SolarCity (SCTY)

[dakh]

Something to think about. SCTY is developing a mean lean solar installing machine. What they install 3 years from now will be a few times more than what they install now. Same goes for 5 years from now. So even if some early installs start defaulting at a higher rate, that would still be a drop in the ocean when that actually starts happening. When I buy the stock I think about paying for what they're ver well prepared to accomplish much more than what they've done so far. That part is just a proof of concept and proof of ability to execute.

 

[TheTalkingMule]

So let's say I pay $200 to my utility today and by using scty I cut my bill to $160 a month. In 7 years panels cost come down to $3000 from $15000. So you either pay $160 a month for another 13 years, a total of $24960, or I can default on the lease and pay $3000 to buy my own panels.

The numbers are hypothetical but the scenario is what Chanos is talking about. Can you explain the error to his logic?

As mentioned above, these numbers aren't realistic, that's the nature of the chanos argument. Cherry pick numbers from different scenarios, slap the numbers together and call it a case study.

If you're paying $200 per month today, you need 10kW of panels at a minimum to net out. That cost $30,000 today and about $12-16k at the dead lowest point we can hope to hit in 10-15 years. You also need to maintain them, and figure out the tax credit, and figure out who's an honest installer, and worry about the roof leaking, and handle any hardware breakdowns, and worry about if the installer/manufacturer will even be in business to honor the warranty if there's a problem in 2026, and think bout how to upgrade in 5 years as batteries come out.

Would most consumers want to do all that? SCTY takes care of all that for you, charges less then you pay today and locks the rate in to hedge against inevitable increases in grid rates.

I would say that at a minimum, 60-80% of households bringing in more than $150k a year would go with something like the SCTY model. It's such a small premium relative to the value and peace of mind received.

 

[Foghat]

For me, owning tsla first because I respect Elon and his "dreams / goals" I purchased scty at $18, sold at $80 to buy more tsla, had Solar City install a PPA solar system on my home and just transfered 10k from my 401k to my IRA to buy more scty at$50. It may be "foolish" to some to put my future retirement funds "all in" on blind trust of one individual or company. I have my reasons that are too much to post, but let's just say that to me if you like the man and the mission, long term investment will pay off in spades. There are always going to be people trying to manipulate the opinions of the individual investor. For me, faith in the man / mission along with due diligence put me where my investments are today. I am not a Teslanaire yet but closing in fast.

Thanks for the post. I think there are many investors that feel exactly the same way.

We'll probably see a lot more of those years old arguments pop up now that a massive catalyst has materialized almost unexpectedly.

the funny thing is they come and go, but we are always still here in the end.

 

[jhm]

That is fine but it doesn't help me because I am not looking to short the utilities or SCTY. I am looking to buy SCTY, but would like to clear things up before doing so. Saying utilities would be worse off doesn't help SCTY.

As far as TSLA, I am much more aware of their business model and am an investor. Their lease is 63 months as opposed to 20 years. While battery costs are certainly coming down, at 8% a year it is not fast enough to be worth it for someone to default on their lease payment to buy another EV.

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Yes, Chanos short position is done, I agree. The carry costs are far too high for him to hold even if everything he says come true eventually. However, for a long, his points still need to be addressed since my time horizon is much longer compared to him.

I am saying that this form of argument is invalid. It's just BS from someone who is simply trying to confuse investors.

If you want to figure out if SolarCity is a good long-term invest, I would recommend that you begin with the Analyst Day presentation deck. Get a good sense of how management frames its business model on strategy.

Take time to digest that before worrying about whatever nonsense shorts may be dishing out. They don't believe 90% of the crap they say. So it's not really worth analyzing.

 

[Foghat]

I am saying that this form of argument is invalid. It's just BS from someone who is simply trying to confuse investors.

If you want to figure out if SolarCity is a good long-term invest, I would recommend that you begin with the Analyst Day presentation deck. Get a good sense of how management frames its business model on strategy.

Take time to digest that before worrying about whatever nonsense shorts may be dishing out. They don't believe 90% of the crap they say. So it's not really worth analyzing.

10MWhs of distributed Powerpacks now online in Southern California. 10MWh of firm demand response. Aggregation now in action.

"They’re going to use this whole fleet of batteries as a virtual power plant,” Bluth said.


Tesla battery system fires up in Irvine Co. office tower - The Orange County Register

 

[gene]

10MWhs of distributed Powerpacks now online in Southern California. 10MWh of firm demand response. Aggregation now in action.

"They’re going to use this whole fleet of batteries as a virtual power plant,” Bluth said.


