Solar City SCTY is the better stock than TSLA

Solar City SCTY is the better stock than TSLA

I have been in scty for a week and love this company.
Now there are only two stocks I own scty and tsla

Thanks Elon!

GeirT | 17. Mai 2013

I believe in the MS/MX and TM - but the photovoltaic industry, sorry - I struggle. This is on paper nice and sweet but - technology is soooo behind, and cost soooo high and investment to energy sooo poor.
I cannot see how this can be sustainable. Politically correct, for sure and tons of money being thrown into it. The opportunistic investor can probably do great here. But when I don't understand the business, its model and its long term potential - sorry. Not for me. I want to try to understand, but don't. And if it doesn't work, stay away.
But, maybe it is me...?

skkhow | 17. Mai 2013

If you would like to know the company, here is the link

Solar city is not like the other solar companies like solyndra or others; they are actually a UTILITY company like PGE with ONLY 3 Billion market caps. There are huge growth ahead of them.

Andre-nl | 17. Mai 2013

GeirT, what you are saying is what they said about Tesla a few years ago ;)

I think you are behind the facts. Solar PV can produce power for about the same price as offshore wind nowadays. But the technology is still progressing rapidly, faster than wind technology. Especially in remote areas in for example India, the pickup is accelerating because it is cheaper than diesel generators (the grid there is clearly not what we're used to in Europe or the US). It has reached grid parity for consumers in many western countries. Here in The Netherlands people are waking up and many of them are installing solar panels.

You ain't seen nothing yet.

btw I'm both in SCTY (got in @ $15) and TSLA (got in @35). A 'thank you Elon' is in order I guess.

skkhow | 17. Mai 2013

scty up 28% today

bb0tin | 17. Mai 2013

I live in New Zealand where there are no solar incentives. I am installing a solar system which will provide all my power. I pay for all of the costs but it will still be fully repaid in 7-10 years. After that I get all my power for free. Solar PV is now a 'no-brainer' in many places in the world.

Hi_Tech | 17. Mai 2013

I think there will be huge advancements in the solar industry, but as this happens, it will benefit SCTY further. This is because SCTY doesn't actually make the panels. They deal with the energy that is generated based on them. So if the price of the panels drop, they make a bigger profit... or reduce the cost to the customer.

In the long run, I think both companies have a long growth ahead of them. I'm just getting a bit nervous with both right now, due to the huge increases lately. Don't know if this will hit some sort of psychological barrier and cause a drop in prices or not.

amirm | 17. Mai 2013

The case for solar in most parts of the world is clear and government incentives make the business model more compelling. The issue is barrier to competition - there is none. I looked at SCTY and found 3 other direct. Competitors. So it's all about execution since there is no technology involved (tesla does have tons of technology innovation). Since Elon is involved its probably not a bad bet.

TikiMan | 17. Mai 2013

My SC home system goes in next month! Hopefully home Li batteries are next, so I can tell my power utility to go Fuc% themselves!

jk2014 | 17. Mai 2013

Hahaha tikiman!

DouglasR | 17. Mai 2013

Well, this thread is prescient: Elon just tweeted that SolarCity is valued at $3.39 trillion by Google.

Andre-nl | 18. Mai 2013

It seems even I have been too convervative. Solar power is starting to reach absolute grid parity

Brian H | 18. Mai 2013

One of the hidden regulatory "gotchas" that are externalized solar costs is the legislated obligation (in WA, e.g.) to give purchasing priority to the "renewables" (after defining hydro out). This causes conventional plants to have to throttle back and cuts revenues, artificially hiking their costs, or even causing closures. The table is far from level, still.

Andre-nl | 18. Mai 2013

Talking about 'level playing field'. Let's by all means not mention the externalised costs of fossil fuels.

Brian H | 18. Mai 2013

What is Elon's stake? 13% or SLT? That makes him worth $440bn or so. :0

GeirT | 18. Mai 2013

@ Andre-nl

Good you see the business model here. And I will be happy to see it too. But solar and wind as of today are completely in la-la land cost wise, compared to coal, gas, not to say nuclear and hydro. Sorry, it does not add up. But - I am receptive and will be happy to be convinced that I am wrong. My money is for the time being going into TSLA and battery technologies - and Thorium of course ;-)

jk2014 | 18. Mai 2013

GeirT - The solarcity model is they install the PV system for free. Take care of all paperwork for free. All you need to do is pay the same amount for your electric bill for 20 years. It is transferable to the new owner if you sell your house.

The solarcity bill will be lower than your current utility bill for 20 years (or more).

Solarcity has a current market of 14 states. Billion dollar contracts with the government (public schools, municipal buildings, military homes and installations currently.

