SolarCity (SCTY)

[jhm]

Kinder Morgan to sell 50% of gas pipeline to Southern Natural Gas | OilPrice.com

So Sothern Company has been buying up natural gas infrastructure in the South. What worries me in this report is that an LNG export terminal has been approved for Georgia. Why does this worry me?

Australia has enjoyed natural gas prices under AU$4/mmbtu, but players have also built up LNG export capacity. They have also written long-term LNG export contracts on the Australian supply. As a consequence, domestic NG prices are surging above AU$20/mmbtu. Moreover, this is doubling the price of wholesale power, and utilities are passing this on as 25% to 30% increases in residential power bills. Meanwhile, the global LNG market trades at glut prices of around $5/mmbtu. Basically, power generators and utilities could import LNG at lower prices than domestic natural gas, if they had LNG import capacity. So how does anyone make money off of this backward situation. The gas producers and distributors are able to jack up domestic prices by overcommitting supplies to LNG market. They take a loss in the LNG market, but make out like bandits in the domestic market. Domestic gas and power consumers are made to pay through the nose.

Could this be the sort of play that Southern Company has in sight for the US South? They cant make money in the global LNG market, but they could remove just enough domestic supply to jack up rates on domestic consumers. If this really is there game, then SolarCity may be moving into Georgia sooner than we think.

 

[doggusfluffy]

Kinder Morgan to sell 50% of gas pipeline to Southern Natural Gas | OilPrice.com

So Sothern Company has been buying up natural gas infrastructure in the South. What worries me in this report is that an LNG export terminal has been approved for Georgia. Why does this worry me?

Australia has enjoyed natural gas prices under AU$4/mmbtu, but players have also built up LNG export capacity. They have also written long-term LNG export contracts on the Australian supply. As a consequence, domestic NG prices are surging above AU$20/mmbtu. Moreover, this is doubling the price of wholesale power, and utilities are passing this on as 25% to 30% increases in residential power bills. Meanwhile, the global LNG market trades at glut prices of around $5/mmbtu. Basically, power generators and utilities could import LNG at lower prices than domestic natural gas, if they had LNG import capacity. So how does anyone make money off of this backward situation. The gas producers and distributors are able to jack up domestic prices by overcommitting supplies to LNG market. They take a loss in the LNG market, but make out like bandits in the domestic market. Domestic gas and power consumers are made to pay through the nose.

Could this be the sort of play that Southern Company has in sight for the US South? They cant make money in the global LNG market, but they could remove just enough domestic supply to jack up rates on domestic consumers. If this really is there game, then SolarCity may be moving into Georgia sooner than we think.

Southeastern Electric Utilities Find Their Way to Higher Profits Through Gas Pipelines and Captive Consumers

Bigger investments, greater risks
Linking pipelines to captive customers should prove a profitable arrangement for the utilities. For the customers who bear the costs and risks, it’s much more problematic. But state law gives them no say in the matter. In these southern states, the electric power subsidiaries hold legal monopolies in their designated territories. Once federal regulators approve the pipelines and state regulators approve the gas plants, the captive customers bear the loss if the bet turns sour.

 

[jhm]

Southeastern Electric Utilities Find Their Way to Higher Profits Through Gas Pipelines and Captive Consumers

Thanks! This is really helpful.

 

[doggusfluffy]

Senators strike deal to move forward on sweeping energy bill

“The Senate will have an opportunity to go to conference with the House to work toward an agreement on the Energy Policy Modernization Act. This reform bill which passed the Senate in April represents the first broad energy legislation to move through the Senate since the Bush administration,” McConnell said.

 

[jhm]

SolarCity Launches Residential Service, Expands Hiring in Utah (NASDAQ:SCTY)
SolarCity is expanding into Utah. Last week they announced also that they were expanding into Rhode Island.

Notice in this Utah announcement that there is no indication that they will be offering PPAs or leases, only loans and cash. Does this mean they are actually not offering PPAs in the state? Is there some regulatory reason here that applies specifically to Utah?

 

[doggusfluffy]

5 facts about solar power in Utah | KSL.com

"Most people really shy away from variable rate mortgages these days when they buy a house" Curtis says. "But that’s exactly what utility power is — variable rate energy. You relinquish control over what you pay for your energy."

 

[neroden]

Notice in this Utah announcement that there is no indication that they will be offering PPAs or leases, only loans and cash. Does this mean they are actually not offering PPAs in the state? Is there some regulatory reason here that applies specifically to Utah?

That's very interesting.

