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Why Solarcity Is Succeeding in a Difficult Solar Industry

technology review -- After a steady stream of bankruptcies, poor earnings reports, and canceled IPOs for clean-energy companies, this week Solarcity bucked that trend by announcing that it had filed the necessary paperwork with the U.S. Securities and Exchange Commission for an IPO.

The key difference between Solarcity and many other clean-energy startups is that it isn't trying to take on incumbents with new technology. It makes money by deploying existing solar technology with a novel approach to financing.

Solarcity designs, installs, and maintains solar-energy systems fitted to homeowners' roofs. Instead of asking for a big upfront payment, it leases the systems. As the panels produce power, surplus electricity is sold back to the local utility. Combined with the savings that come from using less

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Submitted May 04, 2012 By: aservant

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E-Squirrel Champion Author Orange County Posts:3,021 Points:823,240 Joined:Feb 2005	Message Posted: May 9, 2012 6:12:16 PM Ignore E-Squirrel Report Abuse honda0105 asserts: 'keep in mind, all of the manufacturing sectors are subsidized in China, so it is something you would see across the board.' That indeed seems to be the case for this technology doesn't it? As the article points out, even INSTALLATION here in the US requires subsidies to exist. The subsidies help non-profitable, non-viable companies to stay in business at the expense of other potentially successful businesses and alternative technologies, preventing their more widespread adoption. [Edited by: E-Squirrel at 5/9/2012 7:12:49 PM EST]
honda0105 Champion Author Tallahassee Posts:18,818 Points:1,636,245 Joined:Nov 2008	Message Posted: May 7, 2012 4:47:38 AM Ignore honda0105 Report Abuse keep in mind, all of the manufacturing sectors are subsidized in China, so it is something you would see across the board.
E-Squirrel Champion Author Orange County Posts:3,021 Points:823,240 Joined:Feb 2005	Message Posted: May 6, 2012 7:18:36 PM Ignore E-Squirrel Report Abuse honda0105 replies: "esquirrel: one reason is the fact that China is subsidizing its industries to the extent that they can undercut anyone's prices and still be in business." Yes, and my point is that EVEN if the company IS NOT IN THE SOLAR panel manufacturing business, they STILL can't manage in this business without subsidies.
honda0105 Champion Author Tallahassee Posts:18,818 Points:1,636,245 Joined:Nov 2008	Message Posted: May 6, 2012 7:23:30 AM Ignore honda0105 Report Abuse esquirrel: one reason is the fact that China is subsidizing its industries to the extent that they can undercut anyone's prices and still be in business. W/out China's subsidies to its industries, many more startups would succeed w/out government subsidies in this country.
E-Squirrel Champion Author Orange County Posts:3,021 Points:823,240 Joined:Feb 2005	Message Posted: May 5, 2012 3:33:29 PM Ignore E-Squirrel Report Abuse From the linked article above: "For one thing, while it doesn't compete with conventional silicon solar-panel manufacturers, it ultimately competes with conventional power plants, and it can only do that now because government subsidies offset some of the cost of solar-panel systems. Its dependence on state subsidies is the reason it doesn't operate in all 50 states. However, subsidies seem uncertain as governments look for ways to cut costs; in some places, such as California, subsidies are already declining." None of these companies can seem to make it unless they have a lifeline of taxpayer money. Even the best of them are entirely dependent upon subsidy.
Cheepo Champion Author Tampa Posts:9,989 Points:3,147,905 Joined:Apr 2003	Message Posted: May 4, 2012 4:09:45 PM Ignore Cheepo Report Abuse Still to much money!!!!!!
GatorGuy Champion Author Columbia Posts:2,284 Points:1,226,490 Joined:Jan 2009	Message Posted: May 4, 2012 12:37:54 PM Ignore GatorGuy Report Abuse But wait...how will they ever become profitable without Obama's intervention?!?
TustinDad Champion Author Orange County Posts:4,377 Points:915,560 Joined:Feb 2008	Message Posted: May 4, 2012 10:17:52 AM Ignore TustinDad Report Abuse Jeeputtputt wrote: "solarcity?????????" Cambodia?????????
