UPDATE #2 - 12/13/2012 - After delaying its IPO for failure to secure sufficient investors to fill its order book - both at the original target price of $13-15/share, or even at the reduced price of $10/share - SolarCity (Nasdaq symbol SCTY) finally went public today with a bit of a bang. Having priced at $8/share, SolarCity opened today at $9.25 and quickly rose to a day high of $12.70 before closing at $11.79 - a one-day increase of 47% over the IPO price. Trading was busy on 8.3 million shares.
Of course, even with that significant run-up, at $11.79 the stock remained 9% below the low end of the range originally forecast.
UPDATE - 12/11/2012 - On the eve of what was to have been SolarCity’s IPO, the initial offering has been postponed for at least one day. While still confronting a host of legal issues surrounding the valuation of its leased systems, SolarCity was reportedly struggling to fill the order book for the IPO at the price range it was seeking - between $13 and $15 per share.
Ending months of speculation, SolarCity on Friday, October 5, 2012, filed papers with the SEC for an initial public offering of stock. (The form S-1 and its 105 supporting exhibits can be found here.)
It will take us some time to plow through this extensive filing, but there are some excerpts from the section entitled, “Risks Related to Our Business” that are relevant in light of earlier posts about SolarCity on this blog, particularly here and here. To wit:
The Office of the Inspector General of the U.S. Department of Treasury has issued subpoenas to a number of significant participants in the rooftop solar energy installation industry, including us. The subpoena we received requires us to deliver certain documents in our possession relating to our participation in the U.S. Treasury grant program. These documents will be delivered to the Office of the Inspector General of the U.S. Department of Treasury, which is investigating the administration and implementation of the U.S. Treasury grant program.
In July 2012, we and other companies with significant market share, and other companies related to the solar industry, received subpoenas from the U.S. Department of Treasury’s Office of the Inspector General to deliver certain documents in our respective possession. In particular, our subpoena requested, among other things, documents dated, created, revised or referred to since January 1, 2007 that relate to our applications for U.S. Treasury grants or communications with certain other solar development companies or certain firms that appraise solar energy property for U.S. Treasury grant application purposes. The Inspector General is working with the Civil Division of the U.S. Department of Justice to investigate the administration and implementation of the U.S. Treasury grant program, including possible misrepresentations concerning the fair market value of the solar power systems submitted for grant under that program made in grant applications by companies in the solar industry, including us. We intend to cooperate fully with the Inspector General and the Department of Justice. We anticipate that at least six months will be required to gather all of the requested documents and provide them to the Inspector General, and at least another year following that for the Inspector General to conclude its review of the materials.
We are not aware of, and have not been made aware of, any specific allegations of misconduct or misrepresentation by us or our officers, directors or employees, and no such assertions have been made by the Inspector General or the Department of Justice. However, if at the conclusion of the investigation the Inspector General concludes that misrepresentations were made, the Department of Justice could decide to bring a civil action to recover amounts it believes were improperly paid to us. If it were successful in asserting this action, we could then be required to pay damages and penalties for any funds received based on such misrepresentations (which, in turn, could require us to make indemnity payments to certain of our fund investors). Such consequences could have a material adverse effect on our business, liquidity, financial condition and prospects. Additionally, the period of time necessary to resolve the investigation is uncertain, and this matter could require significant management and financial resources that could otherwise be devoted to the operation of our business.
The Internal Revenue Service recently notified us that it is conducting an income tax audit of two of our investment funds.
In October of 2012, we were notified that the Internal Revenue Service was commencing income tax audits of two of our investment funds which audit will include a review of the fair market value of the solar power systems submitted for grant under the 1603 Grant Program. If, at the conclusion of the audits currently being conducted, the Internal Revenue Service determines that the valuations were incorrect and that our investment funds received U.S. Treasury grants in excess of the amounts to which they were entitled, we could be subject to tax liabilities, including interest and penalties, and we could be required to make indemnity payments to the fund investors.
If the Internal Revenue Service or the U.S. Treasury Department makes additional determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our investment funds or to our fund investors and such determinations could have a material adverse effect on our business, financial condition and prospects.
