SolarCity (SCTY)

[TheTalkingMule]

Net metering may be locked in but the IOUs in California will continue to lobby the PUC for fixed charges and shifts in TOU rate periods. One shift SCE recently made was in the peak rate period to 2pm until 8pm. That put more of my solar production out of the peak. That will incentivize new installs to orient more to the west. To me that is fair, because that follows the load.

I think we're looking at the turning point for IOU's ability to push these PUCs into acting against solar customers and lower costs in general. The only reason they can get away with these things in Nevada/New Mexico/Arizona is the public's lack of understanding. How long will that last? California consumers are ahead of the game on renewables and understand cost, therefor the PUC doesn't have the political capital to make such moves, even today. Look at Pennsylvania, if there was ever a state that should rule in favor of protecting natural gas plants it's PA. However we just locked in pure retail net metering and our legislature is every bit as backwards as Arizona.

What happens when solar doubles and then doubles again in short order? A ton of these libertarian semi-conservative types are flooding into solar because of the independence, cost savings and "zombie grid collapse" paranoia. Those folks will occupy federal buildings if the CPUC tries to game the system for IOUs, that's much worse than the hippie/retiree outrage they're facing today.

Once solar more mainstream all these concerns go away, I imagine that's why SCTY is willing to blow through so much cash to get it up to speed. Every doubling of installs multiplies the industry's political power by 10.

 

[Ampster]

I am inclined to agree with you. I still encounter some libertarian types that continue their resistance, but the free market savings are hard for them to ignore.

 

[TheTalkingMule]

I am inclined to agree with you. I still encounter some libertarian types that continue their resistance, but the free market savings are hard for them to ignore.

The minute the cost structure works in their region, these types will absolutely dive in. They have that German mentality of making obvious moves when they obviously make sense.

I went to an installer's info session in the PA suburbs on a 10 degree morning this past Saturday and was shocked at the turnout. And all this was BEFORE the new statewide net metering was locked in. The composition and size of the crowd were not what I expected. Have tons of insights from this installer's group buy project and will share when I have my thoughts in order. Lots of SCTY significance both good and bad.

 

[jhm]

I think we're looking at the turning point for IOU's ability to push these PUCs into acting against solar customers and lower costs in general. The only reason they can get away with these things in Nevada/New Mexico/Arizona is the public's lack of understanding. How long will that last? California consumers are ahead of the game on renewables and understand cost, therefor the PUC doesn't have the political capital to make such moves, even today. Look at Pennsylvania, if there was ever a state that should rule in favor of protecting natural gas plants it's PA. However we just locked in pure retail net metering and our legislature is every bit as backwards as Arizona.

What happens when solar doubles and then doubles again in short order? A ton of these libertarian semi-conservative types are flooding into solar because of the independence, cost savings and "zombie grid collapse" paranoia. Those folks will occupy federal buildings if the CPUC tries to game the system for IOUs, that's much worse than the hippie/retiree outrage they're facing today.

Once solar more mainstream all these concerns go away, I imagine that's why SCTY is willing to blow through so much cash to get it up to speed. Every doubling of installs multiplies the industry's political power by 10.

Made me laugh. Seriously, the only reason why utilities exist as profitable monopolies is because of government protection. Back room deals are the best way for them to hold their cosy political situation. I believe that utilities are making a fundamental political mistake by antagonizing rooftop solar. This pulls all their backroom politics into the public eye and politically activates citizens across the party spectrum to oppose them. They are destroying the political ambivalence that forms the basis of their franchise.

As political support for the utilities crumble, their investors will find that they are sitting on piles of impaired assets.

For example, right before Buffet bought NV Energy, they got the legislature to pass a bill forcing them to shut down coal plant and replace them with gas. But the bill had the provision that NV Energy could continue to recover the undepreciated capital on these plants as an ordinary expense. When the bill was passed Buffett was delighted to buy up the whole company. He knew that NV Energy would profit from both the gas plants and the closed coal plants. This was a huge boost to profits on the backs of ratepayers. So here's the problem. This would never fly in a competitive market. It only works by government fiat. In a competitive market, you can't just keep billing customers for plants that have ceased operation. Moreover, auditors can let you value those assets as unimpaired on your books. Under going concern valuation, a business must write off any asset that no longer has any operational value. So NV Energy is sitting on impaired assets, but through extraordinary political privileged they are allowed not to have written it down immediate upon impairment. The only thing that makes NV Energy a going concern is political favor. Once this is lost, they will be subject to massive writedowns.

