albeit smaller than the mega-plants. SPWR like companies that can do both. They are recently moving a little into SCTY turf as well
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I think that the bulk of the retained value gain is coming from cheaper financing. I know that SPWR said that a 1% reduction in interest rates would increase their retained value by $0.40/W from $1.75/W to $2.15/W.
So I imagine the higher retained value number is coming from SCTY's ability to issue ABS at ~4.5% interest rates.
So as long as SCTY is the only one getting such great interest rates then it will be a great deal for SCTY. They are essentially a bank: borrowing money at 4% and then lending it out (via a LEASE or PPA) at 12%. This is a great deal for them. Going off topic a bit, banks trade at roughly 1x book value, so if SCTY continues this "banking" model then you can throw out your 3x book value assumptions in valuing SCTY. If banks trade at 1x book value and utilities trade at 2x book value, then SCTY as a hybrid utility/bank company should trade at 1.5x BV in the future when the high growth period ends and normalizes around 10% per year. But I digress...
Once again, if SCTY is the only one issuing these ABS then it is a great stock, but if others are able to replicate this same ABS model (or similar crowdfunding, etc.) then margins will contract in the future and so would retained value.
good point.
when would you project that growth v. commodity-service line to cross-peak?
Given where we are in Solar DG with challenges remaining re: battery combo systems etc., it might be some time before SCTY becomes a JPM multiple. I would be inclined to sell TSLA before it becomes the next GM as well, so I'm guessing you believe the transition to occur fairly rapidly for SCTY? Could be right, financing is an easier nut to crack. The risk I guess is whether SCTY can build the brand faster than others. I agreed that is definitely a risk
I was asking for your opinion about other women taking risks of purchasing panels vs. leasing. I wasn't asking if you leased or paid for your system. That's great you paid for your system. I would buy one as well but I don't mind the hassle if it does eventually break down. Out of the first 10 women that come to mind, I do not believe any of them would buy a system if they were single.
The gender comment came up when I was saying that leasing is far from dead. Most of the men commenting strongly against leasing vs. buying were obviously not women. I would love to hear more opinions from any ladies reading these posts.
My step-mother actually retired from Detroit Edison. She actually repaired meters at your home. There is no way she would buy a system. She would lease it. She wants nothing to do with any maintenance or risks with buying something like this even though she's very familiar with electrical components.
The gender comment came up when I was saying that leasing is far from dead. Most of the men commenting strongly against leasing vs. buying were obviously not women. I would love to hear more opinions from any ladies reading these posts.
My step-mother actually retired from Detroit Edison. She actually repaired meters at your home. There is no way she would buy a system. She would lease it. She wants nothing to do with any maintenance or risks with buying something like this even though she's very familiar with electrical components.
a) The potential market size is so abnormally big and growing I have a hard time seeing solarcity coming into competitive pressure and going into lower margins. If anything they are the ones putting pressure on the competition by taking ever increasing market share!!
Feeling threatened by potential competition is the most far fetched idea really.
b) SCTY becoming JPM? Jesus!!
Even after hitting their 1mil customer target by 2018, which is 10X growth from now, they would still be holding only 4.3% market share counting only existing buildings in the 14 states they service!!
What about new buildings, What about other states, What about other countries. The opportunity is many orders of magnitude larger than where scty is now. This company could be growing for next 30 years and it might still not be done!
c) Just like P/E is usually a function of growth, P/B is simply a function of growth (in book value per share).
Utilities get P/B of 2 because they grow at a rate of 2% per annum. S&P gets 3 (2.7 to be more precise) because it grows bookvalue/share at 6.5% per annum.
So when scty is growing at 10% rate, it still deserves a P/B higher than S&P.
Feeling threatened by potential competition is the most far fetched idea really.
b) SCTY becoming JPM? Jesus!!
Even after hitting their 1mil customer target by 2018, which is 10X growth from now, they would still be holding only 4.3% market share counting only existing buildings in the 14 states they service!!
What about new buildings, What about other states, What about other countries. The opportunity is many orders of magnitude larger than where scty is now. This company could be growing for next 30 years and it might still not be done!
c) Just like P/E is usually a function of growth, P/B is simply a function of growth (in book value per share).
Utilities get P/B of 2 because they grow at a rate of 2% per annum. S&P gets 3 (2.7 to be more precise) because it grows bookvalue/share at 6.5% per annum.
So when scty is growing at 10% rate, it still deserves a P/B higher than S&P.
bonnie
I play a nice person on twitter.
Obviously I'm one of the 'first 10 women that come to mind' when I thought about your question, so I think I'm a valid data point for this discussion. And since I'm single, you now know of one single woman who would buy a system (vs. lease). I know two other single women who have purchased, one woman (married) who leased.
I wanted to eliminate my power bill, not just reduce it. Leasing a system didn't let me reach that goal, so that option was a non-starter right from the beginning. Maintenance of the system was not the primary decision driver, pay off point was. I will be fully retired within 5 years and am actively eliminating expenses. Solar was an easy choice.
Another solar question - sorry, just trying to get every detail down. Should I get a little bigger system if I plan to get an EV in the future? I not only want to eliminate my electricity bill as much as possible, but want the EV charging to be offset as well. But since EV charging is at night, does it matter?
Thanks!
Thanks!
