Article in NYT about solar companies not yet being profitable

[holeydonut]

I guess this may be behind a paywall... but it is rather good read:

Home Solar Is Growing, but Big Installers Are Still Losing Money


I guess it's pretty obvious with Tesla undercutting the ever-living-hell out of the competition, that solar and ESS are a revenue chase (yay for valuation based on revenue and growth multiples!!) rather than a profit chase (boooooo!!).

Tesla's playbook is to get rid of marketing/sales and piggy back off the marketing investment of their competition (my words; not from the article). But Sunrun wants to keep investing in both sales and operations (again my words, not things from the article). I wonder what would happen if all solar and resiliency companies in the USA simply stopped advertising...

“You are always going to be negative if you are growing,” Lynn Jurich, chief executive of Sunrun, said in an interview. Sunrun acquired Vivint, which was the country’s second-biggest residential solar installer, in a deal announced in July. That acquisition has helped push Sunrun’s stock up over 400 percent in 2020. Sunnova’s stock was up over 300 percent.

But both are still beholden to massive permitting/planning/other-BS. And it's clear to me Sunrun doesn't know how to navigate this middle-ware. I wonder if Tesla is doing it better...

Industry officials also argue that they are working hard to reduce expenses so they can break even sooner. Solar systems typically cost two or three times more in the United States than in other industrialized nations like Australia, partly because U.S. companies spend more time and money on securing building permits and on marketing.

And of course there's the part where PoCo's feel Solar is just something for rich folks to stick it to the working and middle class. So solar companies have to constantly butt heads with the largest companies in the USA. It's a tough place no doubt!

Utilities have said that residential solar systems primarily help affluent households that can afford to shell out tens of thousands of dollars on panels and batteries. As a result, the companies contend, middle-class and lower-income families are left bearing much of the cost of maintaining the electric grid.

 

[chrstna4]

This is why incentives for solar are important (and maybe should have income-based levels for incentives).

Slightly related is this video on the Tesla solar roof. It’s starting to be pretty affordable compared to a new roof and solar panels. I’m hoping they can train more roofing companies fast to take care of the backlog of people wanting the product:

 

[wjgjr]

Interesting article - I do wish there was more insight available into how (un?)profitable Tesla's solar is. I think that would give a good data point to compare to some of the other large players who report to be struggling. It will also be interesting to see how Tesla continues to approach installs, as they are using a mix of their own players and some of the local contractors mentioned in the article.

On the affordability front, I think continuing incentives is important, and I also think that one area that has real potential in lower-income situations is leasing. It has its challenges (and is a reason it tends do be disfavored when purchasing is an option) but with the right structure (potentially including certain guarantees from utilities and/or governments if the private sector cannot make it work) it has the potential to provide a guaranteed reduction in monthly electric costs (even after factoring in the lease payment) while making the grid more green. And, in the end, that is the goal of the ITC and other incentives for solar.

 

[run-the-joules]

I did feel a *little* bad about using Tesla for my install, knowing that they're undercutting a bunch of smaller businesses, but honestly it came down to "go with Tesla and get solar", or "take the 'support local smaller businesses!' mindset, but not be able to afford solar"

That was about a 30 second debate with myself, as you might imagine

 

[gpez]

I did feel a *little* bad about using Tesla for my install, knowing that they're undercutting a bunch of smaller businesses, but honestly it came down to "go with Tesla and get solar", or "take the 'support local smaller businesses!' mindset, but not be able to afford solar"

That was about a 30 second debate with myself, as you might imagine

There is the stickied thread discussing energy policies - this was my exact point there in that demand side subsidies are simply subsidies for the suppliers. It's possible that those sort of incentives helps grow the marketplace and thus eventually make it more viable and competitive however what is much more likely is that the already established players are able to better afford now to undercut new competition. This has the exact opposite long term effect than was intended.

 

[holeydonut]

There is the stickied thread discussing energy policies - this was my exact point there in that demand side subsidies are simply subsidies for the suppliers. It's possible that those sort of incentives helps grow the marketplace and thus eventually make it more viable and competitive however what is much more likely is that the already established players are able to better afford now to undercut new competition. This has the exact opposite long term effect than was intended.

