SolarCity (SCTY)

[SBenson]

I still feel very confused about batteries and its impact on SCTY.

In my simplistic mind batteries represent revenue to Tesla but cost to SolarCity.

If SolarCity is going to package batteries into their systems, the question is who will pay for it and why?

I understand it as a policy hedge but nevertheless batteries make the system more expensive. Thus it will make it even harder to compete with the grid (at reasonable profitability).

The other source of revenue for batteries can be grid-services. But I think that will be an extremely crowded market. From Musk's own world there will be many things competing for the same revenue - powerpacks sold to others, superchargers (with their in-built batteries), tesla cars. Moreover, what about all the batteries that will be sold by others? And what happens to all those who are currently offering such solutions? All in all I think the market to provide grid-services will be so overcrowded that the prices will drop to nearly nothing.

Keep in mind for SolarCity to make money off batteries they not only need to cover the costs but more than that through third party revenues. I find that as a tall order.

What am I missing?

 

[blakegallagher]

I still feel very confused about batteries and its impact on SCTY.

In my simplistic mind batteries represent revenue to Tesla but cost to SolarCity.

If SolarCity is going to package batteries into their systems, the question is who will pay for it and why?

I understand it as a policy hedge but nevertheless batteries make the system more expensive. Thus it will make it even harder to compete with the grid (at reasonable profitability).

The other source of revenue for batteries can be grid-services. But I think that will be an extremely crowded market. From Musk's own world there will be many things competing for the same revenue - powerpacks sold to others, superchargers (with their in-built batteries), tesla cars. Moreover, what about all the batteries that will be sold by others? And what happens to all those who are currently offering such solutions? All in all I think the market to provide grid-services will be so overcrowded that the prices will drop to nearly nothing.

Keep in mind for SolarCity to make money off batteries they not only need to cover the costs but more than that through third party revenues. I find that as a tall order.

What am I missing?

The competition is basically Peaker power plants, nobody has the scale scty does and the system in place to have so many systems linked/controlled together. There is also great synergy with a solar system and added benefits even if there was not this giant revenue source "in the wings"

So right now there is added cost but also added benefit and in some markets like Hawaii it may actually reduce costs. In the future when SolarCity has contracts in place to have the distributed network act like a peaker plant it is conceivable that while the upfront cost will be higher your payments over the life of the system would be much lower as you receive payments for the use of your system

I think you're also missing that residents will pay for backup power and for the ability to use their solar panel in the grid goes down to assume that a third party has to cover the entire cost plus any profit on a Powerwall is wrong in my opinion

 

[MartinAustin]

Amazing rally going on right now. -11% to +2% in three hours!

 

[Noble Ninja]

Amazing rally going on right now. -11% to +2% in three hours!

Buy SCTY at 11am EST for $27.50, then sell at 3:30pm EST for $34 for a 20% gain, haha I wish I had more funds as it was tempting at $27 this morning.

 

[Johan]

Amazing price action today. Up 11% after being down almost 10% earlier today.

 

[Gerasimental]

So what on earth happened here?? I don't see any substantive news.

 

[gene]

No idea. I am curious as hell!

 

[Johan]

Maybe Elon did another big stock purchase???

 

[Foghat]

No idea. I am curious as hell!

Nevada PUC to reconsider grandfathering on Monday.

Its all about the grandfathering. If it is retained in the most hostile utiltiy environment of Nevada, then it sure as hec will be maintained nationwide.

Strong relief on rating ABS as such.

 

[SBenson]

Foghat, very interesting update. do you have a source to back that up?

 

[AndreN]

A quick Google search found this:

http://www.reviewjournal.com/business/regulators-consider-bids-rehear-rooftop-solar-rates

 

[Foghat]

The competition is basically Peaker power plants, nobody has the scale scty does and the system in place to have so many systems linked/controlled together. There is also great synergy with a solar system and added benefits even if there was not this giant revenue source "in the wings"

So right now there is added cost but also added benefit and in some markets like Hawaii it may actually reduce costs. In the future when SolarCity has contracts in place to have the distributed network act like a peaker plant it is conceivable that while the upfront cost will be higher your payments over the life of the system would be much lower as you receive payments for the use of your system

I think you're also missing that residents will pay for backup power and for the ability to use their solar panel in the grid goes down to assume that a third party has to cover the entire cost plus any profit on a Powerwall is wrong in my opinion

there are many values to adding storage(and total energy control software) that Solarcity solar+storage brings. They also can control the air conditioner(nest thermo), which a utility has never ever been able to do. In addition, Solarcity can aggregate 1000's of energy systems and sell services to the grid at much cheaper/reliably then building out new peaker capacity, transformers, substations, etc... They already have a 50/50 profit share with customers which also translates into further lower energy costs then if they just had solar system in their roof. Also, Solarcity gives customers immediate feedback on energy consumption where, when, and what is using energy in their house. They then can suggest additional products to further reduce energy consumption. Again, this transforms and unlocks many different avenues of value that never existed before.

