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i love my tin hat. This isn't a today iteration. This is part of an evolutionary development over decades that seems to fit the business plan/vision of Elon, Lyndon, et al. Again, none of what I've stated is really that abstract. It's been around for decades, just hasn't been cost effective to do. Now, that is all changing with spacex, tesla, Solarcity scaled production. Litterally everyone in the world has a cell phone so radio freq transmission is in everyone's hands already. Near field transmission is in mass production, digital currency such as M-pesa is approaching 60 million people already not to mention multiples of that number of people using Bitcoin globally. All the elements are growing rapidly in the direction of which I've described in previous posts. If you are comparing an investment in Solarcity with other solar companies, I think understanding the long term innovation road map would give further indication Solarcity might be able to retain customers beyond the 20 year contract with higher probability. This is a major concern for some here, since the retained value is a signifant piece to valuing the company and assessing if it is under priced or over valued.
The Promise of Space-Based Solar Panels | DiscoverMagazine.com
"Mankins, the SPS-Alpha designer, is optimistic, however. He believes he has a business plan that can fly: integrating space-based solar and communications capabilities. These would not be the low-flying satellites that Musk plans to field, but geosynchronous ones that get launched every year to relay TV, radio and telephone signals.
“We could make a very small version of SPS-Alpha and slightly modify the transmitter before launch to send radio signals rather than a microwave beam. Then the power station becomes a high-power communications satellite” with potentially megawatts at its disposal, he says. It could offer 10 to 50 times more bandwidth, thereby generating more revenue, yet cost little more than a standard satellite, he says. Mankins has lined up investors and recently launched a startup that will to try to sell the idea to customers like DirecTV or Verizon."
Two things: Elon has already stated his satellites will be far more advanced then any satellite currently out there and that he doesn't see major set function advances in hardware but rather in the software. With that in mind I think the above quote could be a method of bringing along investors today in developing the advanced energy transmission network that would be required. In Elon's case it's not so much about the space based solar part of mankins idea as it is the duel capability of radio/microwave transmission, communication/energy transmission in the same system.
update:
http://www.solarcity.com/newsroom/press/solarcity-and-directv-make-solar-power-more-accessible-and-affordable-homeowners
might consider the long term relationship between Solarcity and directv(and others)in developing long distance energy distribution over spacex constellation. Would most likely happen through a home satellite dish on the roof(near the PV system). Obviously, powerwall is essential to making this global energy system work. It is to be noted that directv has already 20 million American customers with satellite dishes. Could see this scaling nicely within current directv dish production capabilities.
furthermore, successful microwave energy transmission tests have been conducted from Maui to the big island (92mi). Solarcity is doing a lot of R&d in Hawaii recently and not sure if they have access to these microwave transmission experiments, but it would be very interesting if they do. Again, local distribution doesn't make sense over microwave, however long distance global energy demand might. This seems really relevant for developing countries and as we've seen in Kenya and Tanzania, wireless, mobile phones, and digital currencies are being adopted at accelerating rates well beyond the developed countries... Same is happening for distributed solar.
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Stem, PG&E bid aggregated energy storage into CAISO real-time market | Utility Dive
first consumer sided aggregation sold on the market in california. Remember, each Solarcity solar+storage contract already has 50/50 whole sale share within it so as soon as they begin installing residential powerwalls and commercial powerpacks in a few weeks the aggregation can begin as soon as they have enough installed. Now it's just a matter of how fast they get interconnected to the grid.
Alos, 40 Hawaiian legislators looking at public uliity structure over the HECO merger. This is supported by the governor and the governor is a big advocate for a Rooftop solar heavy grid. All positives for Solarcity business growth.
first consumer sided aggregation sold on the market in california. Remember, each Solarcity solar+storage contract already has 50/50 whole sale share within it so as soon as they begin installing residential powerwalls and commercial powerpacks in a few weeks the aggregation can begin as soon as they have enough installed. Now it's just a matter of how fast they get interconnected to the grid.
Alos, 40 Hawaiian legislators looking at public uliity structure over the HECO merger. This is supported by the governor and the governor is a big advocate for a Rooftop solar heavy grid. All positives for Solarcity business growth.
jhm
Well-Known Member
Rancho Cucamonga approves $6.3 million in solar power projects
SolarCity gets 931kW gig from City of Rancho Cucamonga, for solar car ports.
