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jhm
Well-Known Member
That's great. I wonder if Obama's warning has helped to tilt the politics. I suspect that PUCs do not want to come under federal scrutiny. Also for the utilities, if net metering is the political price not to have their monopoly status quo challenged, it is a very small price indeed. Hands down the biggest subsidy the government has every given to fossil fuels and the utilties is monopoly status. That alone is the franchise the likes of Buffet is willing to pay for. The President called them rent seekers but stopped short of calling them monopolists. Yeah, net metering is a very small price to pay...and it actually does not cost anything to anyone else.
Very interesting. The weakness today was entirely due to the comment from Moody's, that assumes California will change the rate structure for net metering, in a way that will kill the viability of PPAs. This seems very unlikely and would likely violate anti monopoly laws. Sunpower was equally effected by the comment.
Solar City hasn't been this oversold in a long time. Solar City can grow by 50-100% annually for the next 5-10 solely with government contracts. I'm almost certain a number of states are offering incentives for grid storage, that cover the complete cost of residential grid storage. Didn't Obama recently announce he was planning to further increase the incentives for Solar and Grid storage?
In order for states to meet the mandates for grid storage, utilities, and states will need to increase the subsidies for grid storage. Solar City and Tesla's factories will be operating at maximum capacity for many years to come.
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Incentives for energy storage spread worldwide
In California, the state's Public Utilities Commission required that the three main utilities collectively phase in 1.3 GW of storage by 2020. In a twist, half of the assets are required to be owned by private industry -- a rule that will likely make California a proving ground for the young energy-storage industry"
In New York, the subsidies for storage are especially high: $2,100 a kilowatt for battery storage and $2,600 for thermal storage.
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It is very unlikely Tesla won't need a second Gigafactory by the second year of Model 3 production. I will be surprised if Tesla isn't already identifying sites, and preparing all the things necessary to ensure a second factory can be operational within 3-4 years.
Here is a fun website for anyone wondering how incentives vary by state.
ACEEE | Policy Database
Speculation: It's possible Tesla has already worked with Apple , and other parties to secretly build a second factory in China. $1-2 billion dollars isn't material for Apple, and probably wouldn't need to be disclosed. If Solar City and Tesla's only problems are the need for a few billion dollars to build additional plants, neither company has any problems. There are tons of people, companies, and banks desperately looking for places to invest a few billion.
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Johan
Ex got M3 in the divorce, waiting for EU Model Y!
But that seems more like a temporary solution, only until the end of the year. Obviously with the growth in solar deployment the utilities are waking up all over the place. 2016 seems like it will be an important year for this battle to play out. They will come at it from any angle, of course emphasizing the angle mostly of how unjust it is to those poorer customers who can't afford solar who are now subsidizing the rich people and how all those millionaires putting solar ion their roofs are still using the grid at night, but allegedly not paying their fair share for maintaining it.
I think solar will be able to do very well even without net metering, even though it may delay the revolution by 1-2 years. The biggest advantage of solar economically is that you're not buying power from the utility, not that you can sell a little back during the day. As storage becomes better and cheaper the use for net metering becomes less and less. If the utilities do somehow "win" the battle on net metering I think in the end all they'll achieve is an even faster loss of their grip on the market; small and larger microgrids with storage will pop up here and there, interconnect and before you know it the whole electricity distribution system is no longer a monopoly.
It is four months, yes limited. However, a new trend has started, which is directly assaulting the foundational premise of "cost shift" every single utility across the nation uses as justification for eroding net metering. The trend is forcing the utitlity to prove these costs and also giving the rooftop solar companies to contest these costs and support its claims of benefits. In NV and AZ, right now, hearing processes are underway to look under the hood in a real way, which has not been done before in this manner and intensity.
For example, in Mivhigan, DTE says rooftop solar is causing a cost shift, yet if you took DTE's own un-vetted cost estimates into consideration at 1:1 NEM with no benefits to the grid added at all, the total cost to DTE customers is .3c per month. Yes, that's 3 cents per month. Does that sound like a strong argument to add fees and drop net metering in order to stop the cost shift placing non solar customers at significant risk of not paying their bills because of the need to increase rates?
the smoke and mirrors are being exposed now. The tried and true talking points of "cost shift" are crumbling under actual scrutiny. And consumers are taking notice.