TustinDad Champion Author Orange County Posts:4,377 Points:915,560 Joined:Feb 2008	Message Posted: May 4, 2012 10:15:37 AM Ignore TustinDad Report Abuse 357revo wrote: "The major thing that is keeping this company alive is Federal and State subsidies for solar panel installations. This isn't stated explicitly, but the fact that Solarcity doesn't operate in all 50 states [which is acknowledged in the article] is because some states either don't have subsidies, or don't have sufficiently lucrative subsidies to justify the capital investments. Drop the Federal subsidies, and this company will cease operations in all 50 states." How can they if they don't operate in 50 states? Make up your mind!
Wizrd03 Champion Author Illinois Posts:8,288 Points:1,659,060 Joined:Oct 2008	Message Posted: May 4, 2012 9:56:26 AM Ignore Wizrd03 Report Abuse Creative financing makes sense to homeowners. Who wants to fork out $20-$40,000 for a solar electric system to reduce your electric bill by a couple of hundred bucks a month and maybe make a few bucks back from selling electricity to the local utility. The payback period is in decades. Lease the system for a fixed monthly price and let the owner get the money from the utility. Your net cash flow will probably be better.
357revo Champion Author Pittsburgh Posts:18,292 Points:2,411,310 Joined:Sep 2006	Message Posted: May 4, 2012 9:53:59 AM Ignore 357revo Report Abuse The major thing that is keeping this company alive is Federal and State subsidies for solar panel installations. This isn't stated explicitly, but the fact that Solarcity doesn't operate in all 50 states [which is acknowledged in the article] is because some states either don't have subsidies, or don't have sufficiently lucrative subsidies to justify the capital investments. Drop the Federal subsidies, and this company will cease operations in all 50 states. Just another industry living off the taxpayer dollar. Take away the government teat and they go belly up, saddling the taxpayers with cleaning up the mess they leave. Solyndra abandoned their plants, and neglected to do the necessary hazardous waste cleanup.
BudsterMO Champion Author Kansas City Posts:3,845 Points:730,655 Joined:Aug 2009	Message Posted: May 4, 2012 9:48:54 AM Ignore BudsterMO Report Abuse Poor solar, if it isn't the Chinese with their .75 cents an hour labor under cutting American made panel makers its shrinking tax breaks because people are out of work and not paying taxes. Solar has always been good but not quite good enough to take a commanding lead in the residential energy market. Unfortunately the Power Companies have turned into Wall Street bankers and think of nothing but themselves and forgotten their customers.
sciotosix Champion Author Dayton Posts:2,884 Points:692,850 Joined:Apr 2011	Message Posted: May 4, 2012 9:47:37 AM Ignore sciotosix Report Abuse Good - they have found a way to make it work for them.
CapriceWagon Champion Author Washington Posts:1,009 Points:502,870 Joined:Feb 2008	Message Posted: May 4, 2012 9:45:03 AM Ignore CapriceWagon Report Abuse It's good the price of solar panels is coming down, but they still cost too much to be a clear winner to invest in
shari128 All-Star Author Iowa Posts:573 Points:878,665 Joined:Jun 2010	Message Posted: May 4, 2012 9:37:45 AM Ignore shari128 Report Abuse That sounds great if people like what's going on & like the prices. Maybe that would help in other states also.
doctorindyj Champion Author Santa Fe Posts:3,538 Points:864,310 Joined:Nov 2009	Message Posted: May 4, 2012 9:35:15 AM Ignore doctorindyj Report Abuse That's the way it should work. Still be careful about just throwing money at something that just sounds good. That's what happened in the dot.com bubble. Also I'm not sure about the leasing part. If it goes on my home I think I would rather just outright buy. I wouldn't want repo men coming in the middle of the night to tear up my house.
DutchTreatMI Champion Author Grand Rapids Posts:3,441 Points:778,190 Joined:Mar 2011	Message Posted: May 4, 2012 9:33:50 AM Ignore DutchTreatMI Report Abuse It sounds like a interesting concept.If they can show that it is good for consumers as well as their company; it could be a win win situation.
Tutootin Champion Author Toronto Posts:10,256 Points:3,104,155 Joined:Jun 2004	Message Posted: May 4, 2012 9:33:19 AM Ignore Tutootin Report Abuse BlueVanGroup, Great post!!!!