We and our fund investors claim the Federal ITC or the U.S. Treasury grant in amounts based on the fair market value of our solar energy systems. We have obtained independent appraisals to support the fair market values we report for claiming Federal ITCs and U.S. Treasury grants. The Internal Revenue Service and the U.S. Treasury Department review these fair market values. With respect to U.S. Treasury grants, the U.S. Treasury Department reviews the reported fair market value in determining the amount initially awarded, and the Internal Revenue Service and the U.S. Treasury Department may also subsequently audit the fair market value and determine that amounts previously awarded must be repaid to the U.S. Treasury Department. Such audits of a small number of our investment funds are ongoing. With respect to Federal ITCs, the Internal Revenue Service may review the fair market value on audit and determine that the tax credits previously claimed must be reduced. If the fair market value is determined in either of these circumstances to be less than we reported, we may owe the fund or our fund investors an amount equal to this difference, plus any costs and expenses associated with a challenge to that valuation. The U.S. Treasury Department has determined in a small number of instances to award us U.S. Treasury grants for our solar energy systems at a materially lower value than we had established in our appraisals and, as a result, we have been required to pay our fund investors a true-up payment or contribute additional assets to the associated investment funds. (Emphasis added.)
For example, in the fourth quarter of 2011, we had discussions with representatives of the U.S. Treasury Department relating to U.S. Treasury grant applications for certain commercial solar energy systems submitted in the third and fourth quarters of 2011 and the appropriate U.S. Treasury grant valuation guidelines for such systems. We were unsuccessful in our attempts to have the U.S. Treasury Department reconsider its valuation for these systems, and while we maintained the accuracy of the contracted value to the investment fund, we elected at that time to receive the lower amounts communicated by the U.S. Treasury Department. (Emphasis added.)
Other U.S. Treasury grant applications have been accepted and the U.S. Treasury grant paid in full on the basis of valuations comparable to those projects as to which the U.S. Treasury has determined a significantly lower valuation than that claimed in our U.S. Treasury grant applications. The U.S. Department of Treasury issued valuation guidelines on June 30, 2011, and no grant applications that we have submitted at values below those guidelines have been reduced by the U.S. Treasury Department. If the Internal Revenue Service or the U.S. Treasury Department disagrees now or in the future, as a result of any pending or future audit, the outcome of the Department of Treasury Inspector General investigation or otherwise, with the fair market value of more of our solar energy systems that we have constructed or that we construct in the future, including any systems for which grants have already been paid, and determines we have claimed too high of a fair market value, it could have a material adverse effect on our business, financial condition and prospects.
For example, a hypothetical five percent downward adjustment in the fair market value in the approximately $325 million of U.S. Department of Treasury grant applications that we have submitted as of August 31, 2012 would obligate us to repay approximately $16 million to our fund investors. (Emphasis added.)
We will have more to say about this over time. In the meantime, we would love to hear your thoughts in the comments, so please, fire away!
In this intense election season, we are accustomed to seeing lots of polls tracking the day-to-day changes in the “horse race” of the political process. But while various candidates struggle to “break out” of the pack, solar energy is an overwhelming consensus winner with strong support from 92% of the electorate - and when was the last time that 92% of us agreed on anything? Given that tomorrow night’s debate turns on domestic issues, it will be interesting to see how this issue plays, if at all.
We base our observation on a poll that was recently conducted by Hart Research Associates (Hart) for the Solar Energy Industry Association (SEIA). (You can find the poll results here.) The Hart poll got responses online from 1,206 registered voters, including an oversample of so-called “swing” voters (people who did not indicate a strong or consistent partisan voting history). The margin of error was ±2.8%.
Support for solar among voters cuts across party lines. 98% of Democrats and 95% of Independents think it is very important or somewhat important for the U.S. to develop and use solar power - but even among Republicans, support was at a very impressive 84%. And voters think that energy issues should be a factor in this year’s Presidential election with 27% saying such issues are one of the most important while another 47% say they are very important.
Despite an aggressive and well-funded ad campaign to support the quaint notion of “clean coal", of all of the different energy sources surveyed, only coal is upside down on its favorability rating: 34% of the electorate has an unfavorable view of coal, compared to only 32% with a favorable opinion. Solar energy, on the other hand, is on the opposite end of the spectrum, with 85% having a favorable opinion and only a miniscule 4% unfavorable. Here are the overall results:
Interestingly, the three greenest energy sources are at the top of the list while the two dirtiest, coal and oil are at the bottom.
As nice as it is to be supported, perhaps a more pressing question for policy makers/candidates is this: Which, if any, of these forms of energy should the federal government support through tax subsidies? Once again, solar energy was the clear winner with a full 64% of all voters (67% among swing voters) supporting federal tax subsidies for solar. In contrast, only 8% overall support subsidies for coal (4% of swing voters) and just 13% for oil (9% among swing voters). Yet subsidies for the coal and oil industries dwarf those provided to all renewable energy sectors overall and solar in particular. Here’s the overall chart:
These results, if not surprising, are nevertheless gratifying, particularly in an election year. We can only hope that voters will determine where the candidates stand on support for all energy sources, particularly solar, and use that knowledge to inform their vote next month.