SolarCity gets 931kW gig from City of Rancho Cucamonga, for solar car ports.
A very good summary on short view.
http://www.forbes.com/sites/greatspeculations/2015/09/09/even-with-musks-magic-solarcitys-light-is-fading-fast/print/
Pretty much ignores (discredits) out the entire Retained Value concept and thus the very business model.
http://www.forbes.com/sites/greatspeculations/2015/09/09/even-with-musks-magic-solarcitys-light-is-fading-fast/print/
Pretty much ignores (discredits) out the entire Retained Value concept and thus the very business model.
jhm
Well-Known Member
Yeah, just hammers away at conventional profitability. Comments about Net Retained Value at 6% discount are off the mark. He dismisses this claiming some 8% WACC. I do not know where he is getting this WACC, because interest paid is less than that. But the more serious problem is that NRV already nets out the cost of leverage, so he is suggesting that one should double count the cost of capital. NRV is the value that accrues to shareholder, and it is growing about 80% per year.
The relevance of the discount rate is that SolarCity could pay out upto 6% of NRV in annual dividends. Companies that have spun off yieldco are essentially doing this. They get a clean income statement on the development company, while the yieldco pays a dividend. I am not convinced that this would be a better capital structure, but it would silence the profit tirade that this bear is howling about. With SolarCity you get two great companies in one, a DevCo and a PowerCo. SolarCity is worth the sum of the parts and maybe more. Increasingly, SolarCity is also a manufacturer, so there is a MakeCo to add to the mix.
jhm
Well-Known Member
So Chanos is trying to double down on shorting SolarCity. He had his chance to exit with a profit back when Musk bought 123k shares. I'll be happy to pick up more shares between $40 and $45. So let's see how far shorts want to push this.
Nobody on this website should be a stranger to making $$ on the backs of over-aggressive shorts.
SCTY short interest is through the roof right now and shares are extremely hard to borrow. My broker has zero shares available to short. For this reason, put-call parity has broken down and puts are selling at a high premium.
I am willing to hold SCTY for the longterm, therefore, selling SCTY puts is looking very attractive and profitable to me right now.
I sold January $40 puts on 8/26 and closed them last week for a profit of 35% / contract. I am back in today with the October $45 contracts.
Yeah, the author doesn't give any details as to how he came up with WACC. SolarCity's cost of capital is substantially lower than 6% from all the public information that we know of (ABS, convertible bonds etc).
The author goes on and on about various conventional metrics. While none of them apply to SolarCity. Then he completely discredits the best possible metric that we can assess the business with.
To me it feels like a coordinated bear attack. It's hard to imagine these guys are really that ignorant of how this business works.
I don't have patience to write an article or blog post but maybe dalalsid or someone here would be interested in doing this. Here is a very simple way to understand the business model:
Let’s suppose a company's income-statement (statement of operations) looks like this:
Revenue: $5,000
Cost of Goods: $2,500
SG&A: $1,000
Profit: $1,500
Everyone will be ecstatic seeing 50% gross-margin and 33% operating-margin.
Now let’s say the same company, with the same exact operations, recognizes the revenue over 20-years (instead of one quarter), and pro rates the cost-of-goods accordingly:
Revenue: $62.50
Cost of Goods: $31.25
SG&A: $1,500
Profit: -$1,468.75
Looking at this, some people will freak out. OMFG what a monumental losses this company is making and worse the losses are growing (because the company's operations are growing) - sell, sell, sell. short, short, short!!!
Some people like us recognize that the financial statements are stupid, can't be relied upon and that it is still a great company and would be ecstatic shareholders.
Note, for simplicity I didn't use any discount rate. But using a discount rate doesn't change this point much.
The one and only one way to value this company is by doing present-value calc of all cash-flows and thus seeing what value this company is creating for the shareholders. But bears push this aside and talk traditional metrics because it's an easy point to confuse. Shorts try to exploit that and write out propaganda pieces like this.