All this is reoccurring payments for 20 years. Each new contract just adds to revenue. It's an accumulative business model. The more that sign up for the leasing program, the more near iron clad revenue comes in. The number one bill that gets paid, even before the mortgage, is the electric bill. Very safe revenue stream to securitize, thus, obtain more funds to buy more systems to lease to more customers. Accumulation, or scaling, is the name of the game here. This business model almost makes it a certainty that it will. I don't know what the number is (maybe 10 years), but once they pay off a certain percentage of the systems, they own them outright. Then it becomes nearly all profit. Maintenance is low on the PVs and they can produce energy for maybe 100 years.

This is the big picture win here. This is going to be a massively profitable company. You just have to forecast some numbers and you will quickly see this is a fantastic investment opportunity. There are many other reasons to like this company, but the bottom line reasons are clear to anyone with a pulse.

jk2014 | 18. Mai 2013

In addition, they will begin offering energy storage units. Like a Tesla 60Kwh battery to store your PV energy, so at night you power your house and not have to utilize the grid power at all.

There currently are solar city pilot groups testing these energy storage systems.

The significance of this is as Solarcity scales with their solar lease programs, they could begin to offer these battery storage to their current customers on a large scale as a natural step to further reducing their utility bill. As a matter of fact, there is a possibility they could include it in the lease program at a certain point.

Imagine if they get up to a million customers with just the PV leases, then the battery system comes online and ready for market? It will be a transformation of our energy consumer almost over night.

Imagine how that would affect our need for all other forms of energy generations (hydro, nuclear, coal, nat gas, etc...) Energy creation and consumption pretty much sets the price of everything, so how would this affect our economy? This, to me, gets very interesting. The ripple effect is tremendous.

Brian H | 18. Mai 2013

Vs. coal, gas, nukes, etc., have a look at for another order of magnitude cost improvement. Yes, I know that means 10X. It gores a lot of oxen, though. Funding is thus thin on the ground.

jk2014 | 18. Mai 2013

Brian H -- maybe fusion in 20 years to replace hydro, gas, nukes, etc... as a back up to distributed solar power generation. See it as a primary power generation solution for industrial level uses. Not for home and business which will be overwhelmingly solar. Solar is practical, safe, personal, and available right now for a monthly fee less than your current grid utility bill. (in Solarcity markets)

jk2014 | 18. Mai 2013

GeirT -- It's also funny how SolarCity will beat it's yearly guidance of 250mwatts deployed by the end of Q2 low estimate @251mw). Had 157 at year end 2012. They completed 46mwatts in Q1 and expect to complete 48mw (low end estimate) by Q2. Also is cash flow positive already (500m from GS). Said this would happen by Q4. Exceeded expectations by two quarters.

To me, this seems to be a thriving business with continued exponential growth. Profitability is not an effective metric to measure it as a good investment at this time. I think many are starting to see this.

kenliles | 18. Mai 2013

Solar is Fusion

Brian H | 18. Mai 2013

with even minimal funding (~$2 mil.) to push the experimental rig to unity, another 3-4 yrs of engineering should see a prototype license-able design. It will be made available at very reasonable cost to manufacturers world-wide.

Complete unit would fit in a standard shipping container. $250-300K. 5 MW 24/7/355 (a few days per year for servicing and refueling.) Instantly "dispatchable" (ramp up or down). Stand-alone with remote monitoring. Housing radiation at b/g levels within 9 hrs of shutdown for maintenance.

About 2-3kWh/¢, including principal financing, profit, and staffing, etc.

GeirT | 18. Mai 2013

I still struggle with the sustainability of the photovoltaic approach with current generating efficiency, overall cost and reliance of subsidies.
That said, hail all efforts to produce energy clean. Don't misunderstand me on that. The stock market also appreciate what SC is doing. My point is that as I see the very viable sustainable TM business model, thus justifying the recent surge. I consider the SC stocks less so.

Brian H | 18. Mai 2013

I wonder how dependent SC is on inflated FITs.

Andre-nl | 18. Mai 2013

Brian, afaik the only place in the world where inflated FIT's exist is Japan. Solarcity does not operate in Japan. Since SolarCity only operates in the US, I think they don't depend on FIT's at all. The only incentive they depend on is net metering.

Brian H | 19. Mai 2013

An inflated FIT is any payment over the utility's cost of generation at that time of day. Anything higher, and they are losing money which comes out of other users' or taxpayers' pockets.

Andre-nl | 19. Mai 2013

GeirT, don't focus too much on efficiency. Standard panels are now between 15 and 20%. The first steam engines were, iirc, 3$ efficient. Cars barely managed to break the 20$ barrier in the past decade or so. My simple reasoning is: if it works, it works. That's all I need to know.

