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Some people think SolarCity is doing terribly because they're losing so much money. Actually them losing money is an incredibly great sign for the long run (ass

• verandaguy 10y ago
  I totally understand the business model, but I'm betting this was a really tough pitch to VCs when SolarCity was just starting up. "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.
  • charlesdm 10y ago
    Given a fund is generally liquidated after 7 years, yes. But at first glance it actually sounds like a decent model.
• caminante 10y ago
  I can't tell if you're being tongue-in-cheek. 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 https://news.ycombinator.com/item?id=11520789 [1] http://www.bloomberg.com/features/2016-solar-power-buffett-vs-musk/ http://www.bloomberg.com/features/2016-solar-power-buffett-v...
  • saulrh 10y ago
    If the failure mode is "public utilities have achieved regulatory capture", then isn't having something like Tesla come in with billions of dollars of support an effective solution?
    • caminante 10y ago
      You're asking a different question, in a very loaded way. 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."
      • saulrh 10y ago
        There are two different regulatory things going on here. The first is a tax rebate for installing solar. The second is a policy requiring utilities to purchase excess energy from people with solar installations. My interpretation of the article you linked was that the utilities were attempting to conflate these by arguing that the money to pay consumers for their excess power originated from the public, and that they're attempting to place caps and how much energy can be sold back to the grid and don't care much about the installation subsidies. 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.
        • makomk 10y ago
          Net metering is effectively a subsidy for solar for customers with solar once you take into account things like the cost of maintaining the grid, and will become more and more of one as tech improvements and economies of scale drive down the cost of utility-scale solar and the actual free-market price of power at peak solar times compared to the rest of the day.
• thebmax 10y ago
  Not exactly how it works. The projects are leveraged off balance sheet with separate, often tax advantageous entities owning the panels in a complicated lease buyback structure. 'Losing money is a good thing' is not true if you understand time value of money and debt leveraging. I haven't done much research but Solar City is probably hurting now because Nevada renagged on gridnbuyback provisions and lots of other states are eliminating residential incentives and subsidies for solar. 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.
  • a13n 10y ago
    Who owns the panels seems like an implementation detail. Don't agree with you about time value of money for the long haul.
• the_watcher 10y ago
  I really hope you are joking, because what you are describing is basically the business model of Ponzi schemes.
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  • a13n 10y ago
    Not at all. In a ponzi scheme the later investors pay for the profits of the earlier investors. In this case Tesla is taking a loss on customers but turning a big profit in the long run regardless of whether later customers sign on.
  • JBReefer 10y ago
    No, this is the "razor and blade model"
• hugodahl 10y ago
  Unfortunately, their business model and pricing is far from competitive in some areas of the United States. I inquired into their services, and when it came to pricing, they were at least 50% over the average of all service providers and plans, and in the bottom 10% as far as price per kw/h. 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.
  • loceng 10y ago
    The buyers likely can't afford to outright buy. Being the cheapest isn't usually the best idea in business either. Apple does pretty well being much more expensive than the average.
    • ajmurmann 10y ago
      Phones have other differentiators than price. Much less so with electrons.
      • rickycook 10y ago
        well then think of it like the perks package. solar city allows people that couldn't afford solar to afford solar (at least up front). electrons are electrons, sure just like a job is a job but some jobs have a beer fridge and some jobs do not
      • eru 10y ago
        Ha, power companies don't even sell you electrons! The electrons just wiggle a bit back and forth.
    • tdy721 10y ago
      I think the key here is batteries. The utilities will fight (lobby) to give themselves the upper hand when it comes to buying solar power from consumers. Tesla plans to make lots of batteries. Batteries also happen to be good solution to these legislative issues. A match made in... the backroom? It's not about brand at this point, it's about economies of scale and production?
• tdy721 10y ago
  I believe that the regulatory environment for solar is becoming rather un-cooperative. I also think that the solution to the uncooperative (Utilities don't want to pay for solar electricity) situation is a Tesla product, batteries! It makes sense to me. It also reeks of backroom planning.
• rando18423 10y ago
  Hahahahahaha what? That's not how balance sheets work
• treve 10y ago
  Losing money is a great sign? That doesn't make any sense. 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.
• 205guy 10y ago
  Don't forget the carbon credits: by owning the panels on your roof, solarcity (and others in the same business like sunrun) own the carbon credits. Which they can then sell in the carbon markets. 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...
  • technofiend 10y ago
    Sharing or selling those carbon credits to the local utility seems like a way to make them less likely to fight installation of solar.
• tn13 10y ago
  > You save tens of thousands of dollars and lower your carbon footprint by hundreds of thousands of pounds of CO2 over 20-30 years. 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.
  • IkmoIkmo 10y ago
    > Also I dont think there are too many people in USA spending tens of thousands of dollars in electricity bill. 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.
• bedhead 10y ago
  Actually if SolarCity used a realistic discount rate to measure the value of their future cash flows which extend 40 years out, the company would be massively insolvent. Ahhh, the beauty of non-GAAP accounting...
  • Bartweiss 10y ago
    How are they dealing in non-GAAP accounting? I thought GAAP had been essentially mandated in financials after the dot com crash.
• Xyik 10y ago
  The pitch for user adoption seems to be that it will be cheaper and eco-friendly. But I question that, for example if your solar panels break or malfunction. You will always be paying for energy outside of solar as a back up.