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Short-Term TSLA Price Movements - 2016

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How certain I am that the residential solar model isn't financially viable and won't be for at least 5 years? I would say 90% sure. 99% that it isn't viable today. 80% that it won't be viable even in 10 years time.

What would change my mind about its viability today is someone pointing out something I have missed which seems very unlikely to me, I have spent a lot of time on this. In the future residential solar will somehow need to reduce cost much faster than utility scale even though it is the same tech. Or both would have to drop extremely low in price, something like 80%+ so the distribution savings that could be made would be significant enough to tip the scales.

But of course, even though the residential solar isn't financially viable it can still be a success, and SCTY could be a success. So far SCTY has grown a lot on the back of the large subsidy of net metering on top of the 30% ITC. As long as the large subsidies continue residential solar demand will be alive and kicking. But if net metering goes away, SCTY is gone the next day, we saw this in Nevada.
traditional fossil fuel monopolies have 12 tax breaks in the tax code, including no permitting for the installation of an oil Derrick anywhere, nor do they have to eliminate(or disclose) any chemicals they inject into land anywhere in the country(including any neighborhood you live).

Solar has one tax credit that only comes from an actual sale of a system, an actual market has to exist to receive any tax credit, unlike many of the "in perpetuity" tax breaks utilities get. ITC is limited and has an actual expiration date, utilities don't.

Fossil fuel monolpoly utilties are among the 4 most subsidized industries in the entire United States, yet still get a guarenteed rate of return on a rate payer base that can't deny their services. The fossil fuel utilties have mininial service innovation over its 100 year existence and has a historical rate inflation of average of 5% annually.

Solar industry has dropped costs precipitously and have done so on the premise of innovation and scale which has not even scratched the surface on its iteration cycle, not including storage, smart inverters and smart home applications and networking potentialities(aggregation).

To not say fossil fuel, traditional utility monopolies are not far, far more subsidized then solar, you have to be completely lying to yourself and in desperate need of a timeout in the corner.

Take away all utiltity subsidies, including guarenteed rate of returns and a hostage customer base and solar a decade ago would have undercut them in their sleep.

As a matter of fact we could lower every amercians income tax, while getting a grid that is 100% technologically superior and efficient then what we have today.
 
Thank you, you are making my point. We do not have unlimited resources. Rooftop solar puts the power generation closest to where it is being used. Utility scale solar uses huge amounts of resources for transmission and politically still allows "the man" to control our lives. In Denmark, you have 400% the population density of here in the USA. In the USA, our wildlands have great value to us and the wildlife who live there. I've lived in a few European countries and found them quite lonely in the sense that all there is is people everywhere. Zero wildlife, zero true nature. We can save resources with rooftop solar, we can save our wildlife as well by not scraping clean and fencing their lands to profit the utilities. In European countries there is little to zero public lands so I think Perfectlogic, it is not in your culture to comprehend this. We in the USA with our wise choice to save lands for the public, administered by BLM, USFWS, NPS, and USFS would like our public lands to remain public, not be parted out for utilities to panel up, while we easily could have paneled the houses and buildings in cities.

Environmental impacts of utility-scale solar

Utility-Scale Solar’s Impact On The Land

The ressources for the extra little bit of reach from the grid to the utility solar plant is tiny and no problem at all. What matters if we want to transition away from FF as quick as possible is cost, that is just how the world works.

You make it sound like we need to use a huge amount of land if we want to be powered by utility solar. But that is completely untrue, all it takes is a small part of the Nevada desert to power all of the US. You also make it sound like utility scale solar will only benefit the utilities. But the facts are that if everyone had solar on their roof the cost of electricity would be around twice as high (at least if SCTY was the installer) while if the US was powered by utility scale solar the price would be the same as it is today. How do you think the result would be if the US people were to vote on this? I think less than 10% live in your fantasy world.

I also find it amusing that you try to take the moral highground while you could probably save as many starving Africans as you could desert scorpions with the money saved from going with utility scale solar instead of residential.
 
traditional fossil fuel monopolies have 12 tax breaks in the tax code, including no permitting for the installation of an oil Derrick anywhere, nor do they have to eliminate(or disclose) any chemicals they inject into land anywhere in the country(including any neighborhood you live).