If you want to focus on a metric, the more important one is EROI (energy return on investment). FirstSolar is leader in that respect with something like 40. Each kWh of energy used during production will yield 40 kWh during the useful life of the panel. More common crystalline silicon panels are between 5 and 20. According to Argonne lab, gasoline has an EROI of 4.

So you always get much more energy out of PV than you put in and PV handily beats oil already.

For consumers across most of Europe the price is now around EUR 1.50-2.00 per W installed, incl. VAT, no subsidies. Depending on where you live a W of installed capactiy generates between 0.7 and 1.5 kWh per year. (Eg. Netherlands & Germany is 1, Bavaria 1.1, south Italy or Spain 1.5)

I believe you live in Norway? Electricity seems to be very cheap there and each W of installed capacity will probably yield only 0.7 kWh per year. So the economics there are not good. But in other places in Europe there is more sun and more tax on electricity. So things are very different there. In warm and sunny places where there is a mid day demand peak (and consequently, a price peak!) due to A/C, PV is a no-brainer.

Look at the history of the car: Can you believe people drove those expensive, unreliable, hand-built, hand cranked, noisy, smelly, slow. uncomfortable, impractical early automobiles? But each new generation of cars was a little better than the previous one and so they slowly progressed to what we have today. If it weren't for those pioneers, you wouldn't have your Tesla today.

PV technology today is far from perfect, but in all its imperfectness, it already has a practical use for many people in many places. The more the technology progresses, the larger that group will become. PV will improve in leaps and bounds the coming decades. Don't focus too much on today, what lies ahead is far more interesting.

Andre-nl | 19. Mai 2013

Brian, no, a FIT is not any subsidy or incentive, but a specific form in which the producer gets a fixed price for energy over a fixed period (mostly 20 years). The US PTC is not a FIT, since it still exposes the generator to fluctuations in the energy price.

Investors are allergic to uncertainties, and so they will charge a big markup for those risks, making renewable projects more expensive than needed. The FIT greatly reduces the uncertainties for the operators and therefore the financing costs.

In many cases, these FIT's are not payed out of taxes but through a per kWh surcharge (like in Germany). So your tax dollars are safe ;)

GeirT | 19. Mai 2013

@ Andre-nl

You show great enthusiasm and have very good points, and know your stuff. The Norwegian case is part of this though my perspective is global, and as an investor in global stocks. I'll keep my contrarian mind open to the photovoltaic advantages SC included, however - I don't see the business logic yet thus I leave my hard earned cash for other investments, TM for example (that by conservative investors also is a daring venture).

Guys, my comment was not to argue for the sake of argument, just to air my opinion on what was raised. I respect any decision anyone makes in this respect and obviously I am in a minority as the SC stocks skyrocket. Shame on me for not getting in early, as I did on TM :-)

Anyway, let's conclude that regardless of opinion on this, it is good for the game changing disruptive auto-industry technology we see paving out in front of us. As is also helps local noise and particle pollution, the world is finally moving a step or two forward regarding people moving.

Tesluthian | 19. Mai 2013

Reading the links I see that Goldman Sachs is going to securitize the solar leases,(sell them as investments),which is fine, let's just hope they get it right this time. I see SC is publicly publishing the contracts (good for transparency and standards ).

If I understand correctly, GS will bundle these contracts into an investment with a +/- 8% interest rate, (achieved through a tax break) for people with high taxes.

This is great, it will provide needed capital and speed up installations tremendously. Let's just hope GS gets the investments' risk properly rated this time by the ratings agencies. I wonder what the rating will be, AAA, AA, A, BBB etc?

And I hope, for the investment, the solar panel lease contracts have proper risk management controls such as insurance for hurricanes, abandonment of homes , other risks, etc.

Previous mortgage investment problems were improper sales; unqualified applicants; hidden contract gotchas; improper government rules, regulations & requirements; non existent & improper government law enforcement; various improper relationships & conflicts of interest; failure of fiduciary responsibilities; poor legislation through political donations; etc; etc. Let's not repeat those mistakes.

In other words the banks have to get everything right this time, (as opposed to mortgage note securitization). And perhaps the Musk group of people have the integrity and values to facilitate that process along and set a great example with SC.

That said I noticed that these solar panel lease investments seem to depend on a 30% tax break. How exactly does that work, and is it at political risk of being reversed ? Technically the tax break is not a spendinding of taxes, but a tax break, the money never goes to Washington. Does SC stock have a plan if the tax break is repealed ? Will the cost of solar panels keep going down enough to make up the difference if the tax break is repealed?

Finally, I think SC's ideas are good for the energy sector, although we still need the grid. And new competition will have to be cheaper as well as clean, as this idea from Lockheed Martin and their famous "Skunk Works". LM claims it will be ready by 2015.

shop | 19. Mai 2013

Does anyone know what is behind the Feds investigation of SolarCity's finances as it relates to the 30% subsidy the Feds pay? And then there is SolarCity's lawsuit alleging that the Feds aren't paying enough in subsidies?

