SolarCity (SCTY)

[jhm]

Solar PV costs to fall another 25 per cent in three years : Renew Economy

Canadian Solar anticipates reducing the cost of PV modules another 25% over the next 3 years. Much of this reduction is derived from increasing efficiency, and they have the goal of increasing efficiency 0.5% each year. Gains due to efficiency also reduce much of the the balance of system costs. So this drives down the total installed cost of solar. This good news for SolarCity and other installers. within this timeframe ITC could be reduced from 30% to 10%. Thus, installed costs need to come down about 20% to preserve today's level of profit.

Silevo is targeting higher efficiency, 24%, modules. SolarCity will continue to source panels from other makers while sourcing from Silevo. So it is critical that all panel makers drive up efficiency and drive down cost. The competion is not so much within the solar industry as it is with natural gas and coal plants. The combination of solar and storage needs to drop below 6.4 c/kWh in utility installations and below about 10 c/kWh in rooftop installations to beat natural gas. Solar alone is pretty much there and whacking another 25% off the cost seals the deal, but solar needs stoarage to come down to become highly dispatchable.

 

[doggusfluffy]

Aerial shot of the Riverbend factory progress.
One Buffalo on Twitter:

The model:
http://static1.squarespace.com/stat...4807e87e4b030e48057929f/1417707305379/RB5.jpg

Interesting vantage points from this as well:
Solar City Buffalo NY 032315 - YouTube

 

[ItsNotAboutTheMoney]

Silevo is targeting higher efficiency, 24%, modules. SolarCity will continue to source panels from other makers while sourcing from Silevo. So it is critical that all panel makers drive up efficiency and drive down cost. The competition is not so much within the solar industry as it is with natural gas and coal plants. The combination of solar and storage needs to drop below 6.4 c/kWh in utility installations and below about 10 c/kWh in rooftop installations to beat natural gas. Solar alone is pretty much there and whacking another 25% off the cost seals the deal, but solar needs storage to come down to become highly dispatchable.

I'd put it "So it is critical that all panel makers drive up efficiency while driving down cost per Watt."
Cost per Watt is number one, efficiency is two.
Silevo's potential for lowering price per Watt was what attracted SolarCity, as I recall.

For now, I think that there's enough high-priced electricity and spare land to allow significant growth and plenty of time to eat away at the margins. I also think you need to consider that longer-term competition with natural gas is liable to be with higher natural gas prices as demand for natural gas continues to increase, including with growth in sales of electric vehicles and more electrification of heating. As renewable share significantly increases, then natural gas use will fall again (as seen with windy years in Texas).

 

[jhm]

Lyndon Rive is the one who points to high efficiency as a critical success factor for SolarCity. The company aims to get high efficiency (~24%) panel cost down to that of standard efficiency panels (~20%). This means that for given rooftop installation the total installed cost of the system is same, but with high efficiency panels SolarCity produces sells 20% kWh over the life of the panels. Put another way, this decreases the total installed cost per Watt by 17% = 1 - 1/1.2. So 20% more revenue for the same cost is a pretty big deal, and it is almost enough to bridge the reduction of ITC from 30% to 10%.

The longterm prospect for solar is that the industry continues to drive down the installed cost per Watt year after year. Beyond a certain point solar is cheaper than NG on an installed basis and it really won't matter what the cost of NG is. We have a similar situation with electric vehicles once the cost of making an EV is less than the cost of a comparable gas vehicle, then it does not matter how cheap gasoline may become.

Of course, in the near term it is sufficient if solar is competitive with NG including operating costs. In the spot market, solar always can operate at a lower positive spot price than any fossil generator, without having to pay out for the privilege of idling when spot prices go negative. This puts all fossil generators at economic risk. The more impacted the spot market becomes with solar and wind the lower the utilization for all fossil generators. All levelized costs for fossil plants depend on making certain utilization assumptions. As utilization declines the levelized cost goes up. Basically the capex is amortized over a smaller base of lifetime kWh generated. As this happens it makes little difference what the price of NG or coal may be. What matters is getting enough profitable utilization hours to pay back the cost of installation.

