I have a Solar City system. Working with the company has been excellent. The installation is perfect. My city inspector told me that he is assigned only to solar system inspections and that Solar City does a better job than any other company.
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
- Status
Moderator's Note
Please remember that this is a thread in the Investor's Forum. Discussion about SolarCity's business model or practices needs to be connected to an investment thesis or likely impact on SCTY price to be on-topic.
Please remember that this is a thread in the Investor's Forum. Discussion about SolarCity's business model or practices needs to be connected to an investment thesis or likely impact on SCTY price to be on-topic.
certainly understood robert; i do think a discussion about whether Solar City is regularly misleading customers is relevant to the investment thesis (ie. if this is really happening on the regular, it will eventually come back to bite them).
i've never heard of the consumer affairs website, but i think a read of solar city's better business bureau page is probably a more reliable source for this type of information. i haven't read through it, but would probably recommend it before making a significant investment in solar city. [adds another thing to his to do list].
surfside
I agree, which is why I didn't already move all the recent posts. I'm just trying to steer the conversation back to the question "what does this mean for the future of SCTY" rather than getting lost in the weeds.
Clearly, there is a voice here that is not adding to the solarcity investor conversation either bull or bear, but rather set on expressing their dislike for the company. Many members have tried to engage in civil, reasoned debate, but yet this same individual continues to harbor hostile language toward others without reasoned or civil ideas supporting his/her accusations. It comes off as disrespect to the forum and the members that populate it.
I feel it is only reasonable to point out that solarcity has nearly 250k customers (including a reasonable addition of new customers this q2) as well as over 35k "solar ambassadors" and well over 20 million views of its "Ra" commercials. They are popular as well as have the highest better business bureau rating one can receive. It is reasonable to assume they will have dissatisfied customers as well, however, the evidence is clear the vast majority of customers approve of solarcity as their solar energy provider.
If there is a challenge to this assertion, please respect all members of this forum/thread and respond with facts and reasoned opinions in kind. Otherwise, it might be best for a moderator (like Robert.boston)to make the appropriate decision to guide those that come to this thread to disrupt the civil, reasoned discussion (pro or con on solarcity as an investment) to another method/place of expression.
Last edited:
Here's another recent blog posts questioning the value of green bonds and solar ABS notes:
Rooftop Solar And The Fleecing Of The ESG/RI Investor
SpaceX just bought $75mln solarcity solar bonds today, raising their total to $165mln over the past three months. SolarCity - Prospectus Filed Pursuant to Rule 424
solarcity has now raised its solar bond offerings from $200mln to $350mln. SolarCity - Current Report
And according to structured finance expert Ben Cohen(CEO of T-Rex), solar bonds could experience "meteoric growth" soon. Tesla’s (TSLA) Elon Musk Takes Solar Financing to the Brink of Change - TheStreet
its looking like solar bonds make a lot of sense to a lot of different people with substantial amounts of capital.
Yea I stopped reading Rogier or whatever his name is. He always toots the same horn, Solar PV is a terrible investment because it uses valuable roofspace that should be used for hot water heating and other thermal PV and that since Solar City is using all this valuable roofspace with PV they are destroying the future of the country because it makes soo much more sense to put up thermal PV. I have little doubt he installs thermal PV for a living.
Frankly, I'm still having trouble figuring out the financial model.
There are a few possible scenarios:
(1) SolarCity is doing solid credit checks, has solid collateral, and the lending is solid; solid enough that both the "solar loan backed notes" *and* SolarCity corporate will make solid profits
(2) SolarCity is stiffing the investors in solar loan backed notes, dumping the risk on them while giving them a low return rate, and SolarCity will make profits even if they have made a lot of bad loans
(3) SolarCity is giving the investors in solar loan backed notes a fair deal so they'll do fine, but has completely misestimated their lending and will go bust if there's a high default rate.
At this point I really do not know how to tell. This is a matter of analyzing loan quality, which is *notoriously* hard, as well as a matter of looking at intricate detailed of ABS legal arrangements.
It is quite clear (from earlier linked things such as this: Solar City flakes? ) that SolarCity isn't really in the business of selling solar panels, and wants to be primarily in the financing business.
Fine. Then it has to be evaluated as a finance business. And I find that difficult.