UPDATE - Read Part 2 of our series here: Who’s Hot and Who’s Not?
One year ago we wrote a three-part series analyzing six months worth of CSI data that turned out to be our most read blog posts ever. So back by popular demand, here is our analysis of the first half of 2012 CSI data in the SCE service area.
First a brief review of our methodology. We started by downloading the Working CSI data set dated August 22, 2012. (Here’s a link to the CSI Working Data download page, and here’s a link to the data set (8MB zip file) that we used for our analysis.) As we did a year ago, we limited our analysis to just the data from the SCE service area. To limit our time period to the first half of 2012 (equivalent of what we did last year), we took the latest of a series of milestone dates in the CSI data (from First Reservation Date to First Completed Date) and used that as our Status Date and limited that date to values from 1/1/2012 to 6/30/2012. Collectively, that accounted for 9,669 projects, an increase of 53% over the same period last year!
So that we can compare apples to apples, our analysis uses CSI AC Watts as the measure of system size (except where noted) instead of the more commonly reported DC or Nameplate Watts. Why did we do that? Well, not all 5kW Nameplate Watts systems are the same. Some systems use less efficient inverters whereas others have panels that have very poor temperature performance (as indicated by their PTC rating), and some sites are poorly oriented or have substantial shading. CSI AC Watts values take all of those factors into consideration - thereby giving a truer measure of the system’s actual performance.
Apart from the dramatic jump in the number of projects over the same period last year, how does the overall data for the first half of 2012 compare to that data from last year? Here’s what we found:
Even though the number of projects increased dramatically from the same time period last year, the potential installed capacity of the projects declined significantly. This may well reflect the expiration of the federal 1603 Treasury Grant program as it became harder to finance new commercial projects after the first of the year. Here’s how the averages changed from 2011 to 2012:
The average system size in the 2012 data dropped 46% from the same period in 2011. Likewise, rebate expenditures per Watt fell from $1.33 to $0.94, or 29%. At the same time, the system cost per Watt also declined, but far less dramatically, from $6.37 to $6.13/Watt. We will have more to say about system costs later.
Altogether, the data reflects a total of 519 different solar contractors, of which 213 (41%) were responsible for only one project.
One intriguing item we noted last year was the significant number of projects - a full 11% - that were categorized as “delisted” meaning that they had been cancelled for one reason or another. How did that number fare in our new data? It dropped significantly down to just 4.2% of all projects, 6.3% of the potential installed capacity.
Of course, projects can be cancelled for a host of reasons. Nevertheless, we decided to see if there were any companies that jumped out as having an unusually high rate of delisted projects. We listed all of the companies that had any projects flagged as delisted (a total of 113 different companies) and compared that to their total number of projects. We extracted those companies that had ten or more delisted projects and rank ordered them by the percentage of all projects that were delisted.
Here’s what we found:
Holy smokes, what is going on here? Either Remodel USA, Herca Solar and A1 Solar Power are really unlucky, or something about how they create projects would seem to be problematic. We will have more to say on this point in a subsequent post in this series.
Oh and a note to Do-It-Yourself’ers - you have a one in twelve chance of not completing your solar project. Maybe solar really is something better left to the pros!
We closed Part 1 last year by looking at how the size of a system drives down the cost, and we wondered if the same would hold true this year? To find out, we excluded delisted projects from our data and divided the remaining projects based on system size with one category being systems below 10kW and the other being between 10kW and 1MW. (Strangely, we had to exclude some real outliers from our “small” system category - can you believe it, we found systems priced at over $30/Watt? Again, much more to say about that in a subsequent post.)
Here’s our results for the small system category:
Our trend is still downward as system size gets larger, but the slope is not nearly as steep as it was in our corresponding graph last year. Costs start at $8.59/Watt for the smallest systems and decline to an average of $6.41/Watt for systems just under 10kW. That’s a rate of decline of $0.24/Watt per kilowatt of system size increase, in constrast to a rate of decline of $0.34 last year. Certainly as component costs decrease, their related economies of scale would likely flatten out and that is what this data appears to be showing.
Finally, then, let’s turn to the “big” systems - those between 10kW and 1MW - how did our system costs do in that group?