VernonOR Champion Author Oregon Posts:3,013 Points:758,005 Joined:Aug 2010	Message Posted: May 4, 2012 9:30:11 AM Ignore VernonOR Report Abuse They must have happy customers or they would not be in business.
ted4636 Champion Author Cleveland Posts:3,624 Points:1,664,385 Joined:Jun 2007	Message Posted: May 4, 2012 9:26:14 AM Ignore ted4636 Report Abuse great!
passin_gas2011 All-Star Author Ohio Posts:750 Points:145,070 Joined:Sep 2011	Message Posted: May 4, 2012 9:26:06 AM Ignore passin_gas2011 Report Abuse well...ok
techque Champion Author St. Louis Posts:8,790 Points:2,443,655 Joined:Apr 2005	Message Posted: May 4, 2012 9:25:17 AM Ignore techque Report Abuse Combined with the savings that come from using less power from the grid, this will typically reduce the homeowner's electric bill by enough to offset the lease payments. " so breaking even is the best that they can do ??
Gas_Eyes Champion Author Dallas Posts:2,812 Points:671,585 Joined:Mar 2011	Message Posted: May 4, 2012 9:24:52 AM Ignore Gas_Eyes Report Abuse This needs to be checked out whether the economics works for the home owner.
Sneakers55 Champion Author Houston Posts:51,829 Points:2,168,400 Joined:Nov 2005	Message Posted: May 4, 2012 9:24:06 AM Ignore Sneakers55 Report Abuse On May 4, 2012 10:08:54 AM, JCS wrote: >Free enterprise with tax subsidies! No, these people do things the old fashioned way with venture capitalists.
bluebird1 Champion Author Toronto Posts:15,868 Points:3,133,875 Joined:May 2004	Message Posted: May 4, 2012 9:23:01 AM Ignore bluebird1 Report Abuse did gascapade read at least to 2'nd paragraph...it doesn't deal with new techno. but rather leases (novel financing - sounds shady) existing tech. to homeowners that probably can't afford it anyway. An IPO doesn't mean co. is healthy...just that its weaknesses are not public yet!!! Wait till it gets the public funding & homeowner customers start cancelling or defaulting.
fatboy97 Champion Author Twin Cities Posts:2,614 Points:1,733,925 Joined:Aug 2007	Message Posted: May 4, 2012 9:22:00 AM Ignore fatboy97 Report Abuse I'm sure they could get Billions from Obama... just ask, or look like you are going under and Obama will just give you money!!!
Harry813 Champion Author Iowa Posts:3,135 Points:688,365 Joined:Jul 2011	Message Posted: May 4, 2012 9:21:43 AM Ignore Harry813 Report Abuse I wish them the best of luck!
w4kh Champion Author Tennessee Posts:11,805 Points:2,255,715 Joined:May 2004	Message Posted: May 4, 2012 9:21:26 AM Ignore w4kh Report Abuse If I had Solarcity install solar panels with enough capacity to run the entire house and make a profit by selling the excess to the utilities, I'd expect no electric bill, and no lease payment due to energy sales... sweet deal!
mikerroy Champion Author Albuquerque Posts:2,691 Points:747,175 Joined:May 2005	Message Posted: May 4, 2012 9:20:34 AM Ignore mikerroy Report Abuse Good news.
pulpwood Champion Author Mississippi Posts:7,379 Points:1,860,855 Joined:Sep 2006	Message Posted: May 4, 2012 9:20:02 AM Ignore pulpwood Report Abuse good for them.
geezrtek Champion Author Michigan Posts:2,048 Points:449,760 Joined:Apr 2011	Message Posted: May 4, 2012 9:19:30 AM Ignore geezrtek Report Abuse Long term money maker - capitalism at work.
Gascapade Champion Author Fort Worth Posts:3,147 Points:500,710 Joined:Mar 2009	Message Posted: May 4, 2012 9:19:15 AM Ignore Gascapade Report Abuse All new technology has weak players fall by the wayside and strong players that eventually succeed, despite the utterly absurd chatter.....
LQQKGAS Champion Author Phoenix Posts:2,764 Points:1,220,830 Joined:Oct 2009	Message Posted: May 4, 2012 9:19:10 AM Ignore LQQKGAS Report Abuse Maybe they have their eye on a Chinese factory.