Tesla Powerwall batteries draw WA homeowners as Mandurah leads solar charge - ABC News (Australian Broadcasting Corporation)

some more evidence that peak demand drops significantly as rooftop solar is deployed.... Makes sense thst nv energy doesn't want that to happen if they are proposing a $900mln nat gas peaker plant soon in a rate case...

 

[traxila]

Yeah, I got a lot of SCTY. Thinking about buying more. Thought the same last week. Point I am getting at - target buy points. Looks like at the very least we are going to hit 52 week low. Thoughts?

BTW, I am sticking to my thesis that part of the explanation for this fossil fuel swoon is that status quo perfectly happy with the idea that this might annihilate the alternative energy industry. Lot of factors at play here, but they might be successful.

Am I a great contra indicator or what? Was trying to buy today... and failed.

Off to the races is fine by me. I got plenty already.

 

[jhm]

Rebates for LED lights, energy efficient equipment in jeopardy - VEGAS INC

Ok, folks, help me figure this one out. NV Energy is pushing energy efficiencies programs that the PUC does not think are warranted. These programs subsidize the cost of LED lights, refrigerators and pool pumps. Incandescent lights are already off the market, so going with LED over CF lights is no big deal. So why is NV Energy pushing this? Here are a few theories.

1) NV Energy is trying to bolster it's environmental image in the wake of screwing over solar customers.

2) NV Energy is trying to raise it's efficiency budget so it can increase fixed rates to scare off potential solar customers.

3) NV Energy needs to find legitimate places to put those taxes they never sent to the IRS.

4) NV Energy is getting kickbacks from Home Depot, pool contractors and other businesses that benefit from these subsidies.

5) NV Energy likes to induce customers to cut power consumption, then stick them with extra rates because otherwise the user of an LED is just cost shifting to everybody else.

So what is it? I'm quite suspicious.

 

[SBenson]

A quick Google search found this:

http://www.reviewjournal.com/business/regulators-consider-bids-rehear-rooftop-solar-rates

What are the odds that they will rule in grandfathering? Pretty low, no? Given how much of pricks they have been so far

 

[The Blue Owl]

What are the odds that they will rule in grandfathering? Pretty low, no? Given how much of pricks they have been so far

It depends. They may conclude it is a small price to pay in order to keep the rules in place for everybody else. They are getting a lot of heat because of the grandfathering issue, including a lawsuit. They'd probably like to get rid of that one, if only to stop keeping the issue in the news.

 

[SBenson]

At least this news together with trend reversal proves one thing- the downturn from mid 50s to now has largely been because of NV. So like I have been saying all along NV issue is much bigger than losses in NV itself. This is 2% poisoning the whole of 100% pot. Essentially causing the entire SCTY business model to fail (bond yields are now past 16%). My suspicion has always been that this is a coordinated attack against solar everywhere. I'm quite honestly worried about gigafactory and tesla. What if inviting into NV with incentives and all is one big scam? Will gigafactory be held hostage to NV Energy? These questions bother me now.

 

[gene]

I'm quite honestly worried about gigafactory and tesla. What if inviting into NV with incentives and all is one big scam? Will gigafactory be held hostage to NV Energy? These questions bother me now.

I'm thinking the solar issue alone is becoming a thorn for the governor. If they cause trouble for Tesla and the Gigafactory, I think with a bit of publicity, popular approval for the governor will go so low that there will be a political backlash in Nevada.

 

[jhm]

$329 Billion Invested in Clean Energy in 2015 | OilPrice.com

So conventional energy investors are starting to contemplate what $329B of renewables can buy. The invested is up 6% y/y, but GW installed is up 30%.

So let's do the math on this $329B investment into renewable energy. This included 64 GW of wind and 57 GW of solar. New wind offers about 8 capacity hour per day and solar about 4. So together they produce about 740 GWh/day. This competes with fossil fuels used in production of electricity, offsetting about 10.33 MMBtu energy input per MWh of electricity output. Thus, these renewable offset demand for 7,644,200 MMBtu/d or 1.32 million Barrels of Oil Equivalent (MBoe) per day.