Tesla battery system fires up in Irvine Co. office tower - The Orange County Register

oh no! ) The article's title has the word Tesla and f**e in it. The bots will go crazy Monday morning!

 

[blakegallagher]

10MWhs of distributed Powerpacks now online in Southern California. 10MWh of firm demand response. Aggregation now in action.

"They’re going to use this whole fleet of batteries as a virtual power plant,” Bluth said.


Tesla battery system fires up in Irvine Co. office tower - The Orange County Register

It looks like these power packs are 1500kwh so for every 150 solar installs done is like having one power pack installed. Once scty stays deploying these in markets with every solar install it will create very large virtual power plants at a rapid pace

 

[Foghat]

It looks like these power packs are 1500kwh so for every 150 solar installs done is like having one power pack installed. Once scty stays deploying these in markets with every solar install it will create very large virtual power plants at a rapid pace

They average about 440 instslls per day, so if they included storage they could literally install the same 10MWhs every week...

add:
for perspective, that's 520MWhs/year at today's install pace of solar energy that can be shifted to peak hours on the grid. That's just at today's pace, imagine at continued 40%-80% annual compounding... That's now gigawatt hours of flexible solar(and already distributed!)for peak demand in about 2 years time...

You ou think its time for PUCs to rethink capital investments in nat gas peaker plants??

 

[dakh]

So let's say I pay $200 to my utility today and by using scty I cut my bill to $160 a month. In 7 years panels cost come down to $3000 from $15000. So you either pay $160 a month for another 13 years, a total of $24960, or I can default on the lease and pay $3000 to buy my own panels.

The numbers are hypothetical but the scenario is what Chanos is talking about. Can you explain the error to his logic?

Thinking about this, cell phone business in US is pretty good analogy to PPA. You get long term lease on your device that is rolled in with the service contract. The way they manage defectors is by having tight control over phones -- if it's under defaulted contract the phone is unusable, and there are strong laws in place to make this fairly bullet proof. Same thing can easily be done with solar installations.

 

[Johan]

It looks like these power packs are 1500kwh so for every 150 solar installs done is like having one power pack installed. Once scty stays deploying these in markets with every solar install it will create very large virtual power plants at a rapid pace

I believe the reporter got her units mixed up.

It's likely 10 MWh's of storage, with a peak effect of 1500 kW. It says that's 16 PowerPacks so it would suggest each pack stores 625 kWh at can deliver a peak output of 94kW. That's assuming they're all serially connected.

This does not rhyme with what we heard after the reveal where allegedly a PowerPack had 100kWh storage. But they could likely custom build these to different specs. Ir the article could be wrong, perhaps so far 16 PowerPacks have been installed but eventually there will be 100 of them (for 10 MWh)?

 

[jhm]

It looks like these power packs are 1500kwh so for every 150 solar installs done is like having one power pack installed. Once scty stays deploying these in markets with every solar install it will create very large virtual power plants at a rapid pace

I suspect that eventually there will by 1 to 2 hours of storage per unit of solar. It will be interesting to see just how this will be deployed.

SolarCity looks to be pairing Powerpacks with utility scale solar. I suspect this may be the cheapest deployment. Consider that utility scale PV solar is now at a cost of $1.25 to $1.50 per W. Such includes the grid interconnection, wiring, and inverters. All this can also be leveraged for storage. So the incremental cost of storage is about $250/kWh for a Powerpack plus about $100/kWh for installation. So about $350/kWh before ITC, or $250/kWh after ITC. (Yes, I'm ignoring other government handouts.) So pairing 1 hour of storage with large scale PV is about $0.25/W.

So I thoroughly expect to see utility installation with 1 hour of storage approaching the cost of $1.50/W. This is only slightly more than solar only, but it goes along way to firming up solar. Such a facility would be able to compete with peaking power plants and participate in whatever peak hours there may be while avoiding feeding too much power into an oversupplied market. I really think this is the lowest cost way to add peaking power to the grid. It is so cheap that it well could price existing peaking capacity out of the market. This is where it important to understand how the full cost of solar is approaching the fuel cost of natural gas. As the marginal cost of gas generation slips above the full cost of solar, it kills the utilization of gas plant, and these plants fail to make back their capex. Utilities will try to avoid this. But as dispatchable solar gets so cheap, they will not be able to avoid this market displacement of existing capacity.

So the Analyst Day presentation included an image of adding storage to ground mounted solar. I believe they intend to push into this market.

 

[Foghat]

I suspect that eventually there will by 1 to 2 hours of storage per unit of solar. It will be interesting to see just how this will be deployed.

