SolarCity (SCTY)

[gene]

Most other solars are up today. Might SCTY be struggling simply because of the efforts of the shorts?

 

[Foghat]

Most other solars are up today. Might SCTY be struggling simply because of the efforts of the shorts?

Cramer said sell scty, buy fslr at some point in the past 24 hours.

on another note, California decision yesterday has set up a big solar+storage market. The time of use rates scream powerwall purchase. As will any states that develop time of use.

This time of use rate plan will effect all rate payers down the line, so all the more incentive to get solar+storage for non solar rate payers.

The early adopters this year understand buying Solarcity solar with powerwall has far more value then currently available. They understand it will be an over the air upgrade for when the wholesale market opens up. At that point, not only can they use the battery to mitigate time of use rates, they also share 50/50 with Solarcity in a demand response contract with the utiltiy. The savings from both could really drive down that $/kWh much great then solar alone (or being a non solar rate payer in general). In addition, greater reliability occurs because if the grid in general goes down you can island and run off storage.

Also, services may increase as more value is monetized as Solarcity develops more functionality over time. Again, nothing more than an over the air update.

The moment people experience this, it will create a convert/advocate for life. And that's a massive tailwind for reducing acquisition costs as referrals will be through the roof(and referrals are damn good already).

 

[jhm]

Great article, thanks!

Question:

So in this article, Garnaut says:





So is he saying they need to discontinue the rate increases that happen every year due to this technology shift? If so, what happens to the people who have a PPA and in year 12 their rate is higher than the utilities due to the esculator? That wouldn't be good......

I love this:

As I understand his argument, he is saying that the transmission network was over built for current level of utilization. Shareholder and perhaps the government need to bear the cost of this over spending on unneeded capacity. BAU is the recover the cost of this bad investment from ratepayers. Even though this can be done legally, the economic problem is that ratepayers have alternatives in solar and batteries. The attempt to collect on the is bad investment is inducing customers to get solar and even go off grid. These investments that customers are making further impair the value of network investments. So if network operators persist with BAU the future write downs will be even more severe. They are actively destroying value with their current rate plans.

The alternative is to write down the bad investments now. Set new rates that accurately reflect the marginal cost of supplying power in real time. This would both lower power bills and make customers more sensitive to consumption behaviors that truly drive the cost of infrastructure. That is, peak consumption is what drives the capacity requirements for the network. So when customers pay more for using the network at times of peak consumption, they are in fact paying for the capacity requirement they are imposing. So how this helps is that it avoid an artificial inducement for customers to use solar and batteries just to avoid paying retail rates that are well above market value so as to recover costs on bad investments. With better rates solar may still be induced because it offsets peak demands on the network, but customers with batteries will not be induced to charge their batteries at peak demand times just to avoid buy power at times of low demand. And no one is induced to leave the grid. All of this leads to making economically optimal use of the network, which supports the long term value of the network and minimizes the need for further write downs.

Suppose Wal-Mart accidentally spent way too much building out a new store. Maybe the contractor screwed up or something. So Wal-Mart decides it will simply add an extra $2 to every shoppers purchase to recover the cost of the overage in building costs. Would that work? Hell, no. All it would do is drive away customer and make the building nearly worthless. Wal-Mart would never do this. They would write down their loss on the building (and capture a tax break doing so) and sell their goods at their everyday low prices. This way they maximize net income at this store even though the had to take a capital loss.

This sort of thing is so fundamental to any business that operates in a competitive market place. And economics explains why this is so Utilities are a gross exception. They act as if basic economic theory need not apply to them. So they are actually destroying economic value, but as long as they are propped up by a political system investors are happy. Eventually, however, the political support will unravel and investors will lose big time. So the challenge is for management to have the integrity and will to do the right thing to preserve the longterm value of the business. Yet management is caught in a classic over valuation trap, which induces them to perpetuate value destroying practices.

I'm not worried about PPAs on solar systems. Things will get much worse for ratepayers before utilities are even able to match PPA rates, much less beat them. Consider in Australia an utility that charges 25c/kWh and makes only 10% profit. So their bloated cost structure is at 22.5c/kWh. How are they going to cut that cost structure in half? Write-downs help, but it is a very slow process of cutting all the fat. Additionally, in Australia most solar is owned not leased. In either case pay back is very fast when the utility is charging 25c/kWh. Even under a PPA, one would easily get full payback long before the utilities can offer a fair price.