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jhm
Well-Known Member
I guess I would be surprised if utilities started to make an unfairness argument about lower income folks not being able to get rooftop solar. First if it is just a matter of financing, there is already zero down financing available to anyone with decent credit. Calling for fairness here would amount to inviting the government to susidize or guarantee financing for low income families. So anything in that direction makes matters worse for utilities resisting rooftop solar. The next issue is that some people simply do not have roofs that are adequate for solar. This inequity actually works to the advantage of utilities seeking to limit rooftop solar. The equitable solution to rooftop inequity is community solar and virtual net metering. If I rent my home but my neighbor has a roof big enough to provide solar for both of us, then how is it fair to prevent me and my neighbor from sharing his roof? Net metering for self-consumption only enforces inequities while virtual net metering makes sharing possible. This is a bit like restricting a neighbor who likes to garden to only grow as many tomatoes as they can consume, perhaps selling a few to the grocery market only to be bought back at a later time. Preventing that neighbor from selling or sharing his tomatoes with neighbors is the injustice, and the injustice is made even worse when the neighbor would have difficultly affording expensive tomatoes at the grocery.
Here's a thought. Consider a program that allows people with surplus solar energy to donate that to charitable organizations, such as Habitat for Humanity. The donor gets to deduct the full price of the electricity from their taxes as a charitable gift. The utility distributes the power and also gets to deduct the cost of the service as a charitable contribution and also fulfills certain regulatory requirements regarding low income customer. And of course the recipient of the charitable gift benefits directly. So everybody wins. I suspect it would be very unpopular for a utility to oppose this scheme. I'm sure there are many families who would love to donate their solar power to other families in need. That's what neighbors do.
This might become the standard methodology for evaluating NEM across the country. Perfect timing as nearly 60% of utilities are challenging net metering right now, especially NV,AZ (discovery currently underway).
http://www.irecusa.org/ajax-link-file.php?file_name=http://www.irecusa.org/wp-content/uploads/2013/10/IREC_Rabago_Regulators-Guidebook-to-Assessing-Benefits-and-Costs-of-DSG.pdf
http://www.irecusa.org/ajax-link-file.php?file_name=http://www.irecusa.org/wp-content/uploads/2013/10/IREC_Rabago_Regulators-Guidebook-to-Assessing-Benefits-and-Costs-of-DSG.pdf
jhm
Well-Known Member
NRV Fundamental Investing
Let's review some fundamentals in light of recent prices. As of Q2, SolarCity reported $3057M in net retained value (NRV) and 262k customers. I believe the company is still on track to hit the million customer mark by mid-2018, 3 years away. To do this the need to grow customers by 56% per year. Currently NRV per customer is $11,668. Over the next three years it may be hard to retain this average. Specifically the ITC step down could force SolarCity to grow on thinner margins. OTOH MyPower loans generate twice as much retained value per watt higher efficiency panels coupled with SolarEdge optimizers and inverters could lead to more watts per customers, so such innovations point to the potential to improve NRV/customer. So let's suppose at the million customer mark NRV/customer is $11,000. This gets us to $11B NVR mid-2018. Presently, there are 97M shares, but by 2018 this could reach 110M. So NRV/share is $31.52 presently and $100 mid-2018. Thus, we are looking at a 3X growth in fundamental value over the next 3 years.
Personally I think SolarCity should trade at 2 to 3 times NRV/share. This would account for some.of the value of the huge organic growth engine called DevCo. This engine has the power to double the value of PowerCo, ie NRV, every 12 to 20 months. So that ought be worth quite alot, at least as much as the PowerCo. Unfortunately, the market does not agree with me. It seems to think this engine will stall out within a year. The price has been range bound between about $45 and $60 for quite a while, and recently we have tested $35, whence Musk bought more shares on the open market. So with NRV at about $31.52 per share, the market seems willing to price this at 1.5 to 2 times this. Thus, we see the stock price between $150 and $200 by mid-2018. So at current prices around $40, I think the upside is 300% to 400% in three years. Annualized that is 55% to 71% growrh, which is at least as fast as the company will acquire customers.
The upshot of this analysis is that we can track progress the company makes in growing its customer base and NRV and compare this to the stock price. When the stock drops too far below 1.5 times NRV / share, we may want to buy. The stock needs fundamental traders like this to support the stock price. It appears Musk is willing to do some of this, but it would be good for others to join him. I think trading today demonstrated that fundamental investor are willing to put a floor on this. I am very much encouraged.