It's interesting how the consumer clean-car credits played out differently than the residential clean-energy credits. Tesla (automotive) won the hotly contested clean-vehicle market against stalwart players that had HUGE pockets. The electric and partial-electric new vehicle incentives helped Tesla customers afford the emerging tech. And Tesla benefited on the other side by generating EPA credits for selling electric vehicles. This let Tesla sell those valuable clean-car-credits back to automakers who continued to sell ICE vehicle mix that didn't perform to EPA targets. Even though new Tesla customers don't have access to the credit any more, Tesla now has a foothold and the other automakers are playing catchup.

But as we've seen with the California SGIP battery rebate, this programs became a way to funnel tax money into the pocketbooks of the established players and most often helps wealthy homeowners. SGIP put caps in place for how much one single seller could take from the small scale residential pool. But that policy still meant about 75% of the small scale program funds went to customers buying from the four largest established energy players in the state (Tesla, Sunrun, Swell, and Semper). The Resiliency money was also flying into luxury homes that were often a second home or income property. The SGIP operators had to panic-shift their policy into the dedicated low-income buckets, but almost all of the money is already spent.

The federal ITC on solar+battery is often criticized as a subsidy for wealthy people. The PoCos often blame these federal credits for allowing wealthy homeowners to get "low-cost" energy and place the burden of maintaining the grid on lower income homeowners. And the ITC itself is often cited by watchdogs as a "wasteful" tax since businesses that benefit from it don't really need the help or are mismanaged (Solyndra). Anecdotally, coming from a red state, I know people in the Midwest typically think these programs were put in place by Dem's to put more money into Blue State pockets. Even though the programs help all states and Republicans live in California too, the conservative media easily plays on people's biases.

Either way, there's evidence that these incentives disproportionately go to high earners (regardless of party affiliation). When people are working two minimum wage jobs living out of an apartment, the don't have the luxury of installing solar or buying a new Tesla.

 

[gpez]

It's interesting how the consumer clean-car credits played out differently than the residential clean-energy credits. Tesla (automotive) won the hotly contested clean-vehicle market against stalwart players that had HUGE pockets. The electric and partial-electric new vehicle incentives helped Tesla customers afford the emerging tech. And Tesla benefited on the other side by generating EPA credits for selling electric vehicles. This let Tesla sell those valuable clean-car-credits back to automakers who continued to sell ICE vehicle mix that didn't perform to EPA targets. Even though new Tesla customers don't have access to the credit any more, Tesla now has a foothold and the other automakers are playing catchup.

But as we've seen with the California SGIP battery rebate, this programs became a way to funnel tax money into the pocketbooks of the established players and most often helps wealthy homeowners. SGIP put caps in place for how much one single seller could take from the small scale residential pool. But that policy still meant about 75% of the small scale program funds went to customers buying from the four largest established energy players in the state (Tesla, Sunrun, Swell, and Semper). The Resiliency money was also flying into luxury homes that were often a second home or income property. The SGIP operators had to panic-shift their policy into the dedicated low-income buckets, but almost all of the money is already spent.

The federal ITC on solar+battery is often criticized as a subsidy for wealthy people. The PoCos often blame these federal credits for allowing wealthy homeowners to get "low-cost" energy and place the burden of maintaining the grid on lower income homeowners. And the ITC itself is often cited by watchdogs as a "wasteful" tax since businesses that benefit from it don't really need the help or are mismanaged (Solyndra). Anecdotally, coming from a red state, I know people in the Midwest typically think these programs were put in place by Dem's to put more money into Blue State pockets. Even though the programs help all states and Republicans live in California too, the conservative media easily plays on people's biases.

Either way, there's evidence that these incentives disproportionately go to high earners (regardless of party affiliation). When people are working two minimum wage jobs living out of an apartment, the don't have the luxury of installing solar or buying a new Tesla.

This is a great post.

I think fundamentally our view on these credits needs to change. They're assuredly (as you pointed out) not to help more people afford these things in the short term but rather designed to encourage the market to expand and open up to a broader audience over time, which will help those who otherwise can't afford them today. The challenge though is that they often have the opposite effect (by allowing larger players to suffocate smaller ones) and it's extremely challenging to a) predict how subsidies will impact the market and b) design a program to avoid such problems.