I suspect this is true of most utilities. Yet they have bullheaded sense to antagonize homeowners with solar.

 

[Foghat]

California wants batteries behind the meter sooner rather than later, which is smart. They don't want to run into the situation of having very low sunny day prices and then a massive spike in the ducks head each evening in the summer.

The context of batteries in this investment thread is solarcity's ability to aggregate those batteries and sell the power.

Please read the gridx site. Get informed.

Aggregation is a service to the grid. They are selling a service. Thousands of Solarcity customers can either drop off the grid for a period of time, have a specific mix of customers instantaneously put energy on the grid when the grid requests it... All to manage loads across the grid to flattened spikes, control frequencies, and overall create higher reliability, reduce stress on the grid, increase life cycles, and lower overall costs and capital investments...

This service (controlling thousands of lease/ppa Solarcity systems)will come at a value in the whole sale market which will be measured by dollars for a specific unit of energy per month or year.(and thst can energy taken off the grid or added to the grid, all in the requested action on behalf of the specified stakeholder).

the value of this service is split 50/50 with each Solarcity customer, ultimately reducing each customers cost/kWh paid to combination utiltiy/Solarcity(net cost). Tou arbitrage is a separate service Solarcity provides to its own customers. This all apart of Solarcity software platform that will take advantage of 13 separate value stacks that are desired by all stake holders(utiltiy, iso, retail customer). if you understood that you'd know the difference between tou and aggregation.

Again, I ask this of you specifically since you too seem to have an inside track on info... What will be the actual tou rates for California NEM 2.0 since no one else knows officially yet? Please tell us. I'm all ears... And silence... As per usual.

 

[TheTalkingMule]

LEAP prices finally drift down a bit and the stock jumps 11%, this is getting really annoying.

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Thousands of Solarcity customers can either drop off the grid for a period of time, have a specific mix of customers instantaneously put energy on the grid when the grid requests it... All to manage loads across the grid to flattened spikes, control frequencies, and overall create higher reliability, reduce stress on the grid, increase life cycles, and lower overall costs and capital investments...

This service (controlling thousands of lease/ppa Solarcity systems)will come at a value in the whole sale market which will be measured by dollars for a specific unit of energy per month or year.

Maybe save this thought for a boring downtime in mid-March, but......what if SCTY continued to drift in the $20 region and ended up being taken private and bought by a nutjob like the Spirit Airlines CEO. Lets say he had the buyin from most CA SCTY customers to aggregate is some way, what kind of havoc could he create with installing battery packs in each home? Take the entire entity offline for 20 minutes, then dump all solar and battery back on the grid at once? What does that do if SCTY is 3x as big in CA?

Your comments above bring up a TON of ethical and security concerns. What kind of regulatory body needs to be in place once all these folks are even theoretically able to aggregate and have a large combined footprint. Hacking that could easily crash the grid, no? Wouldn't that be easier to do that than hack a portion of the actual utility and get past all the safety switches?

 

[Foghat]

Read my post earlier yesterday on grid security... NREL is working on that right now.

According to Peter rive, customers that get solar+storage either sign or don't sign a 50/50 contract to allow their system to be apart of the network of systems under demand response in the wholesale market.