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jhm
Well-Known Member
Value of battery-backed solar in California: 25¢/kWh : Renew Economy
So one study finds that rooftop solar+battery is worth about 25c/kWh to the grid in California. I wish the study also compared solar without battery and battery without solar under the same methology so we could get a better sense of how value is being created. But other studies have found that rooftop solar is worth about 50% more than the residential rate, or 17 c/kWh compared to 12 c/kWh average residential. So maybe batteries add about 8c/kWh to the value already created by rooftop solar.
But I am not so sure that it makes sense to try to base a fixed feed in tariff off of this. It seems that batteries create more value under variable rate plans. Let the utilities off buy and sell rates that are a linear function of wholesale rates, and they will drive peaking plants out of the market.
But whatever the utilities offer, it won't matter much. The solar owner with batteries has very little need to sell into the the grid. So if a utility wants these benefits, they must be willing to pay for these benefits. The bargaining power of solar owners goes up with batteries, while the arguments around the cost of integrating solar into the grid fall completely appart. With batteries, solar becomes highly dispatchable. Utilities that refuse to make intelligent use of this resource will find themselves losing load and customers while paying to much for grid stabilization and try to pass that stupidity along to all rate payers. It won't fly in a few years. The balance of power will shift soon. It's as close as the Gigafactory.
Consider five different rate plans for a utility with 6c/kWh average wholesale price.
A, 12 + 0.0×Spot c/kWh
B, 9 + 0.5×Spot c/kWh
C, 6 + 1.0×Spot c/kWh
D, 3 +.1.5×Spot c/kWh
E, 0 + 2.0×Spot c/kWh
So residential customers select a rate plan for at least 12 months and can buy and sell at these prices. So what plans might a retail customer without solar or batteries prefer? I suspect A or B. B allows that customer to manage their power use throughout the day to potentially save money. What if the customer has solar? Here it will depend on if spot prices tend to be higher when the sun shines the most. If peak spot prices tend to occur mid-day, then the solar owner without batteries may prefer plan B or C. But if so much solar comes into the system that the peak spot prices shift to evening, then plan A gives the solar only customer a distinct advantage as they sell for 12 while other plans pay less than 12 and buy in the evening at 12 when other plans charge more. So this is a big bind for utilities trying to offer both fixed and variable rates with full net metering. The problem is with plan A coupled with net metering. However, for non-solar customers with limited fixed income, plan A needs to be offered. So this, I think is the basic conundrum of net metering as solar penetration increases. Utilities need to move toward variable rate plans to accomodate more solar, but solar only customers won't want to move on to these plans. So what happens when customers have both solar and storage? Depending on how much storage one has, one may elect to go to plans C, D or E. Suppose that peak spot prices are typically about 10c/kWh with trough prices around 2c/kWh. So under plan D one can sell or avoid purchase of power at 18c/kWh and charge or avoid selling surplus solar at 6c/kWh. This gives one the opportunity to realize a 12c spread for storage and load management. I think this would be sufficient to motivate solar owners to buy batteries, but also to stay connected to the grid and provide benefits to the grid. This is actually cheap storage for the grid, when one contemplates peak load distribution coats. Such a retail pricing plan would exert pricing presure on the spot market and drive down the cost of peak power. What if one has storage without solar? That customer would prefer plan E. That customer can charge 5 kWh at 4 c/kWh, sell 1 kWh at 20 c/kWh, and consume 4 kWh at no net utility cost. This is surely enough spread to motive customers to buy Powerpacks. But is this a bad deal for the utility? Such a customer is providing the grid with storage at 16c/kWh. This is true initially, but as more consumers buy batteries the spread in wholesale spot prives will shrink. The battery customer on plan E will do a great job of making sure that spot prices never go too low. This may push trough prices up from 2 c/kWh to 3 or 4. They will also do a good job of keeping spot prices from getting well above 10 c/kWh, but because they are not generating power, they may not have enough volume to really drive down the peaks. In any case they do a good job of offsetting the need for standby power. Solar+battery customers in plan D will mostly avoid selling into the grid when the system has surplus power. They will mostly self-consume when spot prices are high. Because they are adding to the supply of power in the system and can dispatch when prices are high, they tend to reduce peak spot