Looks to me like leases and PPAs are legal in Utah.
States that allow for Solar Leases and PPAs - Solar Power Rocks

I don't know whether SolarCity is going to offer leases and PPAs in Utah. But they aren't advertising them.

I think this marketing decision is further evidence SolarCity is deliberately moving away from leases and PPAs and trying to move towards loans and cash. Now that banks will finance solar panels with home equity loans at low rates, this makes tremendous sense.

 

[electracity]

I don't know whether SolarCity is going to offer leases and PPAs in Utah.

Certainly consistent with a belief in their funding woes.

 

[jhm]

Thanks, Doggus and Neroden. It does at least appear to be a marketing tact. The ownership model may be more appealing to conservative consumers in Utah. Also, SolarCity really needs to move to a cash upfront model. If consumers don't demand PPAs, it's better for SolarCity not to push them.

 

[neroden]

So I did a tad more research. SolarCity advertised the introduction of a straight-up loan product in 14 states as of June 2. Adding Utah, this includes all the states they're active in west of the Mississippi, and most of the states in the Northeast, but *not* Pennsylvania, Florida, or Vermont for some reason. If I remember correctly from SCTY's financials, the loan program is prefinanced by banks, so SCTY does not take on any of the financing risk.

They're still advertising leases in other press releases. This press release mentions sales, loans, leases, but *not* PPAs: SolarCity Expands to Houston Area, Launches Popular Solar Service for the First Time (NASDAQ:SCTY) (Leases are much easier than residential PPAs to figure out the accounting for, so as an investor I think they're preferable to PPAs, although they still carry financing risk.)

 

[jhm]

So I did a tad more research. SolarCity advertised the introduction of a straight-up loan product in 14 states as of June 2. Adding Utah, this includes all the states they're active in west of the Mississippi, and most of the states in the Northeast, but *not* Pennsylvania, Florida, or Vermont for some reason. If I remember correctly from SCTY's financials, the loan program is prefinanced by banks, so SCTY does not take on any of the financing risk.

They're still advertising leases in other press releases. This press release mentions sales, loans, leases, but *not* PPAs: SolarCity Expands to Houston Area, Launches Popular Solar Service for the First Time (NASDAQ:SCTY) (Leases are much easier than residential PPAs to figure out the accounting for, so as an investor I think they're preferable to PPAs, although they still carry financing risk.)

Interesting. So the state by state differences could simply be due to the availability of financing partners in those states.

 

[TheTalkingMule]

Interesting. So the state by state differences could simply be due to the availability of financing partners in those states.

I would bet there's some regulatory issues in certain states. Pennsylvania has had every single solar roadblock imaginable since our last governor was a Chesapeake Energy plant, but we just last week installed our new forward-thinking PUC head.

Look for Pennsylvania to ramp up like crazy over the next year as pent up demand is released. NJ is a mature market right across the bridge and that market will flood into Philadelphia(the nations 4th largest metro area) like crazy once a few regulatory hurdles are unwound.

We're at a place in time where loan, lease, PPA can all be advertised in detail openly without worrying that one will make the others look less advantageous. If sales cost can be constrained across all offerings, total costs are low enough to simply let the market choose which solution they prefer. Exciting stuff.

 

[jhm]

I would bet there's some regulatory issues in certain states. Pennsylvania has had every single solar roadblock imaginable since our last governor was a Chesapeake Energy plant, but we just last week installed our new forward-thinking PUC head.

Look for Pennsylvania to ramp up like crazy over the next year as pent up demand is released. NJ is a mature market right across the bridge and that market will flood into Philadelphia(the nations 4th largest metro area) like crazy once a few regulatory hurdles are unwound.

We're at a place in time where loan, lease, PPA can all be advertised in detail openly without worrying that one will make the others look less advantageous. If sales cost can be constrained across all offerings, total costs are low enough to simply let the market choose which solution they prefer. Exciting stuff.

Yeah, the legality of PPAs is still going to be an issue in some states, and this can be a barrier for some consumers. I've always have maintained that it is best for the each consumer to decide what financing is best for their family. So I do hope that SolarCity continues to offer PPAs and leases everywhere they can along with low interest loans.

 

[doggusfluffy]

Senate votes for energy bill negotiations with House

“I will reiterate my personal commitment to a final bill that can pass both chambers and be signed into law by the president,” Sen. Lisa Murkowski (R-Alaska), chairwoman of the Energy and Natural Resources Committee, said on the Senate floor before the vote.

Reps. Fred Upton (R-Mich.) and Rob Bishop (R-Utah), chairmen of the House committees with jurisdiction, said last month that their goal is also to get a bill signed.

