SolarCity (SCTY)

[jhm]

US giant enters Australia market to take suburbs off the grid : Renew Economy

Mule, you'll like this one. I hope to see SolarCity get more engaged with microgrids.

Imagine the opportunity of coupling a residential microgrid with a commercial microgrid. This would smooth out the load through the day and make more timely use of solar.

 

[TheTalkingMule]

I would rather say that anyone can do what SCTY is doing but I guess we will just have to disagree about that.

Theoretically, anyone can build electric cars far superior to any ICE vehicle and a fast charging network to power them. You don't see many folks doing it though, do you?

It's all about vision and execution and I'll bet on Musk for that every time. Once SCTY is fully to scale, they'll be too far ahead to be caught.

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US giant enters Australia market to take suburbs off the grid : Renew Economy

Mule, you'll like this one. I hope to see SolarCity get more engaged with microgrids.

Imagine the opportunity of coupling a residential microgrid with a commercial microgrid. This would smooth out the load through the day and make more timely use of solar.

Get to 5% solar overall, then worry about household battery packs, then worry about microgrids. That's the logical path I'm hoping to see from SCTY. There's gonna be a LOT of chaos between here and there.

 

[jhm]

Panasonic had a press release literally 1 day, or a few days after SCTY with a finished product, didn't have anything to do with SCTY. I don't agree with the idea that the industry was stagnant until SCTY came in and saved the day at all. Solar modules have been improving as a product much faster than any other means of producing electricity. Efficiency gains have been around .5%points/y for a while, that is a 3% efficiency gain with cost/w also coming down insanely fast.

All I'm saying is that if suppliers want to earn SolarCity's business, they've got to offer better products at lower prices than what SolarCity can do in house. As far as SolarCity was concerned, there was a growing gap between what they needed and what panel makers were supplying.

 

[TheTalkingMule]

Not to mention we're so deep into trickle down economics that states are willing to pay for and build entire manufacturing facilities just to attract jobs.

I actually think there's a good bit more value to SCTY making their own panels than just cost savings and higher efficiency panels. As we move into the next couple years and solar becomes mainstream across the nation, people are going to want American made panels from an American company. SolarCity's positioning as an end-to-end full service trusted American firm that isn't going anywhere is what will tip customers off the fence.

Having your own US manufacturing plant alleviates one of the major customer concerns and therefore speeds up the sales process. It's all about making the PPA efficient and undeniably advantageous so installs just snowball by word of mouth as they do in Germany.

 

[electracity]

Here is the thesis that will affect what I will do with 8,000 shares. I request people here to correct me if I am going wrong anywhere. I have no agenda but to figure out for myself what to do with the position that is painfully underwater.
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"Now we are actually going to be increasing our pricing in Q1 next year, but we have small increase depending on the state we'll increase roughly 0.25 cents to 1 cent a kilowatt hour in our leases and PPAs, and essentially matches the escalation of the utility rates." -- Lyndon Rive, CEO

This is fascinating. What Rive is really saying is that they will concentrate their sales efforts on the clueless subset of their increasingly sophisticated prospect population.

 

[jhm]

Get to 5% solar overall, then worry about household battery packs, then worry about microgrids. That's the logical path I'm hoping to see from SCTY. There's gonna be a LOT of chaos between here and there.

Yes, I get that path. However, there are some exceptions. Specifically new housing developments offer a rare opportunity to avoid building out expensive grid infrastructure before it exists. So there is an immediate savings to the developer, a near and long-term savings to the homebuyers, and an avoidance of utility cross-subsidization beneficial to utility ratepayers. So everybody wins except the utility that misses a growth opportunity. I think this is part of the answer to the situation where utilities are pushing too many fixed grid costs on to ratepayers. In those edges where new grid service is being added, the utilities can be forced to compete.

I see an interesting parallel here with gas peakers. With the low cost of Powerpacks and competitors, Sierra Club can now argue an economic case against a utility trying to get approval for a new gas peaking plants. Batteries win on economics, and this will shut down the pipeline of new gas peak capacity. So how do we shut down new grid infrastructure? Argue the economics of a microgrid. A microgrid can stand on its own, so if the utility wants to connect to it, they can pay to do so. But that is on the utility, not the developer and homebuyer.

 

[dalalsid]

I would rather say that anyone can do what SCTY is doing but I guess we will just have to disagree about that.

Lots have tried, vslr, nrg etc.

 

[Perfectlogic]

Lots have tried, vslr, nrg etc.

Vivint has done well afaik and recieved a buyout bid from SUNE at a relatively high valuation. SPWR is also doing well with what I believe is primarily a build to sell model which probably gives the customer a much cheaper solution. I don't think SCTY is guiding for market share gains going forward, which is kinda bad given their size (should be an advantage as many of you also believe) and their very high sales spend.