Bryan M. | 19. Mai 2013

@ DouglasR believe that was Elon being sarcastic it was a mistake by google SCTY should be valued at 3Billion not Trillion

Tesluthian | 19. Mai 2013

If Solar City installs enough solar panel systems, they very well could be worth 3 trillion, in the future.

Brian H | 19. Mai 2013

As I mentioned elsewhere, there are many "gotchas" that bias the rate and grid unfairly. One is the requirement that utilities preferentially buy all "renewable" output first, exposing them to its costs and fluctuations, which must be made up by fiddling the conventional plants. That imposes severe additional costs on them, often rendering them uneconomical. Taking the conventional grid for granted may degrade it to the point that it can no longer function as a base-load safety net for the wild variations of the renewables.

Germany and many other European countries are in the grips of exactly this dilemma now. Even at 30+¢/kWh, rising fast. Beware.

DouglasR | 19. Mai 2013

@bmrealmccoy - The number was $39 trillion, not $3 trillion, which would have made SCTY's market cap more than twice the entire U.S. GDP. I guess I should have added a smiley. ;)

DouglasR | 19. Mai 2013

@bmrealmccoy - oops. Just checked my post, and I did say $3.39 trillion. Anyway, I assure you, I knew that wasn't correct.

Tesluthian | 19. Mai 2013

The Solar City system improves the national grid and helps counter peak demand. Peak demand is in the daytime when the sun is shinning. That's when solar panels are working, perfect ! SCTY reduces peak, daytime demand.

A SCTY system, coupled with a battery, allows the home owner to buy electricity at night, at reduced rates, to the system if it's getting low on juice, thus raising offpeak sales for the electric company.

On cloudy days, the battery acts as a backup system , still keeping peak demand down.

jk2014 | 20. Mai 2013

Wouldn't be a surprise to see SolarCity to a similar capital raise right now. Stock at around 50. Could easily raise 250-500m.

Would the risks be worth the rewards these additional funds would do to expanding the business? Waiting for the press release to drop soon...

jk2014 | 09. Juni 2013

What happens when solarcity has developed a quality battery storage system to replace grid power?
They install a system at every customer site. Customer still pay the locked in rate. Solarcity eliminates all payments to pg&e. Every dollar goes to solarcity now. Wonder how long battery storage lasts, how much home battery costs? In partnership with Tesla, to me, revenues could explode in a matter of a single fiscal year.

jk2014 | 09. Juni 2013

Forgot to mention they could purchase, at a deep discount, used MS batteries, divid them into 4-6 home storage batteries further cutting costs and increasing revenue. No other solar company can compete with this either...

SamO | 09. Juni 2013

How about if they provide HPWC connections to a fleet of Tesla cars for employees and use the cars for battery backup.

AmpedRealtor | 09. Juni 2013

I think the next solar revolution is going to be some combination of concentrated solar, using collectors or focusers, and solar thermal like we are seeing at the Solana plant in Arizona. Silicon panels are simply too inefficient. Even panels made by Sunpower out of California - the most efficient panels on the market - are around 35%. I have those on my roof, but I had to cover practically my entire roof to produce 80% of my needs. I read that concentrated solar can significantly reduce that footprint. I'm sure some smart people will figure out a way to shrink those technologies down to residential application.

jk2014 | 09. Juni 2013

Have home battery swap too. Charge the battery off solar. Use primarily as home energy storage when not in the car. Swap if you need a quick charge in the car or vice versa if need more home energy. Also not sure how much wear and tear a home battery system puts on the battery but could help overall longevity as well.

All this just makes me think of how we will one day have mobile energy storage and production at the individual level. No longer will we need a central power production. The future is not about bigger, but about specific and efficient.

If batteries become smaller and more powerful at the same time, I can see a day we could produce enough energy to power our cars, house, etc, by just walking for a day. Take the battery off your back, plug it into your home and you've got enough stored power to run your central heat and water. Wild brained ideas, right? But tesla and solarcity seemed to create this type of thinking... What a different future than the dooms day mad max one I keep hearing about...

Brian H | 09. Juni 2013

Concentrated solar just substitutes mirror area for some of the panels. The area involved total is the same; TANSTAAFL.

jk2014 | 26. Juni 2013

Solarcity in partnership with Tesla Motors will offer a home battery storage package that will take customers off the grid for cheaper then current utility bill by 2015.

With most likely a few 100k contracts by then, this could be huge really fast... Makes scaling battery production a priority for both companies... Hmmm, wonder how that's going to happen?