“At the end of the day, our goal is to get something to the president that he will sign into law,” they said in a joint statement.

 

[EinSV]

Yeah, the legality of PPAs is still going to be an issue in some states, and this can be a barrier for some consumers. I've always have maintained that it is best for the each consumer to decide what financing is best for their family. So I do hope that SolarCity continues to offer PPAs and leases everywhere they can along with low interest loans.

Thanks @jhm, @neroden, and @TheTalkingMule for the very helpful information. It always seemed to me that using PPAs as the principal funding mechanism was an artifact of how Solar City grew up and I have been assuming that Tesla Solar would offer more flexibility. Since it sounds like Solar City is already shifting to a menu of funding options for customers it appears that transition may already be happening. Seems like a very positive development.

 

[doggusfluffy]

I don't have a clue what the market will care about or exactly what is in this bill specifically for SolarCity. I did browse around the CBO estimate relating to s.2012 Energy Bill and found some interesting language which might overrule some PUC decisions...

S. 2012, Energy Policy Modernization Act of 2015

S. 2012 would impose an intergovernmental and private-sector mandate, as defined in the Unfunded Mandates Reform Act (UMRA), on public and private entities regulated by FERC, such as electric utilities, by requiring them to pay fees in some circumstances. The bill would impose two additional mandates on public entities. One would require state and tribal governments to certify to DOE whether or not they have updated residential and commercial building codes to meet the latest standards developed by building efficiency organizations. The other would preempt state and local environmental and liability laws if they conflict with emergency orders issued by the Federal Energy Regulatory Commission (FERC). The bill also would impose private-sector mandates on electric transmission organizations and traders of oil contracts and on individuals seeking compensation for damages caused by utilities operating under certain emergency orders. Based on information from DOE and analyses of similar requirements, CBO estimates that the aggregate cost of complying with mandates in the bill would fall below the annual thresholds established in UMRA for intergovernmental and private-sector mandates ($77 million and $154 million in 2015, respectively, adjusted annually for inflation).

CBO has not reviewed some provisions of section 2001 and section 4303 for intergovernmental or private-sector mandates. Those provisions would provide the Secretary of Energy with emergency authority to protect the electric transmission grid from cybersecurity threats and would protect entities subject to that authority from liability. Section 4 of the Unfunded Mandates Reform Act excludes from the application of that act any legislative provisions that are necessary for national security. CBO has determined that those provisions fall within that exclusion.

 

[GoTslaGo]

More developments in NV

Switch sues PUC, NV Energy for $30 million in damages, permission to leave utility

 

[jhm]

Good Drones Go To Bat For Low Cost Rooftop Solar

Here's a fun item on using drones to cut the soft costs of rooftop solar installations. I'm wondering in the SolarCity Tesla mash-up if they will work on developing robots to assist in rooftop installations. How about a robotic lift that can take panels from truck to rooftop level in optimal position for workers to take it from there. This could improve saftey and minimize the time spent on ladders.

 

[doggusfluffy]

Arizona is obviously wiser and more thoughtful than those reckless PG&E rubes who agreed to testing SolarCity utility services...whilst mid bailout and careening towards certain bankruptcy no less.

How Arizona’s Biggest Utility Is Modeling the Customer of the Future in Its ‘Rate Design Laboratory’

To deploy rooftop solar, APS is working solely with local Arizona installers, leaving the leading national installers out of the picture. The utility is also working with a variety of other DER providers to install technologies and collect data from the 75 homes.

“Then you have a win for the third-party marketplace because they've got a price signal that drives technologies that work, that have harmony with the resource requirements the utility has and match the load shape,” he said. “It's obviously a win for the utility because we'll see resource equivalency from these types of technologies.”

Utilities should be able to participate in this new paradigm of interoperable DER technologies because of their insight into the distribution system, Romito said. But the technologies themselves can be sold, financed and constructed by other companies. Third parties don't have to throw out their existing business models -- but they do need to evolve, he added.

“Solar only as a sale or as a lease is a dinosaur business model,” he said.

 

[30seconds]

Arizona is obviously wiser and more thoughtful than those reckless PG&E rubes who agreed to testing SolarCity utility services...whilst mid bailout and careening towards certain bankruptcy no less.

How Arizona’s Biggest Utility Is Modeling the Customer of the Future in Its ‘Rate Design Laboratory’

Pretty sure that APS won't go bankrupt

So in summary, rooftop solar sucks unless it is your local power company doing it. Pretty good validation for SolarCity