How does the impact of renewables on the spot market impact the relative economics of utility solar versus distributed solar. Utility solar is directly exposed to the spot market. While utility solar can sell into the market at below fossil at any price and avoid paying for idling when spots are negative, it too suffers from the problems of oversupply in the generation market, which calls into question whether capex can be paid off. (Really low PPAs may in fact be pricing this risk in to some of the amazing low kWh prices we've seen.) All utility generators be they fossil or renewable are at risk of an oversupplied power market. But what about distributed solar? Distributed solar has the distinct advantage of being paired with consumption without cost of distribution or transmission. This pairing minimizes the risk of an oversupplied spot market and the friction of transmission. Under net metering, distributed solar is exposed to a generation glut, but the worst that can happen (in an unregulated market, not that such exists) is that feed-in tariffs go to zero. This essentially pushes the distributed solar owner into consuming all the power they make, but with appropriate sizing of the installation along with batteries, this risk has a limited downside. So the key difference between utility and distributed solar not that one is marginally cheaper to install than the other, but that one is highly exposed to the risk of generation oversupply and the other has locked in local consumption to mitigate this tisk. Until their is sufficient grid storage to drive out most of the fossil overcapacity and stabilize the spot market, utility solar will be a much riskier play than distributed solar. It could easily take 20 years or more to resolve the generator glut.

 

[AudubonB]

I believe that the "cost - vs - efficiency" argument is, indeed, specious on first look; perhaps a more understandable way to look at this is to argue that most of the production methodologies to drive down cost-per-watt already have been achieved given current photonics conversion rates, therefore the next significant steps in making major cost reductions will accrue as a result of greater 'efficiencies' - i.e., photonics conversion rates. The bottom-line result is the same: a lower cost per Watt.

That said, I write "most...production methodologies..." at my peril. One can envision an entirely new method for creating PV capture that would cost, say, 1% of today's panels - something like a spray-on paint, for example - it might still have a piddling 16-18% efficiency ratio yet could bring the bottom line to something far lower than what we see today.

 

[atang]

JHM appreciate your hard work, thank you. Also BFPT on TSLA! Just wondering, were you thinking of doing the same for SolarCity? Again, thanks for your work! :smile:

 

[doggusfluffy]

SolarCity executive speaking about Buffalo supply needs - Business - The Buffalo News

Vinayak Gupta, vice president of supply chain at SolarCity, will be in Buffalo on June 18 to present the keynote speech at the Buffalo Niagara Partnership’s 2015 State of Logistics event.

 

[dalalsid]

Any news causing the big drop today?

 

[electracity]

Any news causing the big drop today?

Maybe realizing that most buyers should run away fast from solarcity? The last quote I saw was $5.10/watt.

 

[jhm]

Maybe realizing that most buyers should run away fast from solarcity? The last quote I saw was $5.10/watt.

Where did you see that? A link would be helpful.

 

[electracity]

Where did you see that? A link would be helpful.

on paper

Looking for a really expensive solar install?

 

[drinkerofkoolaid]

Maybe realizing that most buyers should run away fast from solarcity? The last quote I saw was $5.10/watt.

Interesting that you make this post on the day you join TMC. Any link or anything beyond a vague comment would be appreciated. Clearly you don't like Solar City.

 

[jhm]

on paper

Looking for a really expensive solar install?

According to their May 2015 Investor Presentation, their fully loaded cost of installation is $2.95/W, and for leases and PPAs, their retained value is $1.86/W. So retail sales price around $5/W would make them indifferent to selling or financing. It seems quite appropriate for their business model. If a prospect gets a better offer from another installer, it's fine for SolarCity to pass on it. They are already busy enough doubling their book every year and don't need to cut prices just to undercut local installers. Of course, they could, if they wanted to.

 

[electracity]

Interesting that you make this post on the day you join TMC. Any link or anything beyond a vague comment would be appreciated. Clearly you don't like Solar City.

What is "like"? I'm not in a solar related business. I have had no contact with solarcity.

I do recognize a business model that has no value except selling unsophisticated customers during the solar "gold rush".
Here is what a mature solar market looks like. Note the prices are AUD:

Residential solar PV system prices for May 2015 - Solar Choice

Solar is simply an integrated home appliance, like a furnace or air conditioner. Who pays a company $27K to install $7K worth of HVAC equipment? The difference in HVAC is that the technicians are higher paid than electricians and roofers.
Solarcity should be able to do well until the market cools off and buyers become sophisticated. At that point it becomes just a local business, like all other residential trades. Residential trades work for a daily wages, as electricians do today installing solar in Germany and Australia.

 

[dalalsid]

What is "like"? I'm not in a solar related business. I have had no contact with solarcity.

I do recognize a business model that has no value except selling unsophisticated customers during the solar "gold rush".
Here is what a mature solar market looks like. Note the prices are AUD:

Residential solar PV system prices for May 2015 - Solar Choice

Solar is simply an integrated home appliance, like a furnace or air conditioner. Who pays a company $27K to install $7K worth of HVAC equipment? The difference in HVAC is that the technicians are higher paid than electricians and roofers.
Solarcity should be able to do well until the market cools off and buyers become sophisticated. At that point it becomes just a local business, like all other residential trades. Residential trades work for a daily wages, as electricians do today installing solar in Germany and Australia.