Given that the oil glut is about 1.2 MBoe/d, it should not be dismissed that wind and solar added 1.32 MBoe/d to the global energy supply.

Oil and gas investors have had to nix $380B in projects chasing 27 billion Boe over the life of the investments. That is an investment rate of $14/Boe. By comparison, the wind and solar investment has an average useful life of about 20 year. So this represents a reserve value of about 9.6 billion Boe. This is an investment rate of $34/Boe. To compare this to the $14/Boe investment rate for oil and gas, on must recognize that the renewable investment requires very little operating cost to produce final form energy, but the oil and gas investment is just the exploration and drilling costs. There are substantially more investments and operation costs to actually extracting the oil and gas, transporting to refiners/distributors, refining, and finally generating power. The cost per barrel of oil is just the cost of getting oil to maket and that marginal cost for new oil projects is around $60/Boe, whence $14/Boe investments are nixed because the expected price of oil is below $60/b or whatever critical threshold.

So renewables are clear providing a more economical way to add to energy reserves than the oil and gas projects which have been cancelled. This is why renewables are winning. The marginal investment to keep growing the supply of oil and gas is not pencilling out due to the low price of oil, while renewables bring final form energy to market at a lower cost. Moreover, the present oil glut of 1.2mb/d may in fact be a consequence of the failure of energy investors to comprehend that a $329B investment in renewable energy brings 1.32 MBoe/d of supply to market. Until oil and gas investors figure this out, the tendency will be to over invest in fossils. This miscalibration alone is sufficient to perpetuate the glut.

But wait, there's more... renewables are growing about 30% per year. So 2016 very well could see renewables pour on 1.7 MBoe/d of supply, and another 2.2 MBoe/d in 2017. This is the freight train that oil investors ignore to their peril.

In five years, by 2021, all fossil consumption enters irreversible decline. This is the end of the age of oil.

 

[traxila]

$329 Billion Invested in Clean Energy in 2015 | OilPrice.com

So conventional energy investors are starting to contemplate what $329B of renewables can buy. The invested is up 6% y/y, but GW installed is up 30%.

So let's do the math on this $329B investment into renewable energy. This included 64 GW of wind and 57 GW of solar. New wind offers about 8 capacity hour per day and solar about 4. So together they produce about 740 GWh/day. This competes with fossil fuels used in production of electricity, offsetting about 10.33 MMBtu energy input per MWh of electricity output. Thus, these renewable offset demand for 7,644,200 MMBtu/d or 1.32 million Barrels of Oil Equivalent (MBoe) per day.

Given that the oil glut is about 1.2 MBoe/d, it should not be dismissed that wind and solar added 1.32 MBoe/d to the global energy supply.

Oil and gas investors have had to nix $380B in projects chasing 27 billion Boe over the life of the investments. That is an investment rate of $14/Boe. By comparison, the wind and solar investment has an average useful life of about 20 year. So this represents a reserve value of about 9.6 billion Boe. This is an investment rate of $34/Boe. To compare this to the $14/Boe investment rate for oil and gas, on must recognize that the renewable investment requires very little operating cost to produce final form energy, but the oil and gas investment is just the exploration and drilling costs. There are substantially more investments and operation costs to actually extracting the oil and gas, transporting to refiners/distributors, refining, and finally generating power. The cost per barrel of oil is just the cost of getting oil to maket and that marginal cost for new oil projects is around $60/Boe, whence $14/Boe investments are nixed because the expected price of oil is below $60/b or whatever critical threshold.

So renewables are clear providing a more economical way to add to energy reserves than the oil and gas projects which have been cancelled. This is why renewables are winning. The marginal investment to keep growing the supply of oil and gas is not pencilling out due to the low price of oil, while renewables bring final form energy to market at a lower cost. Moreover, the present oil glut of 1.2mb/d may in fact be a consequence of the failure of energy investors to comprehend that a $329B investment in renewable energy brings 1.32 MBoe/d of supply to market. Until oil and gas investors figure this out, the tendency will be to over invest in fossils. This miscalibration alone is sufficient to perpetuate the glut.

But wait, there's more... renewables are growing about 30% per year. So 2016 very well could see renewables pour on 1.7 MBoe/d of supply, and another 2.2 MBoe/d in 2017. This is the freight train that oil investors ignore to their peril.

In five years, by 2021, all fossil consumption enters irreversible decline. This is the end of the age of oil.

Jhm, you make me engage in irrational exuberance which manifests in my sudden desire to dance a little jig. Thank you. Now if the rest of the market can figure it out we will all make bank on our solar investments.

You our know what, I do not care if I lose every dime as long as what you write comes true.