![]() ![]() Ratings agencies have generally given these instruments a BBB rating, currently yielding about 3.7%. SolarCity originated and sold off about $1 billion of these solar ABS since 2013. It all makes for a nice stream of cash, ripe for securitization into Asset Backed Securities. The solar company leased the panels to the homeowners, who agreed to pay for every Kwh of solar power collected from their own roof (including a price escalator of about 3% per year). Tax equity paid to put solar systems on thousands of residential roofs and got at least 30% back in the form of federal tax credits and subsidies (and maybe even accelerated depreciation!). The dominant way of going solar at the time was for a homeowner to lease the panels from the likes of SolarCity, plus enter into a Power Purchase Agreement. SolarCity and its rivals grew so rapidly from 2010-2015 because they were able to attract billions of dollars in “ tax equity” from banks and hedge funds. Meanwhile, keep an eye on the billions of dollars in asset-backed securities originated by the likes of SolarCity in recent years. Federal regulators are probing how Tesla and Sunrun report data on their growing rates of contract cancelations. The practice had been effective in generating contracts, but high-pressure sales tactics have drawn complaints. One of the first things Tesla did upon acquiring SolarCity was to end its practice of door-to-door sales. When margins deteriorate (or were never there at all), selling more just means you go broke faster. In a profitable business, when margins are squeezed you can push your sales force a little harder to make it up in volume. The coming of cheaper, more efficient systems means smaller contracts for the installers and fewer opportunities to pad margins. Equipment now contributes just 50 cents per watt to total average system cost of $3.50 per watt (installed). Berger marvels at the rapid gains in PV tech efficiency, at ever lower prices. He says Sunnova has survived and thrived by squeezing out costs and targeting higher margin customers. He says that relentless onslaught of technological innovation is why he never had any interest in getting Sunnova into the business of making components or even operating a fleet of installers. “It’s an inconvenient set of facts, but technology is moving,” says John Berger, CEO of Sunnova, a Houston-based solar company with 50,000 customers. Panel makers SolarWorld and Suniva both blame Chinese dumping of PV panels for their demise. Sungevity and OneRoof disappeared into bankruptcy. ![]() SunEdison and Abengoa went under last year. Recall that Solyndra burned through $500 million on its revolutionary design for a better solar panel before going belly up in 2012. A lot of other victims have followed. Dow recorded a $500 million loss in 2014 when it abandoned a silicon wafer factory it was building in Tennessee it discontinued Powerhouse last year. Dow Chemical launched its Powerhouse flexible solar shingle product in 2010 and told me at the time that they expected it to become a $1 billion-plus business. There’s a big risk in trying to introduce something in a revolutionary form factor, especially at twice the price. It’ll be the biggest solar panel factory in the western hemisphere. a $900 million factory built with $750 million in Empire State subsidies. It’s unlikely that Tesla’s glass tiles will be the silver bullet to turn its solar business around, but Musk looks determined to make them anyway - with mass production planned at Tesla’s Gigafactory 2 in Buffalo, N.Y. That’s dropped to 40% as smaller, more entrepreneurial solar installers have edged into the game. A couple years ago they had 60% of residential solar installs. It will still grow, but more of the growth is happening away from the big 3 installers of SolarCity, Vivint and Sunrun. Nationwide solar output has doubled since 2014 to 56,000 gigawatthours per year. ![]()
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