Solar has one tax credit that only comes from an actual sale of a system, an actual market has to exist to receive any tax credit, unlike many of the "in perpetuity" tax breaks utilities get. ITC is limited and has an actual expiration date, utilities don't.

Fossil fuel monolpoly utilties are among the 4 most subsidized industries in the entire United States, yet still get a guarenteed rate of return on a rate payer base that can't deny their services. The fossil fuel utilties have mininial service innovation over its 100 year existence and has a historical rate inflation of average of 5% annually.

Solar industry has dropped costs precipitously and have done so on the premise of innovation and scale which has not even scratched the surface on its iteration cycle, not including storage, smart inverters and smart home applications and networking potentialities(aggregation).

To not say fossil fuel, traditional utility monopolies are not far, far more subsidized then solar, you have to be completely lying to yourself and in desperate need of a timeout in the corner.

Take away all utiltity subsidies, including guarenteed rate of returns and a hostage customer base and solar a decade ago would have undercut them in their sleep.

As a matter of fact we could lower every amercians income tax, while getting a grid that is 100% technologically superior and efficient then what we have today.

Why are you talking about oil rigs? That has nothing to do with electricity production. Utilties are using FF yes, but they have begun the transition to renewables. Practically all new capacity additions this year is solar and wind.
 
I just wanted to chime in on why I think Tesla has a broader vision for acquiring Solarcity that directly aligns with the expansion of Tesla Motors.

By focusing on complete “solar systems”, Tesla would be able to approach commercial property owners in desirable locations (regional malls; national chains in the hotel, retail, movie, and dining industries; office parks; etc.) and offer them compelling and scalable energy solutions that get more financially beneficial to the property owner as they allow an increasing number of existing parking spaces to be retrofitted for Supercharging or destination charging. Significant expansion of Tesla branded chargers with no real estate acquisition or leasing expenses at highly desirable locations.

Does the Solarcity acquisition give Tesla the ability to leverage a cost-effective solution with commercial property owners as a way to put fueling facilities at locations that work within people’s daily activities and schedules? Tesla fueling facilities on commercial properties could have dozens of superchargers or destination chargers per location and might be able to build-out this infrastructure quickly if it’s also to the economic advantage of the commercial property owners—thereby solidifying Tesla’s charging standard as the standard that other manufacturers conform to.

Power storage is a great addition for commercial property owners as part of a turnkey solar system that includes permitting and installation (solarcity strengths). If they put their primary efforts on the commercial market/charging facilities they might also be able to rapidly scale charging locations at minimal incremental cost while adding significant revenue to the Tesla energy side of the balance sheet.

Be kind… 1st post from a long time lurker and long holder of both TSLA and SCTY.
 
In trying to determine the worst case scenario with acquiring Solar City, I see two threats: PUCs that allow draconian rewriting of the rules for selling back power to the utilities (and not allowing the grandfathering in of existing installations), and an economic situation in which debt is coming due and there's a lack of appetite in the market for renewing Solar City's debt at reasonable interest rates that allow profitability. How much could the needed contribution by Tesla to Solar City in a worst case year be? Perhaps Foghat or other advocates of Solar City can comment. Synergies between Telsa and Solar City will indeed exist, but an acquisition needs to be balanced with the worst case scenario. Thanks.

btw, welcome to the forum edgeof3.
 
The ressources for the extra little bit of reach from the grid to the utility solar plant is tiny and no problem at all. What matters if we want to transition away from FF as quick as possible is cost, that is just how the world works.

You make it sound like we need to use a huge amount of land if we want to be powered by utility solar. But that is completely untrue, all it takes is a small part of the Nevada desert to power all of the US. You also make it sound like utility scale solar will only benefit the utilities. But the facts are that if everyone had solar on their roof the cost of electricity would be around twice as high (at least if SCTY was the installer) while if the US was powered by utility scale solar the price would be the same as it is today. How do you think the result would be if the US people were to vote on this? I think less than 10% live in your fantasy world.