Remeber, each system is apart of a larger whole. That's the power of aggregating, coordination between thousands of systems for the larger grid needs. The whole purpose for a consumer is to lower cost per kWh for reliable personal use when you need it. Everything Solarcity is doing is positioning itself to meet those needs. Security included, just as you use the Internet to purchase goods and services, security/trust is a cornerstone for the entire thing to work and everyone involved is keen to ensure that happens from the start, especially the department of energy. Our current grid system is far more susceptible to security breaches then the distributed grid as it becomes more sizable. As with designing anything, mitigating risks is just apart of what you do, no different here and you can read about it in the current certification processes on going.

again, aggregation is a service, benefit to the larger grid, for all grid customers, solar& non-solar alike. Solarcity and its customers will paticipate in mass to responding to the needs of the grid. It doesn't mean all systems get called to action at the same time, it means Solarcity will be the one stop shop for the grid to call on to get what they need. Solarcity will then deliver that need on behalf of all its customers signed up to offer their specific system for control. The value to this individual customer signing up to be apart of it is cheaper electricity for personal use that otherwise should not be available.

again, each individual system will have software from whatever company tesla, solaredge, etc) but Solarcity owns the aggregation software that manages the entire grid service. That grid service unlocks value not available in isolation of just owning solar+storage. In addition, Solarcity already has a significant competitive advantage to all other competitors since it has 1/3 of all rooftop solar installs in the United States and about 1.7GWs of lease/ppas under management as of the end of 2015.

as a matter of fact, Solarcity could monetize the entire asset and still make money from providing grid services when Solarcity demand response happens in California. They get 1/3 more upfront cash, receive a service charge for providing grid services, then receive the asset back after 20 years and have a substantial cash flow off the remaining 5-10 years of useful life of the system. So, we haven't even started yet with realizing the tremendous value of Solarcity as a company. Not even close.

 

[electracity]

......
Again, I ask this of you specifically since you too seem to have an inside track on info... What will be the actual tou rates for California NEM 2.0 since no one else knows officially yet? Please tell us. I'm all ears... And silence... As per usual.

I don't have any insider information. I have an understanding of basic information that is well understood by regulators and organizations like CASIO doing smart grid development.

Continue your googling and read about CA rule 21.

 

[Yonki]

FYI/FWIW, Here's what Fidelity's been paying me to loan out my shares (for nefarious shorting purposes I'm sure):

TSLA
01/21/16 2.00%
01/22/16 2.50%
02/01/16 2.00%
02/17/16 2.50%

SCTY
01/25/16 4.00%
01/28/16 5.00%
02/09/16 6.00%
02/16/16 10.00%

 

[electracity]

http://fortune.com/2016/02/16/solarcity-tesla-batteries-hawaii/

The utility will use the batteries to generate power at night, when the sun goes down between the hours of 5pm to 10pm, and when the solar panels are no longer producing energy. The utility will pay SolarCity 14.5 cents per kilowatt hour over a 20-year contract for the combined solar and storage project.

 

[SBenson]

If I were to guess the price action today is due to (nearly) securing some sort of cash. Asset sales or some thing else, which will help avert near term cash crunch.

If indeed this is the case, the best bet for longs is to sell the news. I will consider going short at that time, with puts covering Q1 ER.

Whatever the cash infusion is, will be most likely one time in nature. Won't help much in the medium-term. We got such cash infusion in Q4 with the silverlake deal. The balance sheet and cash flows still look like sh!t.

 

[electracity]

FYI/FWIW, Here's what Fidelity's been paying me to loan out my shares (for nefarious shorting purposes I'm sure):

TSLA
01/21/16 2.00%
01/22/16 2.50%
02/01/16 2.00%
02/17/16 2.50%

SCTY
01/25/16 4.00%
01/28/16 5.00%
02/09/16 6.00%
02/16/16 10.00%

Fidelity has a major chunk of SCTY stock, don't they?

 

[TheTalkingMule]

I'm looking at LEAP prices coming down this morning before this runup and will sit on low orders until they execute on a drift back down.

[UNBIASED POLITICAL PROJECTION]My only concern is that people are starting to see Bernie will likely take Nevada and is on his way from a 5% to 40% chance of nomination.[/UNBIASED POLITICAL PROJECTION]

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Fidelity has a major chunk of SCTY stock, don't they?

There was a Fidelity SEC notice last week, but I assumed it was on behalf of a client. The language said something about "great than 5%", didn't read it.

 

[Noble Ninja]

scty 22.08 +3.71 (20.20%)

 

[Foghat]

I don't have any insider information. I have an understanding of basic information that is well understood by regulators and organizations like CASIO doing smart grid development.

