SolarCity Corp Has An Unstoppable Momentum

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SolarCity Corp Has An Unstoppable Momentum
By BrokenSphere (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

SolarCity Corp (NASDAQ:SCTY) shares declined 7.47% on Monday to $50.89. In fact, the stock has tumbled more than 25% in the last three months. But Chris Umiastowski of the Globe Investor remains bullish on the company’s long-term future. The San Mateo-based company is disrupting old ways of providing electricity. It has emerged as a leader in offering low-cost solar electricity to consumers. The company has captured 36% of the U.S. residential solar market.

Solar power will be cheaper than grid electricity

Umiastowski says the solar installer has an unstoppable momentum. The recent dip in the stock offers a good opportunity to own SolarCity at a discount. Solar systems have traditionally been expensive. But costs are falling rapidly. Chris believes that, in the next five years, costs will come down to a level where rooftop solar power will be cheaper than grid electricity, even without government subsidies.

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The company’s strategy to lease solar systems to consumers has worked well. SolarCity constructs and finances the solar systems, and leases them to customers who sign a long-term agreement. Right from the start of the contract, customers pay less for their electricity than grid power, and SolarCity gets recurring income over a 20-year period.

SolarCity’s project bookings jump 154%

Last quarter, the company’s project bookings jumped 154%. Its 36% market share is higher than the next 50 rivals combined. It speaks volumes about SolarCity’s dominant market position. Just like Tesla Motors Inc (NASDAQ:TSLA), SolarCity has adopted the vertical integration strategy to streamline the business and reduce costs. The company controls panel manufacturing, system design, installation, and sales.

SolarCity has also partnered with Tesla to deploy Lithium-ion batteries with panels to store excess power. This deal will allow customers to ditch the grid and still have “bulletproof supply” of electricity. Umiastowski expects SolarCity’s customer base to grow from the current 168,000 to one million by 2018. Then, the company will generate more than $1 billion in recurring revenue.

SolarCity shares inched up 1.49% to $51.65 in pre-market trading Tuesday.

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7 COMMENTS

  1. At $2.25 per watt after the tax credit, that includes, solar modules, an SMA inverter that provides emergency backup power during a power outage, during daylight hours without the needs for batteries, racking, wiring, full installation, including permits and plans.

    Insurance, maintenance and inverter replacement are nothing more than gimmicks (scare tactics) that are used by the solar leasing companies to convince you to sign their expensive contracts.

    First of all, there is no maintenance with a high quality, properly installed grid tie solar system other than an occasional rinsing off of the solar panel glass and the solar leasing company won’t even do that for you. That’s the homeowners responsibility.

    Insurance is covered by the home owner’s insurance policy because the solar system is an attachment to the home. In many cases your insurance policy won’t even increase after adding the solar system. In some cases your homeowners insurance policy premium will only increase slightly.

    Inverter pricing continues to drop so by the time the inverter’s warranty has expired, 10 years from now, inverter pricing is expected to reach a low of 15 to 18 cents per watt which translates into approximately $900 or approximately $1,200 with labor to replace a typical 5 kW inverter which is peanuts when compared to $8,650 difference in price to purchase a system from a leasing company at the $4.98 per watt that you mentioned in your article before applying the tax credit versus purchasing a system from us at $3.22 per watt before applying the tax credit.

    That $2.25 per watt final price after applying the 30% federal tax credit can be financed if you wish with a $0 down FHA solar loan that requires no equity in your home and only a 650 credit score. This loan offers tax deductible interest (solar leases, PPAs and solar leasing company loans do not offer tax deductible interest) and unlike the solar leasing company’s loan there is no balloon payment of 30% of total system cost is due on June 1st the year after installation, regardless of the amount claimed in the tax credit. And there is no 2.9% annual payment increase. The payments on the FHA $0 down loan are fixed.

    And as for what motivates us to keep our customer’s solar system’s running, Our 17 year reputation in the PV industry motivates us. And the $7,450 difference in price even with a $1,200 inverter replacement motivates our customers.

    And if you want to talk about a lease or PPA versus an outright purchase, then you need to discuss that fact that the expense to rent a solar system from a leasing company dramatically escalates when compared to an out right purchase. Solar leases and PPAs simply don’t make sense anymore in today substantially lower priced market. That explains why nearly all of the major leasing companies are moving away from 3rd party financing and are entering the ownership/loan market.

    The problem that the leasing companies face is that their entire business model was built on a very high margin as well as a heavy dependence on the 30% ITC. They need that high margin and ITC to keep their massive overhead at bay. Now that pricing has dropped and continues to drop, they can no longer remain competitive while supporting their operations.

    I predict many consolidations as well as business failures as we move into 2015 and beyond. Like any emerging market, once saturation is reached and the product has gone mainstream, price is king. With virtually no barriers to entry and much lower priced competitors entering the field at every turn, the giants that started this industry will fall by the wayside. Mark my word.

  2. SolarCity’s price to customers is $0.14/kWh, no money down and you only pay for the energy your solar system produces. That is in practice a 100% satisfaction guarantee.

    Can you tell me what is included in your $2.25 per watt (installation, insurance, maintenance, inverter replacements?) and whether the customer needs to pay those $2.25 per watt down or you offer a financing plan, and if so, which are the terms of the financing plan you offer? Also, what motivates you to keep my solar system running if you are going to receive the $2.25 per watt in any case?

    Thanks

  3. That’s funny, your article states that SolarCity has an all in cost of $2.90 per watt pre ITC which would give it a after ITC all in cost of $2.03 not $1.25. Here’s your statement from your own article:

    “In Q314, SolarCity reported implied total cost per watt of $2.90. This figure includes installation, maintenance, sales & marketing and general & administrative expenses, discounted to today’s dollars at a discount rate of 6%.”

    And besides $2.25 per watt to the customer blows SolarCity’s cost of “$4.35 to $5.60 per watt” to the customer (Again per your own article) out of the water. Again here’s your own statement from your own article:

    “Note that SolarCity expects to be able to charge the average client from $4.35 to $5.60 per watt, or revenues of $4.98 per watt at the midpoint.”

    I think you might be confused. When I say less than $2.25 per watt after the ITC, I mean, that’s what the customer pays not the dealers cost. SolarCity can”t touch a price of $2.25 per watt after the ITC to the average client. We can.

  4. If in “the next five years, costs will come down to a level where rooftop solar power will be cheaper than grid electricity, even without government subsidies” then why would anyone want to lease a system when it would be far more financially beneficial to own one?

    And actually at today’s already low cost of less than $2.25 per watt after the ITC or less than $10,687 for an average sized 4.75kW system that will produce up to 600 kilowatt hours of electricity per month with only 5 hours of peak sunshine per day, it makes no sense to lease a system today anyways.