Let's review some fundamentals in light of recent prices. As of Q2, SolarCity reported $3057M in net retained value (NRV) and 262k customers. I believe the company is still on track to hit the million customer mark by mid-2018, 3 years away. To do this the need to grow customers by 56% per year. Currently NRV per customer is $11,668. Over the next three years it may be hard to retain this average. Specifically the ITC step down could force SolarCity to grow on thinner margins. OTOH MyPower loans generate twice as much retained value per watt higher efficiency panels coupled with SolarEdge optimizers and inverters could lead to more watts per customers, so such innovations point to the potential to improve NRV/customer. So let's suppose at the million customer mark NRV/customer is $11,000. This gets us to $11B NVR mid-2018. Presently, there are 97M shares, but by 2018 this could reach 110M. So NRV/share is $31.52 presently and $100 mid-2018. Thus, we are looking at a 3X growth in fundamental value over the next 3 years.
Personally I think SolarCity should trade at 2 to 3 times NRV/share. This would account for some.of the value of the huge organic growth engine called DevCo. This engine has the power to double the value of PowerCo, ie NRV, every 12 to 20 months. So that ought be worth quite alot, at least as much as the PowerCo. Unfortunately, the market does not agree with me. It seems to think this engine will stall out within a year. The price has been range bound between about $45 and $60 for quite a while, and recently we have tested $35, whence Musk bought more shares on the open market. So with NRV at about $31.52 per share, the market seems willing to price this at 1.5 to 2 times this. Thus, we see the stock price between $150 and $200 by mid-2018. So at current prices around $40, I think the upside is 300% to 400% in three years. Annualized that is 55% to 71% growrh, which is at least as fast as the company will acquire customers.
The upshot of this analysis is that we can track progress the company makes in growing its customer base and NRV and compare this to the stock price. When the stock drops too far below 1.5 times NRV / share, we may want to buy. The stock needs fundamental traders like this to support the stock price. It appears Musk is willing to do some of this, but it would be good for others to join him. I think trading today demonstrated that fundamental investor are willing to put a floor on this. I am very much encouraged.
jhm
Well-Known Member
And consumers should take note. The real economic benefit to all ratepayers is that competition from rooftop solar places market discipline on rates utilities might otherwise impose on ratepayers. It is one thing to have PUCs and mountains of complex laws on the books to try to keep these monopolies from over pricing ratepayers, but look at how much retail ratepayer pay over industrial ratepayer almost 100% more. Why do industrial ratepayers get such a better deal from utilities? The generation costs are the same. Both need transmission and distribution. The underlying cost cannot be that far off, but industrial ratepayers take a much more active role in finding alternatives to what the utilities off. Thus, competition is what keeps industrial rates low. Residential ratepayers need to engage alternatives as well and force the utilities to offer more compelling rate plans. Consider also, that over the last 10 years residential rates have increased by about 3.2% per year. What if competition from solar and batteries reduced this to just 1.6% per year? This would keep the national average below 14.8 c/kWh over the next ten years instead of letting it rise above 17.2 c/kWh. The regulatory status quo cannot slow the pace of rate increases, but competition from rooftop solar can. I should hope that would matter to all ratepayers.
I'm learning a lot from you guys, so thank you for your insight, but what about PPAs? One reason I didn't go with solarcity PPA is because I knew the industry was going to change and change fast. So the escalator they have each year is fine for say the first 5 years, but when I looked at say year 12-20, the cost was going to be pricey and who knows what the utility prices will be with solar+battery storage by that time. I didn't want to get into a 20 year contract with low payments now and then have the industry cheaper by year 14 or whatever.....thoughts?
you will be paid something comparable to $190/kW month for grid services for battery +solar. Plus, your rate is fixed for 20 years. Utitlity rates have gone up nearly double the max Ppa escalator with most cases Solarcity beating the california per/kWh rste by over 5 cents per/kWh already.
Ppa's are good to go. At a quarterly conference call last year, Lyndon rive said he is comfortable with his flat .15c/kWh rate in california, in fact likes how the California rate structure opens up a wider market at healthy margin for Solarcity.
If there was one energy company that understands the innovations and sea changes of California energy landscape, it would be Solarcity.
http://www.irecusa.org/ajax-link-fi...ok-to-Assessing-Benefits-and-Costs-of-DSG.pdf
if you want to confirm a belief in that rooftop is going to keep up rate changes and expand on net metering, read the above document.
Another document to read is the Solarcity white paper on its "grid engineering" website.
if the California utilities ever do start reducing its kWh retail rates, it will be because of distributed grid asset services, not because of any efficiencies in centralized technologies over the next 20 years. In additional current utitliy capital expenditure road maps clearly indicate retail prices will not be going down for the foreseeable future, and I mean decades. So, again, in my opinion, if there was to be a retail rate cut, it would come from the services Solarcity &customers will be offering in distributed asset aggregation of which you would directly benefit in payment.