SolarCity looks to be pairing Powerpacks with utility scale solar. I suspect this may be the cheapest deployment. Consider that utility scale PV solar is now at a cost of $1.25 to $1.50 per W. Such includes the grid interconnection, wiring, and inverters. All this can also be leveraged for storage. So the incremental cost of storage is about $250/kWh for a Powerpack plus about $100/kWh for installation. So about $350/kWh before ITC, or $250/kWh after ITC. (Yes, I'm ignoring other government handouts.) So pairing 1 hour of storage with large scale PV is about $0.25/W.

So I thoroughly expect to see utility installation with 1 hour of storage approaching the cost of $1.50/W. This is only slightly more than solar only, but it goes along way to firming up solar. Such a facility would be able to compete with peaking power plants and participate in whatever peak hours there may be while avoiding feeding too much power into an oversupplied market. I really think this is the lowest cost way to add peaking power to the grid. It is so cheap that it well could price existing peaking capacity out of the market. This is where it important to understand how the full cost of solar is approaching the fuel cost of natural gas. As the marginal cost of gas generation slips above the full cost of solar, it kills the utilization of gas plant, and these plants fail to make back their capex. Utilities will try to avoid this. But as dispatchable solar gets so cheap, they will not be able to avoid this market displacement of existing capacity.

So the Analyst Day presentation included an image of adding storage to ground mounted solar. I believe they intend to push into this market.

Solarcity is in every market now, utiltiy thru residential and everything in between. However, distributed solar+storage is the real prize here. It will beat utility level on retail pricing in the mid to long run going forward. Utiltiy level is the short term. Dealing with grid services is really the true strategy out of all of this. Utilities will ultimately procure a vast majority if not all of infrastructure-as-service in scaling levels, and accelerating at that, over the next fews year and in perpetuity at that...

utiltiy scale solar and all other fossil fuel plants will cost more as well as take much longer to build out over the next few years/decades. They will be the minority investment soon. The "alternative" procurement.
most people forget, it's the RETAIL price of electricity that matters most, not the whole sale. What is the delivered energy cost to consumers.

 

[Foghat]

One thing people aren't talking about is the effect of the 30% ITC extension on solarcity's lobbying efforts. Instead of spending money on the federal level representatives, they can now use most of those resources on state/local lobbying efforts which is where the real changes need to occur for long term stability. This is big in that way.

 

[jhm]

Solarcity is in every market now, utiltiy thru residential and everything in between. However, distributed solar+storage is the real prize here. It will beat utility level on retail pricing in the mid to long run going forward. Utiltiy level is the short term. Dealing with grid services is really the true strategy out of all of this. Utilities will ultimately procure a vast majority if not all of infrastructure-as-service in scaling levels, and accelerating at that, over the next fews year and in perpetuity at that...

utiltiy scale solar and all other fossil fuel plants will cost more as well as take much longer to build out over the next few years/decades. They will be the minority investment soon. The "alternative" procurement.
most people forget, it's the RETAIL price of electricity that matters most, not the whole sale. What is the delivered energy cost to consumers.

You know I'm not a big fan of utility solar. Certainly I want SolarCity to stay focused where the margins are biggest, which for now is residential.

That said, there are interesting opportunity with utilities that could be quite compelling. Consider the Kaua'i dispatchable solar facility. This will have over 3 hours of storage per unit of solar, 52 MWh to 17 MW solar. While this is a good deal in its own right, I do think there is an additional advantage for SolarCity. Specifically, by operating a solar peak power plant, SolarCity should be able to argue that the island grid can handle even greater penetration of rooftop solar. So if they can open up this market for more rooftop, this gives them a critical opportunity with residents. So there is a policy gain here.

Consider now operation in another service area for a utility that cries out to it PUC that they cannot handle a high penetration of rooftop solar. So the utility engages in regulatory obstruction. SolarCity may counter by building out a solar peaking facility that is capable of countering any intermittency that SolarCity rooftop customers may dish out. This would immediately undermine the utility's contention and shift the terms of negotiation. The question should be how much battery capacity does SolarCity need to offer to backup rooftop solar. Once this is nailed down, SolarCity can install it both behind the meter and in solar peaking facilities.

Furthermore if this does not satisfy the utility, SolarCity has the opportunity to be an independent power provider with it solar peaking facility and compete head to head with utility owned peaking facilities. Note that the economics are potentially so good, that it can reduce utility own assets to stranded assets. SolarCity can do economic damage to a utility that is unwilling to negotiate in good faith. So the utility will simply have to stop making a baseless argument about peak capacity required to accomodate additional rooftop solar, or SolarCity could create a glut of peak capacity and force recognition.