prices. So over time the typical peak spot price goes from 10 down to 9 or 8. Thus, plans C through E can draw behind-the-meter storage into the system and dampen price volatility in the spot market from 2-10 to 4-8. If this happens, it will be much cheaper for utilities to offer plan A, and solar customers without storage will have little motivation to prefer plan A over plan B, or at least the utility is somewhat indifferent to the choice. The contribution of such customers is simply to drive down average spot prices, say from 6 to 5. Thus, the full range of plans B through E move the spot market to a range like 3-7, where once it was 2-10. This makes plan A much cheaper for the utility to deliver, and all that is required is for the utility to offer attractive plans B through E (which may require smart metering and rate communication protocols) to motivate ratepayers to invest in behind-the-meter technologies. Does this mean that the utilities need to get out of the power generation business? Not necessarily, they can focus on generation power below 4c/kWh and undercut the spot market. So wind and utility solar are wide open. Customers in plans D and E will assure that spot prices don't go too low, so this greatly reduces the risk of underutilization and the cost of integration for large scale intermittent power. Part of the beauty of this scheme is that it gives consumers real choices about the sort of rate plan and and onsite energy investments that make sense to the consumer. Variable rate plans become attractive when you've got technology at home that can exploit variable prices. These arbitrage opportunities are how a utility can avoid grid defection and how it can harness those distributed assets to drive down costs for everyone. Moreover, the value of the grid is enhanced when everyone has an economic incentive to trade power. So maximizing consumer choice by allowing arbitrage opportunities for people with solar, batteries, and other power management devices actually preserves the value of the grid, albeit long distance transmission is mostly for the benefit of remote power producers and plans D and E put them at risk. Regardless, those elements of the grid that are most used will be worth preserving, while other pieces get scaled back.
So one study finds that rooftop solar+battery is worth about 25c/kWh to the grid in California. I wish the study also compared solar without battery and battery without solar under the same methology so we could get a better sense of how value is being created. But other studies have found that rooftop solar is worth about 50% more than the residential rate, or 17 c/kWh compared to 12 c/kWh average residential. So maybe batteries add about 8c/kWh to the value already created by rooftop solar.
But I am not so sure that it makes sense to try to base a fixed feed in tariff off of this. It seems that batteries create more value under variable rate plans. Let the utilities off buy and sell rates that are a linear function of wholesale rates, and they will drive peaking plants out of the market.
But whatever the utilities offer, it won't matter much. The solar owner with batteries has very little need to sell into the the grid. So if a utility wants these benefits, they must be willing to pay for these benefits. The bargaining power of solar owners goes up with batteries, while the arguments around the cost of integrating solar into the grid fall completely appart. With batteries, solar becomes highly dispatchable. Utilities that refuse to make intelligent use of this resource will find themselves losing load and customers while paying to much for grid stabilization and try to pass that stupidity along to all rate payers. It won't fly in a few years. The balance of power will shift soon. It's as close as the Gigafactory.
Consider five different rate plans for a utility with 6c/kWh average wholesale price.
A, 12 + 0.0×Spot c/kWh
B, 9 + 0.5×Spot c/kWh
C, 6 + 1.0×Spot c/kWh
D, 3 +.1.5×Spot c/kWh
E, 0 + 2.0×Spot c/kWh
So residential customers select a rate plan for at least 12 months and can buy and sell at these prices. So what plans might a retail customer without solar or batteries prefer? I suspect A or B. B allows that customer to manage their power use throughout the day to potentially save money. What if the customer has solar? Here it will depend on if spot prices tend to be higher when the sun shines the most. If peak spot prices tend to occur mid-day, then the solar owner without batteries may prefer plan B or C. But if so much solar comes into the system that the peak spot prices shift to evening, then plan A gives the solar only customer a distinct advantage as they sell for 12 while other plans pay less than 12 and buy in the evening at 12 when other plans charge more. So this is a big bind for utilities trying to offer both fixed and variable rates with full net metering. The problem is with plan A coupled with net metering. However, for non-solar customers with limited fixed income, plan A needs to be offered. So this, I think is the basic conundrum of net metering as solar