SPWR is trying to do everything - panel manufacturing, residential, commercial, utility-scale, all over the world, etc. I'd much rather prefer a CSIQ which IMO has a more disciplined/focused approach (build out the manufacturing capacity and then go big into utility-scale plants).
That said, SCTY remains the most focused on the existing highest margin in the residential/commercial solar industry (customer acquisition, financing, design, permitting, installation, follow-up products/referrals, etc). There's risk that these margins contract in the future but that risk can be largely outweighed if they can continue executing on their growth/expansion plans - both domestically and internationally. And also, they'll likely continue their vertical integration in a more thorough, faster and efficient manner than anybody else.
bonnie
I play a nice person on twitter.
Yes, it matters. You want enough excess in the day to offset what you use in the evening. In my case, the excess I need to produce is smaller than what I need at night (for car or anything else), because I earn more for what I feed into the grid during the day and pay less for what I take out at night. I actively try to avoid using any power during peak hours and have shifted a lot of usage to the off-peak times.
SCTY does not resemble a bank or any other kind of lending institution. They are more of a utility than a bank. They will never be in a position they are only growing by 10% a year until the point of near saturation in solar which is 20 years away. How does borrowing money to purchase solar panels to put on a roof = banking? It's not even close. The risk is taken on by the investors at 4.5%. SCTY isn't investing, they are borrowing. SCTY is the middleman who is also a servicer. A utility is buying natgas and then distributing electricity and servicing the lines. SCTY services the panels. Luckily the sun is free and that's why the utilities are trying to keep SCTY away from their lines. They do not want that solar energy fed back into the grid. They are earning a premium after generating electricity. The states cap what the utilities can charge. If everyone starts using panels then the electric company has to charge higher rates for the shrinking amount of electricity they are supplying. The problem is the price is capped so they can't raise pricing fast enough to cover maintenance of the lines. That is why they are lobbying to get rid of netmetering.
NigelM
Recovering Member
Or, no it doesn't matter. Ggies07, you're in TX but Bonnie is in CA so the true answer to your question may depend on your utility company and the supply pattern to your house. In my case (here in FL) I don't get cheaper electricity at night, it costs me the same all 24 hours of the day which means it makes no difference cost-wise what time I charge the cars. My solar system produces enough power during daylight hours to fulfill all our needs (cars included) 24/7; so obviously we have a net metering system whereby we over produce during daylight hours and every day the meter ticks backwards until the sun goes down and then it clicks forwards again. At the end of the year I want to come out as close to a net zero as possible.
Whether you use the TOU (time of use) rate will ultimately depend on what your powerco offers and you may need to do some individual calculations as I did. A good solar installer will sit down with you and work that out looking at your usage patterns etc.
Final BTW, I charge both cars at night at different times simply to keep total load to a minimum; extra cautious on safety, if you like. During the day there's A/C, washing machines, dryers, oven, pool pumps etc. running at various times.
NigelM
Recovering Member
Not true everywhere. Here in FL our powerco has been running regular lotteries offering big incentives to residential customers and businesses to install PV systems. I'll explain in simple terms: Power demand has been increasing and the local monopoly has an obligation to supply, but the step cost to serve new customers is massive (build a new power plant); ergo, it makes sense for the powerco to persuade customers to install PV and it's even cost effective for them to incentivize customers to do it.
This is one area that I think SCTY is missing out on. I talked to them last year about my plans for our system but they told me they were focusing on states where (state!) incentives were available and there are none in FL. Florida has a horrible history when it comes to state incentives, they promised them in the past but then never funded the program so that thousands of folks were left without their rebate checks. These days no-one I know trusts our state lawmakers but I do know dozens of folks who have installed PV with incentives from our powerco.....business is booming for FL installers but SCTY isn't here.
Definitely interesting blog post.
It reminds me of what's going on in Hawaii. For those who aren't aware, it's quite fascinating:
A Solar Boom So Successful, It's Been Halted - Scientific American
If people really start to think about this, they will see Solarcity a little bit different... Maybe a lot different. Key is networked stationary storage. We will all see some utilities change their tune soon because it just makes good business sense. Instead of the utilities complaining of "cost shifting" they will be praising "cost savings" of PV+storage. And, Solarcity will be maybe the only one to benefit for a while...
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I've recently read that Solarcity will expand to new states soon. They will accept lower margins and thus lower retained value by going to these states, however, the cumulative retained value growth will grow substantially by doing so. Maybe Florida is one of these states to be included.
also, when Solarcity begins to expand into new markets, will this affect how wall street values it? I think so, IMO. I think there are going to be a few different catalyst that will open some eyes to the real potential of Solarcity as an energy/utility hybrid company down the line here.
Seems almost criminal for Solar City not to be in the Sunshine State
I can see where SCTY would like to push the battery storage to the grid ops. But frankly given the path of battery cost coupled with panel/efficiencies now over-producing in daytime by an increasing margin/$- they're fighting their own expansion rate with that argument.
NigelM- for you're own situation, what circumstances of cost would persuade a battery added in lieu of net-metering? i.e. If net metering went away due to load balancing issues, or was reduced dramatically (as some states have proposed)
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They sell the service angle, but i have installed 5 systems, oldest is 10 years. Other than a broken panel because someone backed into it with a tractor, there has been no service necessary whatsoever.
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