 

[jhm]

"Now we are actually going to be increasing our pricing in Q1 next year, but we have small increase depending on the state we'll increase roughly 0.25 cents to 1 cent a kilowatt hour in our leases and PPAs, and essentially matches the escalation of the utility rates." -- Lyndon Rive, CEO

This is fascinating. What Rive is really saying is that they will concentrate their sales efforts on the clueless subset of their increasingly sophisticated prospect population.

Well, that would be your cynical take on this quote. The way I see it is they are going to focus on converting customers from utilities that just raised their rates by a cent or two. It just makes sense to go where utilities are charging 17 c/kWh or more and pass over markets where the utility is below 15 c/kWh. So in a 17 c/kWh market they can offer competitive rates at 14 c/kWh, which will improve their average rate.

Of course, other installers can offer competitive prices too, but the are all competing with the local utility. So if they have to come in at 1 cent below SolarCity to get the sale, then they too are pricing at 13c, where SolarCity is 14c and the utility is 17c. Likewise, they would be offering 11c in a place where SolarCity is at 12c and the utility at 15c. Basically, it makes sense for all installers to charge more in higher priced market and to allocate more sales and installation resources in those markets. Moreover, any installer that can get the sale for the same price as SolarCity is offering would not leave money on the table by underbidding. The only reason to underbid SolarCity is if you cannot book enough sales otherwise. SolarCity is saying that it is willing to pass on certain bookings when it is not sufficiently profitable to pursue. It would be super if competitors can make good money on these passed opprtunities.

Having a strong market presence means you can charge higher prices and still retain marketshare. So we'll have to see if SolarCity can raise rates and still hold share. If so, then shareholders will know they've got a strong franchise.

 

[TheTalkingMule]

Vivint has done well afaik and recieved a buyout bid from SUNE at a relatively high valuation. SPWR is also doing well with what I believe is primarily a build to sell model which probably gives the customer a much cheaper solution. I don't think SCTY is guiding for market share gains going forward, which is kinda bad given their size (should be an advantage as many of you also believe) and their very high sales spend.

Much like the rooftop vs. utility argument, you can't just look at it from the perspective of which is cheaper/better. There are a thousand and one other factors that go into it.

It's two very very different markets and products. Buying panels outright(what I would do) is obviously the way to go, in 2015 an argument can't possibly be made against it. Problem is, that works for you and I and folks who are "sold" on the tech, can research the product confidently and have the means to buy/finance. 70% of potential solar customers don't have the time, know-how, resources or DESIRE to go the route of purchasing. They'd rather outsource at no additional cost/risk to what they're doing today.

To me it looks like SCTY will essentially own the PPA-style residential market for as long as it's valuable to consumers. In my estimation that's only 6-12 years until the industry in the US is so scaled, efficient and trustworthy that it doesn't make sense to pay a premium. By that point SCTY has a huge portfolio of customers paying them monthly and is moving into batteries.....

I see the market for residential solar customers being split roughly 50/50 purchase/PPA over the next few years, so long as SCTY can keep the payments at grid parity or below. That should be no problem once they get a tiny foothold and wholesale bids at peak start to plummet.

 

[jhm]

SolarCity vs SolarEdge

Ok, folks, we've all have invested considerable energy investigating SolarCity and the solar industry. Let's see if we can use that to make better investment choices wrt over solar investments.

So here's my challenge: SolarCity or SolarEdge, which is the better investment for the next two years?

I own both and would love to get other investors' views. I do have a particular leaning right now, but I'd rather not say. Thanks.

 

[TheTalkingMule]

Clearly the short-term investment is in simple panel manufacturers/installers who make all their profit on the spot. The risk is to miss the SCTY squeeze which could end up dwarfing TSLA if things go well.

I like my $80 & $90 Jan2018 calls in SCTY. They're probably cheaper right now, jump on those.

 

[doggusfluffy]

Solarcity lawsuit against Arizona utility to go forward: pv-magazine

It is also interesting to note that SRP's moves to shut down distributed solar do not mean that the utility is uninterested in solar technology. In July the company broke ground on a 45 MW PV plant in Florence, Arizona.

 

[Discoducky]

Ok, folks, we've all have invested considerable energy investigating SolarCity and the solar industry. Let's see if we can use that to make better investment choices wrt over solar investments.

So here's my challenge: SolarCity or SolarEdge, which is the better investment for the next two years?

I own both and would love to get other investors' views. I do have a particular leaning right now, but I'd rather not say. Thanks.

I'm doubling down on my SolarCity investment as their manufacturing plant and optimizations for install will reap huge margin improvements. I see their business model scaling better overtime as compared to SolarEdge due to their Flextronics partners.