Continue your googling and read about CA rule 21.

And Silence continues

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If I were to guess the price action today is due to (nearly) securing some sort of cash. Asset sales or some thing else, which will help avert near term cash crunch.

If indeed this is the case, the best bet for longs is to sell the news. I will consider going short at that time, with puts covering Q1 ER.

Whatever the cash infusion is, will be most likely one time in nature. Won't help much in the medium-term. We got such cash infusion in Q4 with the silverlake deal. The balance sheet and cash flows still look like sh!t.

its got to something right?

 

[electracity]

scty 22.08 +3.71 (20.20%)

I wimped out at 19.80.

 

[jhm]

LEAP prices finally drift down a bit and the stock jumps 11%, this is getting really annoying.

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Maybe save this thought for a boring downtime in mid-March, but......what if SCTY continued to drift in the $20 region and ended up being taken private and bought by a nutjob like the Spirit Airlines CEO. Lets say he had the buyin from most CA SCTY customers to aggregate is some way, what kind of havoc could he create with installing battery packs in each home? Take the entire entity offline for 20 minutes, then dump all solar and battery back on the grid at once? What does that do if SCTY is 3x as big in CA?

Your comments above bring up a TON of ethical and security concerns. What kind of regulatory body needs to be in place once all these folks are even theoretically able to aggregate and have a large combined footprint. Hacking that could easily crash the grid, no? Wouldn't that be easier to do that than hack a portion of the actual utility and get past all the safety switches?

I was talking about that a year ago. When a single entity can aggregate DERs at significant scale, it has to be taken seriously at the negotiation table. The ability to mobilize GW of power make you quite relevant to the wholesale market.

There is an interesting split between FERC and PUC oversight. Interstate wholesale vs state retail. But when you can swing a GW, it won't matter where you stand. FERC will take an interest. So I really do think that scale is the issue here. An aggregator with a GW or more has material impact on interstate wholesale prices. Under FERC regulation all wholesale maket participants are entitled to the wholesale price. So an aggregator will be able to extract wholesale prices for providing grid services.

So SolarCity has 1.7 GW of solar assets under contract. Add to each customer a battery and/or demand management device such as Nest. Make all these devices networkable. Then SolarCity is sitting on about 1.7GW of aggregated dispatchable power. This scale makes them a player in the wholesale market across the country. If a certain PUC tries to block them from participating in a wholesale market, SolarCity can appeal to FERC.

Suppose SolarCity wants to sell aggregated solar sourced in Nevada to California. Does comes under FERC jurisdiction? Can the Nevada PUC block access to an out of state wholesale market? This has not been tested yet, but it could be a significant change of game.

 

[electracity]

And Silence continues

-

Even most of the non-technical people here understand why TOU is a problem for any company planning to aggregate kWh from behind the meter residential batteries. I have explained the issue in previous posts. Ask nicely, and I will explain it to you as if you were a five year old.

I've also referred you to CA rule 21 to show you that the vast number of inverters on the future grid will be required to provide support services for free.

 

[jhm]

If I were to guess the price action today is due to (nearly) securing some sort of cash. Asset sales or some thing else, which will help avert near term cash crunch.

If indeed this is the case, the best bet for longs is to sell the news. I will consider going short at that time, with puts covering Q1 ER.

Whatever the cash infusion is, will be most likely one time in nature. Won't help much in the medium-term. We got such cash infusion in Q4 with the silverlake deal. The balance sheet and cash flows still look like sh!t.

What? The last two ABS offerings in this quarter were not a big enough cash infusion for you? I thought you said net cash flow was not your issue.

 

[Foghat]

Even most of the non-technical people here understand why TOU is a problem for any company planning to aggregate kWh from behind the meter residential batteries. I have explained the issue in previous posts. Ask nicely, and I will explain it to you as if you were a five year old.I've also referred you to CA rule 21 to show you that the vast number of inverters on the future grid will be required to provide support services for free.

(tap,tap)is this mic on?... Oh flip the switch... Okay got it (speaks into the mic)

"And the silence continues."

(mic drop, walks away)