So I'd be surprised if SolarCity needs to force the issue, but in any case dispatchable solar is a huge bargaining chip for SolarCity. Additionally, SolarCity can offer to place Powerpacks within a substation to stabilize the substation service area. This too can be used to negotiate for favorable rooftop solar policies.

With all these plays, the ability to aggregate all SolarCity assets for good of the utility make the negotiating leverage even stronger. The virtual link of all solar and storage under SolarCity's control is very powerful.

 

[TNEVol]

JHM I am just an interested long time lurker. We all tend to look at the world thru our own environment. For me that is TVA which has proposed severe constraints on solar for next year. And they are not subject to any regulatory oversight. As a result I have felt that we in the Southeast are in a time warp. However I just returned from a cruise where we visited Grand Turk and found that they rely on desalinization and that diesel generated electricity is the sole generation source. By the way I saw a sign that diesel was $6 a gallon. In addition I was told that electricity in St Thomas is $.49 pr kWh. It appears to me that there is a huge profitability opportunity for solar/storage in these and other similar situations around the world that mirror the disruptive force of cell vs land lines in developing countries

 

[jhm]

IEA coal outlook blithely ignores the big picture : Renew Economy

This is the kind of blindness we can expect from all the fossil industries for quite a while.

The IEA models blithely ignore the real world financial condition of the companies that actually mine the coal. The successive solar auctions in India over recent months in India (SunEdison’s US$500m 500MW November 2015 solar contract at a record low Rs4.63/kWh (US7.1c), and SoftBanks’ US$350m 350MW December 2015 at the same price) highlight the massive disruption that is pending from ever lower cost solar power generation contracted to deliver a 5% annual real price decline. Storage will only accelerate this trend.

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JHM I am just an interested long time lurker. We all tend to look at the world thru our own environment. For me that is TVA which has proposed severe constraints on solar for next year. And they are not subject to any regulatory oversight. As a result I have felt that we in the Southeast are in a time warp. However I just returned from a cruise where we visited Grand Turk and found that they rely on desalinization and that diesel generated electricity is the sole generation source. By the way I saw a sign that diesel was $6 a gallon. In addition I was told that electricity in St Thomas is $.49 pr kWh. It appears to me that there is a huge profitability opportunity for solar/storage in these and other similar situations around the world that mirror the disruptive force of cell vs land lines in developing countries

Yes, there are huge opportunities for islands. I don't know anything about the situation in St Thomas, but if they are not already deploying, I suppose there are vested interests holding it back.

What's the residential rate that TVA offers?

 

[TheTalkingMule]

Yes, there are huge opportunities for islands. I don't know anything about the situation in St Thomas, but if they are not already deploying, I suppose there are vested interests holding it back.

The rates in St Thomas/St John/USVI have hovered around $.49-.56 and would be moving much higher if not for tanking oil. They get all their juice from burning diesel at a big refinery I think in St Croix, which is now either closed or is closing shortly. So they're probably just importing diesel. The good thing is these islands are already interconnected, so the infrastructure for balancing across a bunch of islands seems to already be in place.

Imagine the savings if someone walked in there with a massive solar/storage plan. Taken as a whole these are not just a string of tiny islands, there's a ton of demand there. Square villas with perfectly slanted roofs all with one side perfectly oriented south. Would be nice to see the USVI government take the lead and get a plan in place, they already have a pretty huge array along the entrance to the St Thomas airport.

I'll be in St John in about three weeks and will drunkenly spout random potential plans to gauge the reaction of villa owners. Will report back.

Edit(several corrections): St Thomas/STJ has a 200MW operation now fired by propane. St Croix is a separate 122MW grid facility. Options to link both to Puerto Rico have been explored.

St Thomas opened a 5MW utility solar array this summer providing 5% of peak.

 

[SBenson]

Saw on IB feed that Morgan Stanley upped it's price target to $104 (from $86) this morning.

If anyone has access to the report, could you please share the highlights?

 

[Gerasimental]

SBenson, are there shares available to short on IB?

 

[SBenson]

SBenson, are there shares available to short on IB?

Yes, they are. But the rebate rate went further up a bit. It is now at 64.81%. This is higher than on Dec 15, before the big spike, when it was 64.01%. In other words, shorting increased after the big move up.

Other data, MarkIt and S3 Blacklight also indicate that shorting increased since before the big spike.

Shorts are relentless for some reason. Are they in like, who blinks first contest or something? They really ought to wake up.