I also find it amusing that you try to take the moral highground while you could probably save as many starving Africans as you could desert scorpions with the money saved from going with utility scale solar instead of residential.
Speaking of African, Solarcity has a sizable investment in Off Grid Electric a Kenyan company selling low cost solar systems to locals. They too have a million customer goal and are well on their way to getting there. Over 90% of them use M-Pesa, a digital currency, to pay for for their usage, sending a text code over their phone to turn it on when they use it. Now instead of using kerosine for night time lighting and having go into town to charge their phone for an exorbitant fee, they can turn on their solar system and save money.

Solarcity in effect is helping people in Africa with distributed solar...
 
By focusing on complete “solar systems”, Tesla would be able to approach commercial property owners in desirable locations (regional malls; national chains in the hotel, retail, movie, and dining industries; office parks; etc.) and offer them compelling and scalable energy solutions that get more financially beneficial to the property owner as they allow an increasing number of existing parking spaces to be retrofitted for Supercharging or destination charging. Significant expansion of Tesla branded chargers with no real estate acquisition or leasing expenses at highly desirable locations.

Does the Solarcity acquisition give Tesla the ability to leverage a cost-effective solution with commercial property owners as a way to put fueling facilities at locations that work within people’s daily activities and schedules? Tesla fueling facilities on commercial properties could have dozens of superchargers or destination chargers per location and might be able to build-out this infrastructure quickly if it’s also to the economic advantage of the commercial property owners—thereby solidifying Tesla’s charging standard as the standard that other manufacturers conform to.

Power storage is a great addition for commercial property owners as part of a turnkey solar system that includes permitting and installation (solarcity strengths). If they put their primary efforts on the commercial market/charging facilities they might also be able to rapidly scale charging locations at minimal incremental cost while adding significant revenue to the Tesla energy side of the balance sheet.

Be kind… 1st post from a long time lurker and long holder of both TSLA and SCTY.

Welcome. Good points. I suspect firms that are after a turnkey solution don't have to look very far. There are 8,000 solar companies in the U.S. and that is growing daily. Many link storage with their offerings.

Your point is a good one of going that step further in linking it to Supercharger construction which would be a benefit no other firm could offer. Although Tesla would have to be careful in not making Tesla solar mandatory with Supercharger construction.

Tesla in focusing on the commercial clients could let the smaller companies fight over the residential market and supply these smaller firms with the hardware.

Lots of possibilities.
 
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In trying to determine the worst case scenario with acquiring Solar City, I see two threats: PUCs that allow draconian rewriting of the rules for selling back power to the utilities (and not allowing the grandfathering in of existing installations), and an economic situation in which debt is coming due and there's a lack of appetite in the market for renewing Solar City's debt at reasonable interest rates that allow profitability. How much could the needed contribution by Tesla to Solar City in a worst case year be? Perhaps Foghat or other advocates of Solar City can comment. Synergies between Telsa and Solar City will indeed exist, but an acquisition needs to be balanced with the worst case scenario. Thanks.

btw, welcome to the forum edgeof3.

The PUC threat was at its height in all of Solarcity's history, was over the past year. That threat was primarily in Nevada as far a draconian extremes. California decided to maintain retail next metering into 2019. Overall, Nevada was the actual worst case scenario and it stirred up massive resistance and fallout politically (and economically) from a citizen's ballot initiative for vote, lawsuits, and a governor lead task force to dispute/review PUC's actions. The ability for the PUCs worst case decision to hold up into 2017, is very tenitve at best. Again, this was the worst Solarcity would face and it is expected to be struck down in the coming months. Arizona is currently going into a rate case, and they're seeking to change net metering, but its is not close to worse case scenario of Nevada.

Key policy position filled now by former unities states FERC chairman Jon wellinghoff which should really help on the value of solar/net metering discussions with PUCs going forward.
With Jon Wellinghoff, SolarCity looks to resolve net metering disputes in Nevada and elsewhere

What is very promising going forward is the developments in New York and in California right now, which will essentially be the standards of which all utiltiy territories will follow around the country in one form or another after. There we see how distributed energy resources are now being integrated into the planning process of utilities by commissons which is exactly where Solarcity is heading and positioning the company to go.

This planning process includes then*value of solar* which is litterally the same thing *net metering* is, only the break down of values could essentially yeild higher compensation then retail value net metering in end, so the future looks just as it ever has.