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Yes, but I live in TX where rates are cheaper to begin with and what happens if the utilities keep rates lower in year 12 to keep up with the competition of solar+batteries? I would then be paying more for my solar (because of the escalator) than from the utilities, right? Maybe I'm missing something here.
This is what I'm talking about if it goes this way:
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
This was an OK read and a pretty balanced view:
Analyst trolls Chanos, says he's lying about Elon Musk's SolarCity - Yahoo Finance
"We're all entitled to our own opinions but not to our own facts".
Analyst trolls Chanos, says he's lying about Elon Musk's SolarCity - Yahoo Finance
"We're all entitled to our own opinions but not to our own facts".
Unless you are a Wall Street analyst with a not-so-well-hidden agenda, then facts are only limited to your imagination!
Perfectlogic
Member
You seem to be forgetting that utility scale solar is a thing too, and that it is half the price of residential. The sentiment here seems to be that the 20 year PPA from SCTY is great because the price from utilities will just go up over time, but that doesn't make sense considering that solar has reached parity now and is clearly going much lower. I certainly wouldn't sign a 20 deal with SCTY with an escalator to save a few cents today while solar cost is still dropping 10%+/y. And what if net metering goes away, then the system will be a huge liability right? How strong is this PPA, can the resident get out of it?
jhm
Well-Known Member
It is a falacy to compare the cost of utility solar to residential rates. In the US residential rates are about 80% higher than industrial rates. Roughly the industrial sector pays about 7c/kWh while the residential sector pays about 12.5c/kWh. The point here is that wholesale prices are the same regardless of sector. So even the average wholesale price goes from 6 to 4 c/kWh because of cheap wind and utility solar, this will mean very little rate relief for residential ratepayers. The spread from industrial to residential has little to do with the cost of generating power. So the spread will remain. In fact the spread has been widening in both absolute and relative terms over the past 10 years. Residential rates have gone up 3.2% annually for the last 9 years, while industrial has only gone up 2.4% in the same time. It is not the cost of wholesale electicity that is driving this widening gap. I suspect the different owes to greater demand elasticity among industrial ratepayers than residential. So increasingly the residential sector is bearing more than its share of the cost of the grid. So utility solar can go to zero, but the residential sector is still stuck with the bill for the grid.
So the primary issue with distributed solar is whether residential ratepayer are willing to pay for the grid. The attack against distributed solar was that these residents were not paying as much for the grid, as if residents have a moral obligation to subsidize the grid for industrial ratepayers. But what rooftop solar owners are doing is expressing demand elasticity. They are simply not willing to pay higher rates and will modify their homes and finance their own energy investments to do so. It is the unwillingness of marginal residential ratepayers to accept high prices that puts economic pressure on utilities to lower their rates. The regulatory framework cannot do this. Only consumers willing to defect can force utilities to lower their rates. But the defection has to be massive. Electricity consumption has actually been in decline for a while, while revenue rises. So a modest decline cannot motivate a utility to compete. But if the threat of defection is high enough to impact solvency, they will have to change strategy.
jhm
Well-Known Member
W.A. says solar is the future as it prepares to dump coal : Renew Economy
This is an extraordinary postcard from the future as Western Australia's Energy Minister comes to see rooftop solar as the dominant energy source for the state. This is an exciting evolution in thinking. Note that the government had been subsidizing energy to the tune of $500 per family per year and a bloated capacity market was called a "rort" which is Australian for either a dishonest practice or a wild party. Many peaking plants had been built but never switched on. Within this context, rooftop comes as a sweeping "democratic" alternative that is actually quite inexpensive to deploy. The government can save money and shut down unneeded fossil plants. With deep penetration of solar there is actually no need for baseload generation. What is needed is storage, but given the recognition of rooftop solar's contribution, I suspect schemes to support behind-the-meter batteries cannot be far off. So the people have spoken, and they want their own solar and batteries. This is stunning progress.
This is an extraordinary postcard from the future as Western Australia's Energy Minister comes to see rooftop solar as the dominant energy source for the state. This is an exciting evolution in thinking. Note that the government had been subsidizing energy to the tune of $500 per family per year and a bloated capacity market was called a "rort" which is Australian for either a dishonest practice or a wild party. Many peaking plants had been built but never switched on. Within this context, rooftop comes as a sweeping "democratic" alternative that is actually quite inexpensive to deploy. The government can save money and shut down unneeded fossil plants. With deep penetration of solar there is actually no need for baseload generation. What is needed is storage, but given the recognition of rooftop solar's contribution, I suspect schemes to support behind-the-meter batteries cannot be far off. So the people have spoken, and they want their own solar and batteries. This is stunning progress.
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