Most finance businesses are scummy to one degree or another, so SolarCity can be pretty scummy and still come out on top. The investment question is really whether their loan quality is solid.
It appears that having solar panels which *you don't own* on your home, which are either owned by SolarCity or collateral for a SolarCity loan, can impair the saleability of a house. Apparently SCTY doesn't offer a buyout option for a new home buyer. I know I wouldn't buy a house with that sort of obligation; it's at least as bad than a condo agreement or HOA. What odds are there that a home seller will sell the house, the buyer will refuse to assume the contract on the panels (which the buyer should be able to do, unless it's a 'covenant which runs with the land'), and then the seller will default on the payments? I'd expect it to be a fairly likely scenario...
Frankly, the bear case is that a lot of loans are defaulted, for one reason or another. And repossession of collateral gets SolarCity very little -- more than half the costs are in installation, and the old solar panels are becoming obsolete as time passes. If their lending standards are screwed up, they could go under quite suddenly.
There are, by contrast, no such risks with Tesla, which is fundamentally not in the lending business.
There are a few possible scenarios:
(1) SolarCity is doing solid credit checks, has solid collateral, and the lending is solid; solid enough that both the "solar loan backed notes" *and* SolarCity corporate will make solid profits
(2) SolarCity is stiffing the investors in solar loan backed notes, dumping the risk on them while giving them a low return rate, and SolarCity will make profits even if they have made a lot of bad loans
(3) SolarCity is giving the investors in solar loan backed notes a fair deal so they'll do fine, but has completely misestimated their lending and will go bust if there's a high default rate.
At this point I really do not know how to tell. This is a matter of analyzing loan quality, which is *notoriously* hard, as well as a matter of looking at intricate detailed of ABS legal arrangements.
It is quite clear (from earlier linked things such as this: Solar City flakes? ) that SolarCity isn't really in the business of selling solar panels, and wants to be primarily in the financing business.
Fine. Then it has to be evaluated as a finance business. And I find that difficult.
Most finance businesses are scummy to one degree or another, so SolarCity can be pretty scummy and still come out on top. The investment question is really whether their loan quality is solid.
It appears that having solar panels which *you don't own* on your home, which are either owned by SolarCity or collateral for a SolarCity loan, can impair the saleability of a house. Apparently SCTY doesn't offer a buyout option for a new home buyer. I know I wouldn't buy a house with that sort of obligation; it's at least as bad than a condo agreement or HOA. What odds are there that a home seller will sell the house, the buyer will refuse to assume the contract on the panels (which the buyer should be able to do, unless it's a 'covenant which runs with the land'), and then the seller will default on the payments? I'd expect it to be a fairly likely scenario...
Frankly, the bear case is that a lot of loans are defaulted, for one reason or another. And repossession of collateral gets SolarCity very little -- more than half the costs are in installation, and the old solar panels are becoming obsolete as time passes. If their lending standards are screwed up, they could go under quite suddenly.
There are, by contrast, no such risks with Tesla, which is fundamentally not in the lending business.
Last edited:
From a classic "unethical investor" point of view, the big question is how many of them will default -- and whether SolarCity can collect if they default. What are the collection provisions in the contract if those customers don't pay up? What if the customer declares bankruptcy?
- - - Updated - - -
Nah, pricing can go down a lot more than that. It won't be a linear drop; there'll be a flatlining for a year or two followed by a massive decline as multijunction cells start to become cheaper.
Wrong. Your local convenience store DOES compete with Walmart. The only reason Walmart has been winning is that it can generally undercut your local store on price, and maybe even on selection.
By contrast, in areas where local installers go head-to-head with SolarCity for *sales*, the local installers are almost universally cheaper.
But SolarCity isn't really in the business of selling or installing solar panels, they're in the businesses of
(1) lending money against solar panel installation
(2) selling power to customers who may or may not be getting better prices than the alternative, while leasing space on the customers' roofs for next to nothing...
(3) and possibly other financial models I haven't noticed yet
The high profits on the PPA model (#2) depend on a shortage of competitors in the business. Eventually someone will start actually paying customers for the roof location.
SolarCity is a financing firm. Any other solar financing firm could outcompete them, and I don't see that they have any sort of lock on the financing business. Where's the barrier to entry?