Solar city sells power. Selling panels is a side business.

 

[electracity]

Solar city sells power. Selling panels is a side business.

If they just sold power, there wouldn't be a lien on the house for an overpriced solar system. The reality is that most people will pay solarcity for their costs plus a profit, and then pay them again to remove the lien when the house is sold. The great american business tradition of getting as close to a scam as possible without stepping over the legal line.

What they have managed to figure out is how to take the financial benefit of solar from the homeowner and keep it for themselves. Clever!

 

[jhm]

Electracity, please tone down your condemnatory language. This is not a scam. This is business that is competing directly with the utilities. They build their business where utilities are charging over 16 cents/kWh. What SolarCity is a complete installation and financing package for no money down so that the customer pays only 13 cents/kWh. SolarCity is doing an excellent job at competing directly with these monopoly utilities and bringing customers relief. I would encourage you to take a closer look at their business model to see where improvements could be made. I would challenge you to come up with a business model that could offer power at 11 cents/kWh or less with no money down. If you can figure out how to do that, then fantastic. We need smart entrepreneurs to enter this space. For SolarCity's part, they see a path to reduce their total cost from $2.95/W to $2.50/W by 2017. If you see a way to achieve cost reductions fast, then by all means share that with us, or better yet go into business and show the utilities how it's done.

 

[dalalsid]

If they just sold power, there wouldn't be a lien on the house for an overpriced solar system. The reality is that most people will pay solarcity for their costs plus a profit, and then pay them again to remove the lien when the house is sold. The great american business tradition of getting as close to a scam as possible without stepping over the legal line.

What they have managed to figure out is how to take the financial benefit of solar from the homeowner and keep it for themselves. Clever!

So they should put the panels on your house and just trust you to pay them? SolarCity is a business and the one business making the most difference to the adoption of residential solar. You can complain about their pricing, practices or whatever else but they are adding customers at a breakneck pace. So obviously they are doing something right even if you don't agree.

 

[SBenson]

If they just sold power, there wouldn't be a lien on the house for an overpriced solar system. The reality is that most people will pay solarcity for their costs plus a profit, and then pay them again to remove the lien when the house is sold. The great american business tradition of getting as close to a scam as possible without stepping over the legal line.

What they have managed to figure out is how to take the financial benefit of solar from the homeowner and keep it for themselves. Clever!

Is there a lien on the solar home?
No. What you’ll find on the title of a home with a SolarCity power system is a UCC-1 fixture filing. A UCC-1 fixture filing is not a lien against the home. SolarCity files a Uniform Commercial Code Financing Statement, or UCC-1, on all of our solar energy systems in the real property records where each system is located prior to or when the system is installed. We file the UCC-1 to notify anyone who might perform a title search on the address where the system is located that our property, the solar energy system, is installed on the home. This filing protects our rights as the system’s owner against any mortgage on the real property. If the lender that holds the mortgage on the real property forecloses on our customer’s home, the UCC-1 filing protects our interest in the solar energy system and prohibits the lender from taking ownership of it.

If a UCC-1 is not a lien, can it be removed?
Yes. We are aware that lenders prefer not to see anything on the title so it’s common practice for us to release the UCC-1 fixture filing for financing purposes and re-file later. In fact, we have a dedicated team for this purpose to ensure that there is no disruption to the sale, purchase or refinancing of your home.


Selling or Buying a Home with Solar Panels | SolarCity

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electracity,

You are here just to spew nonsense with ZERO research.

I'd say lets not feed this troll. We fed him enough.

 

[electracity]

So they should put the panels on your house and just trust you to pay them? SolarCity is a business and the one business making the most difference to the adoption of residential solar. You can complain about their pricing, practices or whatever else but they are adding customers at a breakneck pace. So obviously they are doing something right even if you don't agree.

I'm sure their lead to sale ratio is falling fast. But they are in a strong up market. I'm evaluating their value proposition, which is horrible. No one should be signing a solarcity contract. Have you compared solarcity to alternatives in a particular market?

You can say "good for them" for finding naive customers. But how is that a long term business plan? Do an ROI calculation from a homeowners perspective. Look at mature solar markets in other countries. Solarcity has no IP, and no barriers to entry to their potential customers.

Is this investing, or did I stumble into a solarcity cult of some sorts? Tesla is a business with fantastic upside potential. Solarcity is not Tesla.