 

[Foghat]

As I understand his argument, he is saying that the transmission network was over built for current level of utilization. Shareholder and perhaps the government need to bear the cost of this over spending on unneeded capacity. BAU is the recover the cost of this bad investment from ratepayers. Even though this can be done legally, the economic problem is that ratepayers have alternatives in solar and batteries. The attempt to collect on the is bad investment is inducing customers to get solar and even go off grid. These investments that customers are making further impair the value of network investments. So if network operators persist with BAU the future write downs will be even more severe. They are actively destroying value with their current rate plans.

The alternative is to write down the bad investments now. Set new rates that accurately reflect the marginal cost of supplying power in real time. This would both lower power bills and make customers more sensitive to consumption behaviors that truly drive the cost of infrastructure. That is, peak consumption is what drives the capacity requirements for the network. So when customers pay more for using the network at times of peak consumption, they are in fact paying for the capacity requirement they are imposing. So how this helps is that it avoid an artificial inducement for customers to use solar and batteries just to avoid paying retail rates that are well above market value so as to recover costs on bad investments. With better rates solar may still be induced because it offsets peak demands on the network, but customers with batteries will not be induced to charge their batteries at peak demand times just to avoid buy power at times of low demand. And no one is induced to leave the grid. All of this leads to making economically optimal use of the network, which supports the long term value of the network and minimizes the need for further write downs.

Suppose Wal-Mart accidentally spent way too much building out a new store. Maybe the contractor screwed up or something. So Wal-Mart decides it will simply add an extra $2 to every shoppers purchase to recover the cost of the overage in building costs. Would that work? Hell, no. All it would do is drive away customer and make the building nearly worthless. Wal-Mart would never do this. They would write down their loss on the building (and capture a tax break doing so) and sell their goods at their everyday low prices. This way they maximize net income at this store even though the had to take a capital loss.

This sort of thing is so fundamental to any business that operates in a competitive market place. And economics explains why this is so Utilities are a gross exception. They act as if basic economic theory need not apply to them. So they are actually destroying economic value, but as long as they are propped up by a political system investors are happy. Eventually, however, the political support will unravel and investors will lose big time. So the challenge is for management to have the integrity and will to do the right thing to preserve the longterm value of the business. Yet management is caught in a classic over valuation trap, which induces them to perpetuate value destroying practices.

I'm not worried about PPAs on solar systems. Things will get much worse for ratepayers before utilities are even able to match PPA rates, much less beat them. Consider in Australia an utility that charges 25c/kWh and makes only 10% profit. So their bloated cost structure is at 22.5c/kWh. How are they going to cut that cost structure in half? Write-downs help, but it is a very slow process of cutting all the fat. Additionally, in Australia most solar is owned not leased. In either case pay back is very fast when the utility is charging 25c/kWh. Even under a PPA, one would easily get full payback long before the utilities can offer a fair price.

cost plus system incentivizes high costs. 10% return on high cost is much better then 10% on low costs.

thsts why Solarcity is advocating for utilities to get paid on procuring other people's infrastructure(like solarcity's network of rooftop solar+storage).

on that line, Solarcity is going to start making two separate revenue streams from each install they do. They will collect a monthly payment from the customer AND a monthly payment from the utility demand response contract. So, each solarcity install maybe worth multiple times what they are worth today.

I think if you just think about that for a few minutes, one might really understand the magnitude of how undervalued solarcity(and tesla) really are right now...

 

[ggies07]

As I understand his argument, he is saying that the transmission network was over built for current level of utilization. Shareholder and perhaps the government need to bear the cost of this over spending on unneeded capacity. BAU is the recover the cost of this bad investment from ratepayers. Even though this can be done legally, the economic problem is that ratepayers have alternatives in solar and batteries. The attempt to collect on the is bad investment is inducing customers to get solar and even go off grid. These investments that customers are making further impair the value of network investments. So if network operators persist with BAU the future write downs will be even more severe. They are actively destroying value with their current rate plans.