Diesel_Ram Champion Author Dallas Posts:6,634 Points:1,545,125 Joined:Jan 2009	Message Posted: May 4, 2012 9:17:47 AM Ignore Diesel_Ram Report Abuse But they wouldn't be able to stand on their own feet if cut loose.
rhail2 Champion Author Kentucky Posts:1,452 Points:287,485 Joined:Apr 2011	Message Posted: May 4, 2012 9:17:34 AM Ignore rhail2 Report Abuse ok
WebGabe Champion Author Pennsylvania Posts:2,505 Points:523,345 Joined:Jun 2007	Message Posted: May 4, 2012 9:17:21 AM Ignore WebGabe Report Abuse Hmm.
tobasco Champion Author Los Angeles Posts:7,376 Points:2,130,835 Joined:Mar 2004	Message Posted: May 4, 2012 9:16:55 AM Ignore tobasco Report Abuse But they still cannot profit without government subsidies. When these dry up, then what?
naw62 Champion Author Maine Posts:9,567 Points:2,243,640 Joined:Sep 2006	Message Posted: May 4, 2012 9:16:44 AM Ignore naw62 Report Abuse Don't think so
ED6 Champion Author Riverside Posts:9,589 Points:1,871,965 Joined:Jul 2007	Message Posted: May 4, 2012 9:15:16 AM Ignore ED6 Report Abuse Can,t afford it.
BlueVanGroup Champion Author Colorado Posts:7,341 Points:1,555,120 Joined:May 2008	Message Posted: May 4, 2012 9:15:05 AM Ignore BlueVanGroup Report Abuse Why Solarcity is succeeding: they operate like a business, not a sink-hole for Obama bailouts to be laundered back into campaign contributions.
INBwana Champion Author Indiana Posts:5,702 Points:722,710 Joined:Apr 2011	Message Posted: May 4, 2012 9:12:56 AM Ignore INBwana Report Abuse Sounds like they want some of the tax payers dollars from the Obozzo Administration.
sramroop Champion Author Birmingham Posts:3,437 Points:765,905 Joined:Jul 2010	Message Posted: May 4, 2012 9:12:32 AM Ignore sramroop Report Abuse Okay.....
beohbeNJ Champion Author New Jersey Posts:2,161 Points:557,085 Joined:Sep 2011	Message Posted: May 4, 2012 9:12:26 AM Ignore beohbeNJ Report Abuse I hope it works.
Hypersonic All-Star Author Maryland Posts:980 Points:871,175 Joined:Aug 2008	Message Posted: May 4, 2012 9:12:02 AM Ignore Hypersonic Report Abuse Just pump in more solar energy into the national grid. We need more clean energy
LQQKGAS Champion Author Phoenix Posts:2,764 Points:1,220,830 Joined:Oct 2009	Message Posted: May 4, 2012 9:10:53 AM Ignore LQQKGAS Report Abuse Conversion to solar would be more appealing with a lifetime warranty. If the company can stay in business for a lifetime.
ItsMorph Champion Author Grand Rapids Posts:33,653 Points:3,212,075 Joined:Mar 2004	Message Posted: May 4, 2012 9:10:32 AM Ignore ItsMorph Report Abuse Good for them.
Jeeputtputt Champion Author Ohio Posts:3,002 Points:677,465 Joined:Aug 2009	Message Posted: May 4, 2012 9:09:11 AM Ignore Jeeputtputt Report Abuse solarcity?????????
esquared Champion Author Oklahoma City Posts:8,197 Points:1,995,860 Joined:Jan 2006	Message Posted: May 4, 2012 9:09:03 AM Ignore esquared Report Abuse Just make sure the power grid is up to snuff.
JCS Champion Author Twin Cities Posts:4,144 Points:1,338,640 Joined:Apr 2002	Message Posted: May 4, 2012 9:08:54 AM Ignore JCS Report Abuse Free enterprise with tax subsidies!
Insuremn Champion Author Twin Cities Posts:5,087 Points:1,057,435 Joined:May 2010	Message Posted: May 4, 2012 9:08:26 AM Ignore Insuremn Report Abuse Ok.