penetration increases. Utilities need to move toward variable rate plans to accomodate more solar, but solar only customers won't want to move on to these plans. So what happens when customers have both solar and storage? Depending on how much storage one has, one may elect to go to plans C, D or E. Suppose that peak spot prices are typically about 10c/kWh with trough prices around 2c/kWh. So under plan D one can sell or avoid purchase of power at 18c/kWh and charge or avoid selling surplus solar at 6c/kWh. This gives one the opportunity to realize a 12c spread for storage and load management. I think this would be sufficient to motivate solar owners to buy batteries, but also to stay connected to the grid and provide benefits to the grid. This is actually cheap storage for the grid, when one contemplates peak load distribution coats. Such a retail pricing plan would exert pricing presure on the spot market and drive down the cost of peak power. What if one has storage without solar? That customer would prefer plan E. That customer can charge 5 kWh at 4 c/kWh, sell 1 kWh at 20 c/kWh, and consume 4 kWh at no net utility cost. This is surely enough spread to motive customers to buy Powerpacks. But is this a bad deal for the utility? Such a customer is providing the grid with storage at 16c/kWh. This is true initially, but as more consumers buy batteries the spread in wholesale spot prives will shrink. The battery customer on plan E will do a great job of making sure that spot prices never go too low. This may push trough prices up from 2 c/kWh to 3 or 4. They will also do a good job of keeping spot prices from getting well above 10 c/kWh, but because they are not generating power, they may not have enough volume to really drive down the peaks. In any case they do a good job of offsetting the need for standby power. Solar+battery customers in plan D will mostly avoid selling into the grid when the system has surplus power. They will mostly self-consume when spot prices are high. Because they are adding to the supply of power in the system and can dispatch when prices are high, they tend to reduce peak spot prices. So over time the typical peak spot price goes from 10 down to 9 or 8. Thus, plans C through E can draw behind-the-meter storage into the system and dampen price volatility in the spot market from 2-10 to 4-8. If this happens, it will be much cheaper for utilities to offer plan A, and solar customers without storage will have little motivation to prefer plan A over plan B, or at least the utility is somewhat indifferent to the choice. The contribution of such customers is simply to drive down average spot prices, say from 6 to 5. Thus, the full range of plans B through E move the spot market to a range like 3-7, where once it was 2-10. This makes plan A much cheaper for the utility to deliver, and all that is required is for the utility to offer attractive plans B through E (which may require smart metering and rate communication protocols) to motivate ratepayers to invest in behind-the-meter technologies. Does this mean that the utilities need to get out of the power generation business? Not necessarily, they can focus on generation power below 4c/kWh and undercut the spot market. So wind and utility solar are wide open. Customers in plans D and E will assure that spot prices don't go too low, so this greatly reduces the risk of underutilization and the cost of integration for large scale intermittent power. Part of the beauty of this scheme is that it gives consumers real choices about the sort of rate plan and and onsite energy investments that make sense to the consumer. Variable rate plans become attractive when you've got technology at home that can exploit variable prices. These arbitrage opportunities are how a utility can avoid grid defection and how it can harness those distributed assets to drive down costs for everyone. Moreover, the value of the grid is enhanced when everyone has an economic incentive to trade power. So maximizing consumer choice by allowing arbitrage opportunities for people with solar, batteries, and other power management devices actually preserves the value of the grid, albeit long distance transmission is mostly for the benefit of remote power producers and plans D and E put them at risk. Regardless, those elements of the grid that are most used will be worth preserving, while other pieces get scaled back.
TheTalkingMule
Distributed Energy Enthusiast
If I'm reading this correctly, selling ten $45 Oct23 puts @ $3.58 nets me an upside of $3580 and a downside of owning a thousand shares effectively bought at $41.50. That's delicious, no?
Still trying to understand selling options.....you(the seller) can exit this position at any time taking various profit/loss, but the buyer can only exercise that put at expiry?
As an investor with limited funds sitting in an IRA I'd need to hold a ton of cash to cover these sold puts so my main concern would be missing the squeeze by not having those funds in SCTY shares. I simply buy moderately aggressive medium and long calls to cover that, correct?
