Also, the home owner has no ownership stakes in any of the hardware. That's great during the service period (10 years if I recall), where they maintain and manage the hardware. However, at the end of the term, you are offered to buy the equipment with a hefty baloon payment. To the point ehere you'd be better off and come out FAR ahead by paying out of pocket from the onset and own the equipment outright.
I treat it like a riskier CD, no more no less.
No one was worried about vast amounts of people no longer paying their subprime mortgages either. Not saying your investment strategy is wrong, but "predictions are difficult, especially about the future".
The prospectus https://solarbonds.solarcity.com/assets/bond_document/180/?f... lists the following risks (among others).
• your inability to initiate bankruptcy proceedings against SolarCity;
• the lack of certain “customary” investor protective covenants in the indenture;
• your inability to require us to repurchase the Solar Bonds upon a change of control of SolarCity;
• lack of cross-default provisions in the indenture with respect to our other debt; and
• the lack of an underwriter to conduct third party due diligence and other types of “gatekeeper” actions typically taken by an underwriter in an underwritten public offering.
A match made in... the backroom?
It's not about brand at this point, it's about economies of scale and production?
Converting to metered grids (on which consumers can sell) costs a small fortune, often for very little benefit. Even environmentalists have been weighing in against it as wasteful.
Tesla's home battery solution offers an obvious response to this situation - you can minimize or avoid grid sell-off by doing in-home storage to smooth demand. That has the potential to make SolarCity an incomparable player in non-metered markets, keeping with Musk's general "no viable competitors" ethos.
You aren't just whistling Dixie... http://www.solarcity.com/newsroom/press/following-nevada-puc...
I doubt losing Nevada as a market did anything to help SolarCity's bottom line.
-there is redundant/duplicate hardware between solar panel & the Powerwall installations
-substantial drop of cost of sales for SolarCity between 30-50%, also drop on tesla's side
-biggest asset is SolarCity's installers
-also some strengths in the SolarCity's sales side
-a special deal with SolarCity would be a conflict of interest
-a seamlessly integrated product/system is just better, and "you aren't wondering if you should blame the solar company, the battery company or what if you are the end customer"
-installation crew can do everything in one visit instead of two or three
Other interesting note:
-Elon explicitly said Tesla has the potential to be a trillion dollar market cap company
My take on it is if the deal is viewed solely based on past performance and traditional financial analysis it probably has big issues. If viewed from a future standpoint where Tesla pulls off things like the Model 3 successfully, it could be a pretty good deal for Tesla. A bigger question for shareholders is what kind of shareholder dilution could occur between today and say 5 years from now on whatever roadmap Elon is imaging and isn't public.
I think Tesla's ability to sell another company's installations is limited by the impression they are trading on their brand. ie. a "Trump Steaks" problem.
SolarCity's business model is incredibly risky. [0] They've already gotten shut down when trying to "sell you that electricity."[1]
[0] https://news.ycombinator.com/item?id=11520789
[1] http://www.bloomberg.com/features/2016-solar-power-buffett-v...
Bringing your question back to SCTY, one of the critiques of SCTY in NV was that SCTY was expecting/betting to be able to sell back electricity to the grid at retail (not wholesale) rates via net-metering. Inarguably, this was a threat to the utility and its ability to re-coup its large capital investments (sunk costs) in the grid.
There are other solar companies whose business model doesn't rely as directly on "billions of dollars of (taxdollars in) support."
From what I can tell, the biggest jumps in Solar City's business were when the caps on excess power were lifted. Which makes sense. Rebates are nice and reduce their risk and increase how deep they can go in, but increasing the net metering cap from 3% to 10% more than triples their revenue and cuts their return period to a third what it was. Those caps are not subsidized, in fact often being implemented as trivial accounting tricks where a user gets credits during the day that they can spend that night or next month.
2) The utility can't (and honestly, shouldn't) directly shoulder that cost, so they pass it on to other clients.
3) net-metering cap serves as a limit to prevent the utility from being unsustainable, because the rooftop energy business can't survive without it.
What SolarCity effectively wants is to move the cap so that they get more parts of a pie which they are stucturally forced to share with the utility. Effectively, we're witnessing the woes of a growth-hacking model in an environment where the main source of margin and growth is regulatory decision.
Also although they were the first to do some of the complicated financing stuff, rooftop solar installation has turned into a very low margin business with lots of competition in most markets. It's not really groundbreaking stuff they are doing.
"We'll be lucrative by the early 2020s, assuming solar starts seeing widespread adoption" carries a lot more weight now than it would've a few years ago, just because of the explosion of programs and services like Project Sunroof.
At most you can infer then that them losing money is no sign at all, because losing a lot money can also be a sign of failure obviously.
Most consumers don't give an eff about carbon footprint unless it saves them money or the pollution does affect them directly. Also I dont think there are too many people in USA spending tens of thousands of dollars in electricity bill.
Solar Panale is a great idea if there is technological breakthrough but else it a tried and failed model.
They do spend that much, the average in the US is $115 a month, and the spread is lowish, ranging from $90 to $130 a month between states, and up to $150 in outliers like Alaska. Or in other words, a US average of nearly $1.4k a year.
A 10 year horizon puts total electricity expenses at $14k, a 30y horizon you mentioned puts it past $40k.
However, those are not savings like the guy implied that you replied to. Solar today tends to lower your bill by maybe 5-10% on average over large amounts of customers tops. So savings would be a few thousand bucks, not tens of thousands.
More importantly, that's a rate for today, and it remains to be seen how that will develop into the future.
The big untold truth for customers is that there's a high probability that electricity prices will come down sharply. Renewable energy resource price points are dropping fast, both on the hardware side, the soft-market side, and spurred on by subsidies. We've already seen crazy low record rates, like the latest PPA (power purchase agreement) was as low as 3 cents. PPA's set electricity prices for contracts that last well into the future, so they're essentially the industry's prediction for where the market will go. (i.e. a 20 year contract at 3 cents per kwh might look silly when the price is 5c today, but it implies industry experts expect the price to drop such, perhaps to 2 cents near the end, that the average cost level over 20 years will drop below 3c.)
Those PPAs will spread and start to affect electricity prices, 3 cents already undercuts wholesale prices of most coal, gas and nuclear capacity for example. And those wholesale prices will push down retail prices, too, such that existing solar installations on average over 20 years may actually turn out to be more expensive than the market rate, i.e. no savings at all, because their financing assumes rates to stay stable, or drop less than they likely will as far as I can see. I'm still a huge fan of solar and urge anyone to consider it, but as an investment as a consumer I think it's financial benefits are oversold.
When you buy your own panels, there's no way to cash in on the carbon credits. I'm waiting for some startup to provide a way to market them...
Here's how their business model works:
- They will install solar panels on your house for free (or cheaper than the full cost).
- You pay them a much lower rate than what the public utility company charges for the electricity generated from those solar panels.
- You save tens of thousands of dollars and lower your carbon footprint by hundreds of thousands of pounds of CO2 over 20-30 years.
- They lose a ton of money installing those expensive panels but make a TON of money in the long run selling you that electricity that is generated for next to nothing.
So as you can see, SolarCity losing money is actually a good thing because it means they're making so many damn sales that in 10 years they're going to be reaping the profits from those sales like crazy.