As far as debt, Solarcity is not even close to any trouble. All systems are generating income this is the basis of most financing. They've already extended all solar bonds that were due to come up this year into 2017 and have a revolving debt that they pay down through some capital from tax equity and abs.

Thus far Solarcity has grown from 31mws/ year installed in 2010 to 870mws/year in 2015 all while maintaining debt level and repayment schedules.

Tesla would have to finance nothing for Solarcity. Not one dollar. However, tesla could utilitize Solarcity's capital raising channels for its own purposes. Solarcity already has long standing tax equity partner relationships as well as BBB+ ratings on its ABS paper. Tesla and none of this, solarcity does. If they were to merge it would be more of a burden on Solarcity's immediate growth rate then the other way around in my initial judgement here.

It is interesting that the idea that tesla is going to have to finance solarcity is unfounded and non existent in reality.

I would be open to discussion on how Solarcity's financials are problematic at all and how Tesla's financials are less so.
 
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Welcome. Good points. I suspect firms that are after a turnkey solution don't have to look very far. There are 8,000 solar companies in the U.S. and that is growing daily. Many link storage with their offerings.

Your point is a good one of going that step further in linking it to Supercharger construction which would be a benefit no other firm could offer. Although Tesla would have to be careful in not making Tesla solar mandatory with Supercharger construction.

Tesla in focusing on the commercial clients could let the smaller companies fight over the residential market and supply these smaller firms with the hardware.

Lots of possibilities.
8000 solar companies were there when solarcity had 0% market share, and there are 8000 companies now as solarcity has 34% of market share, more then the next 70 largest rooftop solar companies combined.

See the trend here?
 
The PUC threat was at its height in all of Solarcity's history, was over the past year. That threat was primarily in Nevada as far a draconian extremes. California decided to maintain retail next metering into 2019. Overall, Nevada was the actual worst case scenario and it stirred up massive resistance and fallout politically (and economically) from a citizen's ballot initiative for vote, lawsuits, and a governor lead task force to dispute/review PUC's actions. The ability for the PUCs worst case decision to hold up into 2017, is very tenitve at best. Again, this was the worst Solarcity would face and it is expected to be struck down in the coming months. Arizona is currently going into a rate case, and they're seeking to change net metering, but its is not close to worse case scenario of Nevada.

Key policy position filled now by former unities states FERC chairman Jon wellinghoff which should really help on the value of solar/net metering discussions with PUCs going forward.
With Jon Wellinghoff, SolarCity looks to resolve net metering disputes in Nevada and elsewhere

What is very promising going forward is the developments in New York and in California right now, which will essentially be the standards of which all utiltiy territories will follow around the country in one form or another after. There we see how distributed energy resources are now being integrated into the planning process of utilities by commissons which is exactly where Solarcity is heading and positioning the company to go.

This planning process includes then*value of solar* which is litterally the same thing *net metering* is, only the break down of values could essentially yeild higher compensation then retail value net metering in end, so the future looks just as it ever has.

As far as debt, Solarcity is not even close to any trouble. All systems are generating income this is the basis of most financing. They've already extended all solar bonds that were due to come up this year into 2017 and have a revolving debt that they pay down through some capital from tax equity and abs.

Thus far Solarcity has grown from 31mws/ year installed in 2010 to 870mws/year in 2015 all while maintaining debt level and repayment schedules.

Tesla would have to finance nothing for Solarcity. Not one dollar. However, tesla could utilitize Solarcity's capital raising channels for its own purposes. Solarcity already has long standing tax equity partner relationships as well as BBB+ ratings on its ABS paper. Tesla and none of this, solarcity does. If they were to merge it would be more of a burden on Solarcity's immediate growth rate then the other way around in my initial judgement here.

It is interesting that the idea that tesla is going to have to finance solarcity is unfounded and non existent in reality.

I would be open to discussion on how Solarcity's financials are problematic at all and how Tesla's financials are less so.

Foghat, thanks for the reply. I am okay with the concept that the Nevada decision was an abnormal situation and is likely to be reversed. Jon Wellinghoff does indeed appear to be a good choice for defending SolarCity in Nevada and elsewhere.