The alternative is to write down the bad investments now. Set new rates that accurately reflect the marginal cost of supplying power in real time. This would both lower power bills and make customers more sensitive to consumption behaviors that truly drive the cost of infrastructure. That is, peak consumption is what drives the capacity requirements for the network. So when customers pay more for using the network at times of peak consumption, they are in fact paying for the capacity requirement they are imposing. So how this helps is that it avoid an artificial inducement for customers to use solar and batteries just to avoid paying retail rates that are well above market value so as to recover costs on bad investments. With better rates solar may still be induced because it offsets peak demands on the network, but customers with batteries will not be induced to charge their batteries at peak demand times just to avoid buy power at times of low demand. And no one is induced to leave the grid. All of this leads to making economically optimal use of the network, which supports the long term value of the network and minimizes the need for further write downs.

Suppose Wal-Mart accidentally spent way too much building out a new store. Maybe the contractor screwed up or something. So Wal-Mart decides it will simply add an extra $2 to every shoppers purchase to recover the cost of the overage in building costs. Would that work? Hell, no. All it would do is drive away customer and make the building nearly worthless. Wal-Mart would never do this. They would write down their loss on the building (and capture a tax break doing so) and sell their goods at their everyday low prices. This way they maximize net income at this store even though the had to take a capital loss.

This sort of thing is so fundamental to any business that operates in a competitive market place. And economics explains why this is so Utilities are a gross exception. They act as if basic economic theory need not apply to them. So they are actually destroying economic value, but as long as they are propped up by a political system investors are happy. Eventually, however, the political support will unravel and investors will lose big time. So the challenge is for management to have the integrity and will to do the right thing to preserve the longterm value of the business. Yet management is caught in a classic over valuation trap, which induces them to perpetuate value destroying practices.

I'm not worried about PPAs on solar systems. Things will get much worse for ratepayers before utilities are even able to match PPA rates, much less beat them. Consider in Australia an utility that charges 25c/kWh and makes only 10% profit. So their bloated cost structure is at 22.5c/kWh. How are they going to cut that cost structure in half? Write-downs help, but it is a very slow process of cutting all the fat. Additionally, in Australia most solar is owned not leased. In either case pay back is very fast when the utility is charging 25c/kWh. Even under a PPA, one would easily get full payback long before the utilities can offer a fair price.

I see. Thanks for the explanation.

 

[TheTalkingMule]

I'm not worried about PPAs on solar systems. Things will get much worse for ratepayers before utilities are even able to match PPA rates, much less beat them. Consider in Australia an utility that charges 25c/kWh and makes only 10% profit. So their bloated cost structure is at 22.5c/kWh. How are they going to cut that cost structure in half? Write-downs help, but it is a very slow process of cutting all the fat. Additionally, in Australia most solar is owned not leased. In either case pay back is very fast when the utility is charging 25c/kWh. Even under a PPA, one would easily get full payback long before the utilities can offer a fair price.

Just look at Germany. They are doing everything they can to protect all ratepayers at retail(far more than US regulators will), and their retail rates continue to drift upward even as wholesale costs absolutely plummet because of renewables. It takes a looooong time to "work off" these short sighted investments such as the totally unnecessary new $1B NV Energy peaker plant. It is physically impossible for retail grid prices to do anything better than drift upward for the next 10-15 years, unless there's a gov't bailout or something moronic like that. I guess we shouldn't discount that possibility in this country.

 

[TheTalkingMule]

Most other solars are up today. Might SCTY be struggling simply because of the efforts of the shorts?

Short interest is way down as of Jan 15th, but we can hope I guess.

 

[jhm]

cost plus system incentivizes high costs. 10% return on high cost is much better then 10% on low costs.

thsts why Solarcity is advocating for utilities to get paid on procuring other people's infrastructure(like solarcity's network of rooftop solar+storage).

on that line, Solarcity is going to start making two separate revenue streams from each install they do. They will collect a monthly payment from the customer AND a monthly payment from the utility demand response contract. So, each solarcity install maybe worth multiple times what they are worth today.

I think if you just think about that for a few minutes, one might really understand the magnitude of how undervalued solarcity(and tesla) really are right now...

That's right, cost plus 10% profit motivates unnecessary cost.

How about this? Simply fix the profit per kWh sold. For example, 2c/kWh for renewable energy and 1c/kWh for nonrenewable energy. This allows the utility to maximize profit by switching to 100% renewable energy while reducing costs to motivate higher consumption. Regarding distributed solar and batteries, solar feed-in power adds a cent profit for practically no incremental cost, and tapping aggregated batteries to offset fossil peakers also improves profitability. Generally the utility is motivated to minimize prices to increase volume, this can only be done by improving the utilization of network assets. Demand response mechanisms are properly encouraged because they smooth out utilization from peek to valley.