This fact sheet appears to a bit old and I wonder why they haven't updated it? Maybe because they aren't the leader for installs currently?

http://www.solaredge.us/files/pdfs/se-fact-sheet-na.pdf

 

[drinkerofkoolaid]

Tempted to buy a ton of January $50 calls, then sell all my shares. I think this allows me to write off the loss and realize the gains when (if?) the stock rises to $60 or higher by then. Is this correct? Anyone have any thoughts on this strategy. At $30, SolarCity is very undervalued. The main headwinds are being caused by uncertainty about the entire market and tax incentives.

 

[MikeC]

Tempted to buy a ton of January $50 calls, then sell all my shares. I think this allows me to write off the loss and realize the gains when (if?) the stock rises to $60 or higher by then. Is this correct? Anyone have any thoughts on this strategy. At $30, SolarCity is very undervalued. The main headwinds are being caused by uncertainty about the entire market and tax incentives.

I think that violates the wash rule.

 

[jhm]

I'm doubling down on my SolarCity investment as their manufacturing plant and optimizations for install will reap huge margin improvements. I see their business model scaling better overtime as compared to SolarEdge due to their Flextronics partners.

This fact sheet appears to a bit old and I wonder why they haven't updated it? Maybe because they aren't the leader for installs currently?

http://www.solaredge.us/files/pdfs/se-fact-sheet-na.pdf

Thanks. What is your concern about Flextronics?

The fact sheet is old. It is missing latest developments in HD Wave technology and an inverter optimized for Powerwalls.

I think I agree about SolarCity scaling well into the future ten years out and beyond. An inverter maker like SolarEdge may in fact lose its technological edge. This is what SolarEdge is doing to Enphase right now. So there is risk of technological obsolescence.

That said, for the next two years, it looks like SolarEdge can keep taking marketshare from Enphase and other inverter makers even as the global solar market grows. They've been growing profitability at 72% for several years and look to keep that pace for a few more.

So this leaves me to wonder if it would be better to ride out ITC with SEDG for a year or too and then jump back in SCTY. So that is the sort of play I am trying to weigh out.

If ITC is extended and SolarCity takes off again, SolarEdge will take off too. Currently, a quarter of SolarEdge's sales are to SolarCity. But if ITC is cruel to SCTY, SolarEdge has broad international exposure to rooftop and commercial solar and should be able to weather the US residential solar downturn better than SolarCity. So this trade seems to be a sort of hedge against specific US risks.

 

[TheTalkingMule]

When shares are this massively undervalued, just buying @ $28 on a mini-dip is hard to beat with fancy strategery. I believe I said the same at $38. That being said, I was overjoyed to buy Jan2018 $90 calls for $2.10 a month ago, since nothing has really changed since then logic states paying $1.34 today would be more better. Wait a month or two til the volatility cools down and buy them even cheaper.

Nothing will happen by January 2016 that's significant enough to move the needle of investor consensus, so why take the risk on Jan16 options? I'm all about timing this inevitable squeeze with leverage through way out-of-money calls, but the timing is looking highly improbable for the next 6 months. Now, January 2017.....that could be a whole different story. Imagine SCTY is fully scaled, efficient, churning and cash positive......then Bernie Sanders wins. Yikes. Instead of a mild squeeze to $80 or $100, you're talking $150 and beyond.

 

[jhm]

When shares are this massively undervalued, just buying @ $28 on a mini-dip is hard to beat with fancy strategery. I believe I said the same at $38. That being said, I was overjoyed to buy Jan2018 $90 calls for $2.10 a month ago, since nothing has really changed since then logic states paying $1.34 today would be more better. Wait a month or two til the volatility cools down and buy them even cheaper.

Nothing will happen by January 2016 that's significant enough to move the needle of investor consensus, so why take the risk on Jan16 options? I'm all about timing this inevitable squeeze with leverage through way out-of-money calls, but the timing is looking highly improbable for the next 6 months. Now, January 2017.....that could be a whole different story. Imagine SCTY is fully scaled, efficient, churning and cash positive......then Bernie Sanders wins. Yikes. Instead of a mild squeeze to $80 or $100, you're talking $150 and beyond.

So you're betting on Sanders? I guess at some point we need to figure out how presidential race factors into solar stocks. With any luck we may get an ITC extension this year and campaign politics will have less impact.

I tend to think that when it come to reach carbon emission goals, ITC is one of better policy levers. I think it is too late for a carbon tax, and that just pushes costs onto consumers. A carbon tax that funded ITC and other renewable energy incentives could be revenue neutral and rightly focused on solutions, not just taxing the problem. In all this, we at least need a government that is willing to address the issues.

 

[drinkerofkoolaid]

I think that violates the wash rule.

I think it only violates the wash rule if I buy calls after I sell shares, not if I buy them before I sell the shares. I think it might also violate the wash rule if the calls are dated less than 30 days out. Is this correct?

I think this is a technique hedge funds use to "accrue losses", to offset gains in stocks they want to be long and are bullish on, that have experienced a significant sell off.

I think this is one of the reasons stocks that experience a significant sell off, justified or not, sometimes remain relatively flat for at least a month before picking a direction.