My biggest concern continues to be on the funding side. If I visit the SolarCity website, I see I can buy bonds that yield over 5% if I'm willing to commit for a period of five years or better, and the higher interest rate has me concerned because higher rates are generally linked to the perception of greater risk. The biggest thing that Musk and others could do to get me comfortable with this acquisition would be to break down which money is borrowed from which sources, how much needs to be refinanced and when, and how does the need for cash compare to the income from existing PPA agreements? If SolarCity will generate enough income 3 to 5 months from now so that it can self-finance additional installations, then my worries diminish, but I would really like to see the numbers laid out for inspection.
 
Some potential good news:

China May Lift Cap on Foreign Carmaker Stakes in Joint Ventures

From Bloomberg published today
This is huge news for the auto industry, potentially no longer required to share the spoils for the worlds largest auto market.

Wonder if Tesla has already made their deal with a local partner

Tesla will have a natural advantage if the deal comes in before they start producing there. Sometimes it pays big time being the last to a party.
 
Foghat, thanks for the reply. I am okay with the concept that the Nevada decision was an abnormal situation and is likely to be reversed. Jon Wellinghoff does indeed appear to be a good choice for defending SolarCity in Nevada and elsewhere.

My biggest concern continues to be on the funding side. If I visit the SolarCity website, I see I can buy bonds that yield over 5% if I'm willing to commit for a period of five years or better, and the higher interest rate has me concerned because higher rates are generally linked to the perception of greater risk. The biggest thing that Musk and others could do to get me comfortable with this acquisition would be to break down which money is borrowed from which sources, how much needs to be refinanced and when, and how does the need for cash compare to the income from existing PPA agreements? If SolarCity will generate enough income 3 to 5 months from now so that it can self-finance additional installations, then my worries diminish, but I would really like to see the numbers laid out for inspection.
I hope they have a massive press conference on CNBC or across all mainstream media so that as many people can learn how this business works. As I've said before, I think this is about getting widespread understating of Solarcity as opposed to second hard news from short hedgefund managers with standing /continuous appearances on tv and print media influence. Once understanding of how it works is laid out for a wide audience, clarity one way or the other will happen.

The solar bonds are a direct bond from Solarcity to the public. The use of these solar bonds is like a revolver debt for in construction projects. They are not a long term debt in their eyes.

As I recall, they have about 350mln-400mln in cash on hand, and have raised financing for over 1.1bln in installs through q1.

That financing has come from tax equity investors and essentially has been partially refinanced at sub 6% thru abs offerings.

As I recall no equity raises thru stock have been done for almost 2 years now.

The boiled down, bottom line on finances:

Solarcity sells tax credits and portions of each installed system's 20 year reoocurring revenue stream for upfront capital to install more 20 year revenue streams and Solarcity grows its install base at compounded annual rate.

As all-in costs come down due to scale and efficiency, Solarcity is able to offer lower cost revenue generating assets and expand the addressable market which further creates demand proportionate to their ability to scale to meet that demand. As such they will always require upfront capital to install.

Self funding will come at a point when demand slows and tapers off and look just like traditional utilities today with their high profits and nearly non-existent customer aquisition costs.

FWIW, I am absolutely against the terms of the deal as a scty investor, but very very happy with the terms as tsla investor. I think scty is getting robbed and tsla is getting a steal.

As scty investor that knows the long term value of scty, I would more then willingly accept an attractive convertible bond as opposed to this stock offer atrocity.
 
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My biggest concern continues to be on the funding side. If I visit the SolarCity website, I see I can buy bonds that yield over 5% if I'm willing to commit for a period of five years or better, and the higher interest rate has me concerned because higher rates are generally linked to the perception of greater risk. The biggest thing that Musk and others could do to get me comfortable with this acquisition would be to break down which money is borrowed from which sources, how much needs to be refinanced and when, and how does the need for cash compare to the income from existing PPA agreements? If SolarCity will generate enough income 3 to 5 months from now so that it can self-finance additional installations, then my worries diminish, but I would really like to see the numbers laid out for inspection.
Maybe if you wait until they complete their due diligence in two to three weeks they will address those concerns?
 
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