So right now utilities make about 1.5c/kWh profit. So under my plan they would need to move to 50% renewable to get back to that. This could be phased, say the nonrenewable profit rate starts at 1.4 and shrinks down to 1.0 over 20 years. This would push utilities to 50% renewable by 2035 just to maintain their profit, but in actuality I think utilities would move much more quickly than that. I think we could get to 90% re enables by 2035 under this plant. What about inflation? Have a provision that the 2c for renewables can be indexed to inflation once, 90% renewables have been achieved. So again this would reinforce moving quickly to renewables.

 

[drinkerofkoolaid]

Isn't the current pattern the definition of a pennant? Brushing up against the upper bound preparing for a breakout?

 

[dakh]

/disagree, the market has to be spoon feed and solar city has been radio silent on all of this

This is pretty much what my statement was, they'll either have to show the money or tell a story that'll make investors change their mind about the valuation vs. current. I hope they'll have enough time before ER to crunch the numbers given the new California and Fed decision news and update the guidance based on that.

- - - Updated - - -

This time of use rate plan will effect all rate payers down the line, so all the more incentive to get solar+storage for non solar rate payers.

this I'm looking forward to, seems might happen earlier than expected in CA that moved well beyond basic net metering. We'll get to see if SCTY really has a superior integrated solution including the control software/cloud computing part, and will be able to establish/influence the standards. They also seem to be quite willing to go into various partnerships so I'm exited to see if/how quickly can this become a driver for wide adoption of true home automation. Before it was just a matter of cool factor/convenience, now folks will see an actual monetary value (via power bill) of having their fridge and AC unit being connected to an intelligent control system.

 

[Foghat]

Who owns the sun? - Moneyweb

Here is a fascinating article about Nevada situation with amazing new info given out from Lyndon Rive.

Sandavol was completely emotionally involved and paranoid the rooftop solar was out to smear him from the start of 2015 when the whole legislative process happened. He also had his two long time friends, both nv energy lobbyist in his ear constantly like lady Macbeth. Obviously, he was not neutral like he says he is... add more lies to the evidence now.

Also interesting to note that the legislation originally planned to be voted on proposed lifting the cap to 10%, but then was taken out and new anti net metering language put in. What changed this movement early in 2015 process? From there it just went down hill.

also Solarcity came to Nevada before buffet boought nv energy a few months after.

Lots of interesting stuff in here...

- - - Updated - - -

This is pretty much what my statement was, they'll either have to show the money or tell a story that'll make investors change their mind about the valuation vs. current. I hope they'll have enough time before ER to crunch the numbers given the new California and Fed decision news and update the guidance based on that.

- - - Updated - - -



this I'm looking forward to, seems might happen earlier than expected in CA that moved well beyond basic net metering. We'll get to see if SCTY really has a superior integrated solution including the control software/cloud computing part, and will be able to establish/influence the standards. They also seem to be quite willing to go into various partnerships so I'm exited to see if/how quickly can this become a driver for wide adoption of true home automation. Before it was just a matter of cool factor/convenience, now folks will see an actual monetary value (via power bill) of having their fridge and AC unit being connected to an intelligent control system.

Solarcity is the one to provide the data by which all else will be judged/monetized industry wide. many of these hedge funds don't get that fact. When Solarcity says it's experiencing 99.9% transfers of all leases to new owners, it's based on actual real world data, not hypothesis as they work from. When Solarcity says they receive 99.4% of all payments on time since 2006, that's hard fact from actual business transactions, not theories they conjure from academic studies.

and it's no different with powerwall energy storage integration and grid services. Solarcity has firsthand knowledge (and only at this depth and scale) of how this really works in the real world. If they are hinting that this his a massive advantage and adds another revenue stream to the company, then everyone ought to listen. It's the same for tesla as well.

its boggling to me that so much credence is being given to fund managers thst have no idea whatsoever is actually happening in the real world of distributed solar. But in the end, which I feel will start this year and become painfully apparent over the next two years, everyone of them will lose a lot of money or get out of short position before they do. Ultimately, they love money so in order to make any of it they will take a long position at some point in there.