Again, another outlier as our highest system cost here is higher than it was a year ago - $16.50 vs $15.50/Watt. Overall, we continue to see the downward trend as system size increases, but again, not as pronounced as it was a year ago. This year, we see the average cost of a 100 kW system coming in just below $6/Watt whereas a year ago the 100 kW benchmark was closer to $6.80/Watt. So our trend line is lower, but flatter than a year ago.
Moreover, we see far few systems in the 500kW and up category compared to last year. Specifically, this year we have only 24 projects that crossed that threshold (10.98 MW total capacity), compared to 32 last year (21.6 MW). Bottom line - projects have gotten smaller and really large projects have dropped off substantially. Without the pull of those larger systems, it is not surprising that we are not seeing the same downward pressure on costs for larger systems.
That’s enough to get us started. Yet to come: whose equipment is hot and whose is not? Any significant new kids on the block (be they installers or products)? And who are our outliers this year? (Hint - you’ve already seen some of those names!) So stay tuned as we name names and follow the data wherever it may lead!
And of course, if you have thoughts on cuts of the data that you would like to see, please let us know in the comments.
While a meaningful national energy policy is nowhere to be found, California continues to lead the way, announcing that its three Investor Owned Utilities (IOUs) have reached their intermediate target of 20% energy from renewables in 2011. According to a Renewables Portfolio Standard (RPS) Status Report just released by the California Public Utilities Commission, Southern California Edison (SCE), San Diego Gas & Electric (SDG&E) and Pacific Gas & Electric each exceeded the 20% target for renewables in 2011. Specifically, SCE lead the way with 21.1% of its energy delivered coming from eligible renewable sources, followed by 20.8% for SDG&G and 20.1% for PG&E. Collectively, the three IOUs account for roughly 68% of the state’s electric retail sales. Unfortunately, the report does not provide a breakdown of those numbers by type of renewable energy source.
Most of the gains are the result of utility-scale renewable energy products, but customer-side renewable energy generation - such as that created through the California Solar Initiative (CSI) - has also played an important role in two ways:
Under the RPS, the IOUs must average 20% from 2011-2013, 25% from 2014-2016 and 33% by 2020.
Growth of renewables in California has been dramatic: between 2003 and 2011, 2,871 MW of renewable capacity came online, with over 300 MW coming online in the first half of 2012 alone. But future growth stands to be even more dramatic with more than 2,500 MW scheduled to come online before the end of the year! According to a report in Forbes, that is the equivalent at peak output to the electricity generated by five nuclear power plants - which is good news given the problems at San Onofre.
It has been nearly a year since we last wrote about PACE, or Property Assessed Clean Energy, a means by which an assessment against a parcel’s property tax is used to pay for Clean Energy improvements, including solar. At that time, PACE for residential properties had been dealt a mortal blow by Fannie Mae and Freddie Mac which refused to subordinate their loans to the PACE assessment. (Never mind that by lowering a property owner’s utility bills you made it far less likely that the owner would default on their loan. Wonder who benefited the most from Fannie and Freddie’s actions? Certainly not consumers.)
Residential customers are still out in the cold, but for non-residential property owners the situation, at least in LA County, is far more promising and this may be just what is needed to get commercial and non-profit building owners into the game. The basic idea is this: any property owner who pays a property tax bill - including non-profits like private schools - can participate. They hook up with a funder - Wells Fargo is actively participating, for example - and the County issues a bond to that funder in exchange for the proceeds to fund the project. The property owner then pays off the bond by a property tax assessment that “runs with the land” so it is not a personal obligation of the property owner.
Part of the beauty of this program is its flexibility. The funder and the property owner reach mutually agreeable terms for the project including interest rate and payback period. (Indeed, we see this as a great way for a SunCorp to assist a non-profit entity in going solar.) The County simply determines that the proposed project qualifies for the program and then acts as the bill collector.
There are requirements for participation, but they are not particularly onerous:
Notably, there are no program requirements regarding equity in the building (although the funder may impose some) or other financial hurdles. The program can finance up to 100% of the project cost, including engineering reports and permit fees. To qualify, the building must either be in the unincorporated areas of the County or in one of the 79 cities (some 90% of the County) that have approved the program.
The County is actively trying to get the word out to building owners throughout the region. They have launched a website, and will be offering an outreach meeting for interested contractors sometime in August (we will post the details when we have them). In the meantime, you can request more information by emailing them at: email@example.com.
«climate change» cpuc enphase «enphase energy» «feed-in tariff» fit gwp «jim jenal» ladwp «net metering» pg&e pwp «run on sun» sce seia «solar power» «solar rebates» solarcity usc «westridge school for girls»