerly SCTY thread) . While it's tangentially about SCTY, it's more generally about all solar stocks (all of which rely, to one extent or the other, on subsidies and mis-pricing of electricity in current retail tariffs).

And another tranche of posts have been moved to snippiness.

Folks, let's try to focus on investment opportunities in SCTY here, and in parallel companies in the thread linked above. If it's too challenging to talk about SCTY apart from other solar companies, I'll simply close this thread and we can use the other to talk about all solar investments.

Thanks,
Robert

 

[NigelM]

I'm agreeing with Robert.B, we've spent more time on moderating this thread than any other in the Investor section so far this year, and the darned thing is less than two months old!

Discussion on SCTY has to be able to include stuff on the competitive environment but it's up to you guys to keep your comments focussed; otherwise there's no point in having yet another solar thread. Oh, and all normal etiquette rules apply.

 

[ggies07]

If you didn't remember about this today, here is the link to the webinar:

In this webinar, SolarCity will discuss the following key topics:

• Recent state policy developments expanding or restricting net metering
• The costs and benefits of net metering
• The impact of rate design

Webinar - Net Energy Metering: Update on Key Distributed Generation Policy

 

[DaveH]

Capital One Bank Invests $100 Million in SolarCity Fund

http://www.solarcity.com/pressreleases/241/Capital-One-Bank-Invests-%24100-Million-in-SolarCity-Fund-to-Provide-Solar-Power-To-Thousands-of-U-S--Homeowners.aspx

 

[Curt Renz]

This 8-K filing with the SEC dated May 23 was emailed to me this morning by SolarCity:

"The Loan has an initial commitment of up to $125,000,000 and also permits Borrower to increase that commitment in an aggregate amount not to exceed an additional $32,000,000."

http://investors.solarcity.com/secfiling.cfm?filingid=1193125-14-217891&CIK=1408356

- - - Updated - - -

Here is the May 28 press release regarding an arrangement between SolarCity and Groupon:

"Groupon (Nasdaq:GRPN) will work with SolarCity (Nasdaq:SCTY), the nation's largest solar power provider, to offer deals on solar systems in the Groupon marketplace."

SolarCity and Groupon Offer First of Its Kind Deal on Solar Power (NASDAQ:SCTY)