Sorry for the kindergarten questions, I'm trying to get up to speed before missing the boat.
jhm
Well-Known Member
Yeah, you've got to have cash to sit on. But in theory, if you have 882 shares, you could sell them for say $47/share. So $41,454 from the shares plus selling the 10 puts at $3580 gets you the $45,000 you need to cover the put plus $34 for transaction costs. So if the puts expire in the money, you buy 1000 shares at 45. So you've gone from 882 shares to 1000. Or if the puts expire out of the money, then you still have $45,000 to buy back your shares. The down side here is that if the stock price goes above $51.02, then $45k buys you fewer than 882. So you are taking the risk of losing some of your shares. Of course, the stock price is so volatile that if there was something like a short squeeze, you could simply hold your cash until the price comes back down. You also don't need to hold the option to expiration. As the stock price goes up, the put will lose value. So you can just buy to close at a profit, and potentially buy back all your shares before the price goes too high. But all this comes down to quick trading.
BTW, please don't take any of this as a recommendation. I am personally content to just sit on my shares. Additionally, my employer puts a 30 day holding restriction my trades, so trades like this become too risky because I cannot reverse at trade in less than 30 days.
Another way to play this is to sell a put that is sufficiently deep in the money such that you are not too worried about missing upside potential. Say a strike at 60. This put has a bid price just above $14.50. So you are basically committing your self to buy at net price of $45.50 = 60 - 14.50, so long as the stock is below $60, but for price X above 60, your net price is X - 14.50. You can also also look at this from the perspective of selling 968 shares now and 10 puts, and buying shares back at expiration. What's nice about the sell/buy back view is you can see how in effect you are lending out your shares with no assurance of getting them all back if prices go up.
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This is exactly backwards. Either party can exit the position by paying the money to sell/buy back the equivalent of what was bought/sold, "sell/buy to close". But the contract itself can be exercised before expiry by the buyer of the contract. The seller ("writer") has no control over this, nor can he force an exercise at any time other than expiry.
jhm
Well-Known Member
I was just about to post that. This is very exciting and surprising. I believe this is SolarCity's first utility scale installation. If they are able to compete at utility scale now, then they must have more capability to compete in the industrial and commercial markets as well.
They are able to provide a PPA at just a little above the PPAs for 2 other 12MW installations with the utility. So we know this is competitive. What is more is that this includes 52 MWh of storage on what appears to be a 13 MW solar array. Thus the most of the solar power produced will be stored. It will be sold into the evening hours. So this supply of solar does not really compete with rooftop solar feeding in before evening. This is good because we want SolarCity to be able to continue to add rooftop capacity. It's nice that at least one utility in Hawaii is willing to work with SolarCity.
This is awesome. This ties into my point as SolarCity will move into wherever there is opportunity, read: economic value to shareholders. It doesn't matter if it's residential, commercial, utility-scale, manufacturing (or even if it's solar. Yes, Lyndon said that once - if there is a magical new renewable energy source with better attributes, SolarCity will simply get into that).
Dissing out the company based on very specific residential PPA/lease model is grossly misguided. In fairness, PPA/lease model doesn't deserve dissing either. But that's a separate topic.
- - - Updated - - -
Sorry, too late. Already discussed up-thread.
tl;dr - it's a bunch of non-sense.
jhm
Well-Known Member
Kaua'i Island Utility Cooperative
Recall that Gov. Ige is quite eager to find a utility the state can partner with in pursuing a vision of 100% renewable energy. Could it be that Kaua'i Island Utility Cooperative (KIUC) has an ambition to be that partner? I hope so. This could motivate really good collaboration with SolarCity. Kaua'i is the fourth largest island in the state, only about 30 miles in diameter, 562.3 sq. mi., 66k population. So 52 MWh of storage is about 3.15 kWh per family of four, comparable to half of households getting a Powerwall. This could be a really good proving ground for 100% renewable microgrids.
So here's to KIUC becoming Gov. Ige's energy partner.
Recall that Gov. Ige is quite eager to find a utility the state can partner with in pursuing a vision of 100% renewable energy. Could it be that Kaua'i Island Utility Cooperative (KIUC) has an ambition to be that partner? I hope so. This could motivate really good collaboration with SolarCity. Kaua'i is the fourth largest island in the state, only about 30 miles in diameter, 562.3 sq. mi., 66k population. So 52 MWh of storage is about 3.15 kWh per family of four, comparable to half of households getting a Powerwall. This could be a really good proving ground for 100% renewable microgrids.
So here's to KIUC becoming Gov. Ige's energy partner.
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