Tuesday, May 1, 2012
SolarCity Files IPO: Will It Be The Solar Walmart?
The news that SolarCity (http://www.solarcity.com/) is moving forward with an IPO raises 2 questions: Is anyone making money in the hyper-competitive solar business? And could SolarCity be the solar Walmart, the company that achieves economies of scale in retail distributed solar?
Companies are making money in solar, but mainly on the solar development or project side of the industry, where the intense competition in solar manufacturing is driving down prices for materials used and sold by companiers like SolarCity. NRG and Warren Buffet are two examples of investors who have plunged into large, utility-scale solar projects that deploy much cheaper solar systems to provide electricity through power purchase agreements with utilities.
SolarCity, however, is the market leader on rooftop, distributed solar that is at the homes and businesses of its customers. It is targeting solar in service territories where the full electric rate--including distribution and transmission--is among the highest in the nation and so the solar payback period is shorter. Solar pricing is at grid parity--a price equal to the price of grid electricity--in about 200 utility service territories
Founded in 2006, SolarCity has completed or underway 30,000 solar projects in 14 states and pioneered the solar leasing model that is expanding the solar market . It has not had federal loan guarantees, but impressively has secured private financing for its projects from Bank of America and U.S. Bancorp.
Its goal is to be the Walmart of retail, distributed solar. Perhaps it can be. Indeed, one of SolarCity's business customers is Walmart for whom SolarCity has installed rooftop solar systems at its stores.
SolarCity has some unique qualities, but it enters the IPO market at a time of bearishness for clean energy investment. All that means this is an IPO worth watching and even possibly worth participating in.