 

[wjgjr]

Either way, there's evidence that these incentives disproportionately go to high earners (regardless of party affiliation). When people are working two minimum wage jobs living out of an apartment, the don't have the luxury of installing solar or buying a new Tesla.

While I think this is true (and why I note above that I think there are opportunities to expand the solar incentives through rent or lease-style programs that reduce or eliminate the upfront costs) I don't think this is necessarily a bad thing, or in any way surprising. Almost all new innovations (and new car technologies, like rear cameras, are a great example) start off expensive, and prices drop over time. The ITC (and I can't speak to the CA incentives as I am not familiar with them) served to speed that process by more quickly expanding the market and driving innovation. The effect has been to more quickly bring the price of solar down to a more affordable price point for more people (though not surprisingly, still higher earners.) And, it has gotten us to the point where the purchase can be justified in more parts of the country purely on financial considerations - and not just due to a desire to be more environmentally friendly. But, of course, improving the environment is the goal of the credit, and it is the benefit society is getting by incentivizing individuals who can afford it to add solar and incentivizing companies to invest in the sector.

The markeplace for solar has increased dramatically, as has the number of companies both on the manufacturing and installation side. As this is a Tesla energy forum, it seems particularly noteworthy that SolarCity, which is now Tesla Energy, was founded right after the ITC was enacted. It has become a great option for low-cost installs fitting a particular mold, and as the original article suggests, may be a strong challenge to other large companies trying to compete using older sales models. But, as the article also notes, they are competing against "hundreds of smaller rivals, many of which have been turning a profit for years." It seems clear there is a thriving market for the kind of custom, full-service installs these small companies can provide, while also a space for companies like Tesla, who will compete on cost but also provide a more cookie-cutter approach.

 

[jjrandorin]

I said in another thread, that I thought, in this particular section of TMC, an interesting discussion could be had around solar / energy storage and policies, etc without getting into specific political partisanship, etc.

I appreciate the fact that you all (so far) are proving me correct in this

I am enjoying reading the various points in this thread, and also very appreciative of the general tone. Thanks all!

 

[h2ofun]

It's interesting how the consumer clean-car credits played out differently than the residential clean-energy credits. Tesla (automotive) won the hotly contested clean-vehicle market against stalwart players that had HUGE pockets. The electric and partial-electric new vehicle incentives helped Tesla customers afford the emerging tech. And Tesla benefited on the other side by generating EPA credits for selling electric vehicles. This let Tesla sell those valuable clean-car-credits back to automakers who continued to sell ICE vehicle mix that didn't perform to EPA targets. Even though new Tesla customers don't have access to the credit any more, Tesla now has a foothold and the other automakers are playing catchup.

But as we've seen with the California SGIP battery rebate, this programs became a way to funnel tax money into the pocketbooks of the established players and most often helps wealthy homeowners. SGIP put caps in place for how much one single seller could take from the small scale residential pool. But that policy still meant about 75% of the small scale program funds went to customers buying from the four largest established energy players in the state (Tesla, Sunrun, Swell, and Semper). The Resiliency money was also flying into luxury homes that were often a second home or income property. The SGIP operators had to panic-shift their policy into the dedicated low-income buckets, but almost all of the money is already spent.

The federal ITC on solar+battery is often criticized as a subsidy for wealthy people. The PoCos often blame these federal credits for allowing wealthy homeowners to get "low-cost" energy and place the burden of maintaining the grid on lower income homeowners. And the ITC itself is often cited by watchdogs as a "wasteful" tax since businesses that benefit from it don't really need the help or are mismanaged (Solyndra). Anecdotally, coming from a red state, I know people in the Midwest typically think these programs were put in place by Dem's to put more money into Blue State pockets. Even though the programs help all states and Republicans live in California too, the conservative media easily plays on people's biases.

Either way, there's evidence that these incentives disproportionately go to high earners (regardless of party affiliation). When people are working two minimum wage jobs living out of an apartment, the don't have the luxury of installing solar or buying a new Tesla.

Totally agree. Too bad SGIP did not have enough thoughts before they opened the flood gates to wells, and not understanding how it would be SO abused.