They don't have any real ringfencing around their business, though, do they? I mean, they're not even competitive on price or quality in the sales market (as opposed to the leasing and PPA markets). So basically they're relying on people paying high rates because they're capital-starved. A competitor who competes on interest rates or finds a cheaper financing model could make a humungous dent in their business.
I guess they have a brand, but it seems kind of weak.
As opposed to competing with Tesla, which requires designing and manufacturing a car, and developing massive brand reputation on top of that.
I guess my biggest point here is that SolarCity's business model is *cloneable*, and it can be cloned very easily, and the clone can do a better job pretty easily. So where's the long-term investment future? (The short-term future looks good, but what about the long term?)
This was also an analysis I undertook with Tesla, and in the case of Tesla, (a) other startups have major hurdles to overcome which Tesla has already overcome, while (b) existing car companies have a bad attitude which will prevent them from competing until it's too late and Tesla is firmly established.
I don't see that sort of blinkered attitude in the solar industry. Other companies offer leases, other companies offer PPAs, other companies are floating solar bonds; all of them are capable of getting lots of capital; any good business model will be copied and copied fast.
Thanks for your analysis neroden. WRT barriers to entry, what do you think of the things Solar City is doing that are giving them or will give them (with some luck) a cost advantage over their competitors? I'm thinking of their installation systems, the advanced panels that will be produced in the new factory, and a head start on battery storage? What led me to invest long in SCTY was their ability to consistently be one step ahead of their competitors in this regard. Overall I agree with you that this will become a more competitive industry. Margins are likely to shrink.
interesting points, thank you for your analysis and thoughts.
I think it may be much simpler to sum up Solarcity's business model: they sell electricity. All the financing, all the cost reductions, everything Solarcity does is based off the idea of selling electricity on par or cheaper then the local utility in today's dollars.
When a person hears a sales pitch from Solarcity, they only want to beat what they are currently paying their current utility. They're not interested in solar equipment, they are not generally interested (or don't care) about solar in general. They don't want to worry about anything, so they want a turn key, insured product at the end of the day. They want just the cheaper electricity.
Thats it. And, Solarcity knows this. If you look the vast majority of its products and sales, they all revolve around cost per kWh a person pays at the end of the day. (This includes the loan product since they base monthly payments on beating the local monthly utility bill in cost on the customer.)
solarcity beats the solar competition in the market share game because the market is so vast and untouched that they are able to reach far more people and also establish a strong brand on a simple concept of no fuss cheaper electricity. It's like the Wild West out there. The bigger more robust solar operations will lay more land stakes then the smaller guy. This game is about meeting the massive demand and smaller operations can't achieve the same kind of awareness or movement the bigger guys can.
Last edited:
What's the issue with declining earnings per employee, if the company hires people who bring more revenue than they cost?
This could be a problem if:
1) the company's sales stagnate (hint: they don't)
1) the solar market has limited potential (hint: it hasn't)
2) the hired employees don't increase sales (hint: they are)
This could be a problem if:
1) the company's sales stagnate (hint: they don't)
1) the solar market has limited potential (hint: it hasn't)
2) the hired employees don't increase sales (hint: they are)
The revenues as increasing significantly. Gross profits have also significantly increased year over year.
Remember revenues are spread out over 20 years, so annual revenue you see today is a fraction of total revenue.
The actual numbers show they are growing significantly, hiring around 300 people a month right now, doubling the physical operational buildings/centers.
They are paying up front for long term revenue streams that last 20-30 years.
its better to look at assets and liabilities, but more importantly, what are their revenue generating assets...
Remember revenues are spread out over 20 years, so annual revenue you see today is a fraction of total revenue.
The actual numbers show they are growing significantly, hiring around 300 people a month right now, doubling the physical operational buildings/centers.
They are paying up front for long term revenue streams that last 20-30 years.
its better to look at assets and liabilities, but more importantly, what are their revenue generating assets...
No accounting background, I see. Installation labor is capitalized as part of the asset created. They have sold most of their future revenue stream.
While this guy wanders off into the weeds at times, he again covers the important points:
Solar City - The Rooftop Solar Racket And The Economic Obfuscations Of The ITC
- Status
Similar threads