 

[Foghat]

http://www.solarcity.com/sites/defa... - Integrated Distribution Planning_final.pdf

Now with California net metering set, here is the current phase of what the net metering decision sets up. Solarcity is, at this very moment proving out this next phase(outlined above). My feeling is California will sign off on as soon as some supporting data comes out soon. That will be a monumental moment to say the least, because all of the number crunching will happen and the capital markets will go nuts wanting to be apart of its development. Abs, tax equity, facilities, bonds, etc...

Energy Storage QA with New COO Chris Beitel - SimpliPhi PowerSimpliPhi Power

Great insight into energy storage market in this interview... another interesting development is silevo's Chris beitel has taken a COO job with an energy storage start-up. Elon has stated he's always on the look out for new tech and getting into business with those that meet tesla criteria. He said currently a couple are a 3 out of 5 on his scale, which means tesla should be in preliminary talks.

Im wondering if Chris beitel' start up is on that list if preliminary talks? Since beitel is an insider to Solarcity/silevo, does he see a big opportunity to sell to tesla(maybe Solarcity) just as he did with his silevo start up? Could this potentially be a pre selected acquisition target if all works as planned?

listening to the interview, Chris sure sounds exactly like Elon and the Rive bros when describing a scalable technology(as well as the important aspects of a commercially viable energy storage product). Exactly how he approached silevo and we all know how that turned out....

 

[Lessmog]

Minor point on spelling: ISTM that is Sil-Evo, not silveo. Makes more sense that way?

 

[Foghat]

Minor point on spelling: ISTM that is Sil-Evo, not silveo. Makes more sense that way?

Love/hate relationship with iPhone autocorrect...

 

[Lessmog]

Love/hate relationship with iPhone autocorrect...

Did you mean: Autocorrupt? ;-)

 

[doggusfluffy]

Swarms of workers turning SolarCity into complex panel factory - Strictly Business

Inside the 1.2 million-square foot-factory – the size of 10 Home Depot stores – on a recent January afternoon, the beeping from dozens of lift trucks created an off-key symphony as workers installed a spider web of duct work, piping and wiring that is supported by a lattice of overhead steel beams running the length of the factory.

 

[The Blue Owl]

An Op-Ed in the NYT about the Nevada bait-and-switch.

 

[TheTalkingMule]

An Op-Ed in the NYT about the Nevada bait-and-switch.

Best piece to date and was almost enough to get me to actually pay for NYT's online content. I'd still like to see someone clearly and with actual figures illustrate how these real dollars are being shifted from the citizens of Nevada to Berkshire shareholders. I mean, it's got to be in billions from 2014 through 2016.

These nonsense rules will be overturned within the calendar year no doubt, but what about the economic impact to Nevada? Not to mention the ~$2-3B profit swing for Berkshire.

 

[TheTalkingMule]

From discussion in another thread, filed under potential causes for concern......

Dominion Resources CEO Tom Farrell sitting on Mad Money for 10 minutes tonight. Not a peep from anyone about renewables inevitably eroding their entire profit base. Again, something we have already seen happen in Germany the 4th largest economy in the world and no one is even discussing it.

Cramer calls their $4.4B purchase of a Utah natural gas company today a "really smart move". This is NV energy all over again. Do they really think American consumers with internet access are going to allow renewables to be undermined to the point where this kind of purchase shows a profit past 2016?

It's one thing to say Warren Buffett bought NV Energy at the wrong time in 2013, Dominion is willing to do the very same thing today in Utah. Obviously consolidation while valuations are low is going to happen regardless of outlook, I just find this moderately insane.

The minute residential solar gets any foothold in these states companies like NV Energy and Questar become worthless, so what's the logic? Do they really think solar is some kind of fad that can be beaten back?

 

[Lessmog]

From discussion in another thread, filed under potential causes for concern......



It's one thing to say Warren Buffett bought NV Energy at the wrong time in 2013, Dominion is willing to do the very same thing today in Utah. Obviously consolidation while valuations are low is going to happen regardless of outlook, I just find this moderately insane.

The minute residential solar gets any foothold in these states companies like NV Energy and Questar become worthless, so what's the logic? Do they really think solar is some kind of fad that can be beaten back?

Yeah, just like Internet, donchaknow. The Swedish minister for communications became infamous mid-90's when she declared Internet to be just such a fad that wouldn't last very long. Pretty shrewd lady otherwise ...