Tag: "galkos construction"

08/01/13

  05:52:00 pm, by Jim Jenal - Founder & CEO   , 195 words  
Categories: Ranting, 2013

State of Solar 2013 Series Starts Tomorrow

The first half of the year is in the books which means that it is time for one of our perennial favorite posts - our analysis of the State of Solar in California based on the CSI data.  Here’s a teaser…

CSI dataWe will kick off the series tomorrow documenting our methodology for analyzing the CSI data, and identifying some key trends about the number of projects, the cost of those projects, and how project size influences project cost.

Then on Monday we will continue with an assessment of Who’s Hot and Who’s Not - manufacturers and installation companies alike.

That will invariably lead to our third - and most popular - installment on Tuesday about the Outliers and Oddities in the industry.  Will long time champs Galkos Construction and SolarCity continue to dominate this closely contested category - or will some unexpected player suddenly jump out of the data and into infamy?

It promises to be an informative - and irreverent - take on the State of Solar 2013.  You won’t want to miss it!

Oh, and if there is something you want us to include in our analysis, please mention it in the comments and we will try to work it in.

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09/06/12

  06:47:00 am, by Jim Jenal - Founder & CEO   , 2795 words  
Categories: All About Solar Power, Residential Solar, Ranting, 2012

Outliers & Oddities - State of SoCal Solar 2012 - Part 3

This is it - time to name names and find out which solar companies are the good, the bad, and - if not ugly, at least Outliers and Oddities!


In Part 1 of this series we laid out our data methodology and showed some of the general trends in the costs of solar power systems in Southern California Edison (SCE) territory for the first half of this year.  Part 2 built on that to determine Who was Hot and Who was Not - and of course, being identified as Not Hot is certain to generate a lot more consternation than the other way around!

Now in Part 3 we turn our attention to some curious things that we have found in the data: Outliers who are charging way beyond any reasonable amount compared to their peers, or taking interminably long to complete projects, and Oddities - curious trends that defy easy explanations but raise questions about the State of Solar in Southern California.

Outliers

Last year when we analyzed this data, we discovered that there was one company that really stood out for being a bad actor when it came to over-charging on solar power systems.  That company was Galkos Construction, coming in at a staggering $13.32/Watt compared to an average of $8.91/Watt, nearly 50% above the average.  (We also noted that HelioPower, Inc. was the lowest in our analysis, coming in at just $6.56/Watt or 27% below the average.)  What will we discover in this year’s data?

First a reminder of how this analysis works.  Our focus is on systems in the residential market segment since that is the bulk of sales and also where consumers are at greater risk of being pressured into a high-priced sale.  (If you are installing a 500kW solar farm and you don’t do your homework, we have somewhat less sympathy for your plight.)  Moreover, since the residential segment in the CSI data is limited to systems between 1 and 10kW, there is not as much size difference to skew the pricing data.  We excluded systems that were “delisted” so only completed or pending projects are counted.  We included, as we did last year, both cash sales and leased systems (although that data has gotten more interesting as we will see later) to capture as many data points as possible. That subset of our data accounts for 8,977 systems with an average system price of $7.23/Watt (CSI Rating).

Finally, since we really only wanted to look at the behavior of the biggest players, we limited our analysis to only those companies with over 500kW of residential projects in the data.  As a result, no company had fewer than 80 projects on our list, and the largest had nearly 1,800!  These are big players indeed, and they should be able to demand tremendous pricing for their components - but do they pass those savings on to their customers?  When we apply this restriction to the data, our sample size is reduced to 6,095 systems (68%) with an average system price of $7.38/Watt - roughly 2% higher than the overall average!  Here are our results:

Outliers - 2012The bulk of our companies here, 9 out of 15, come in below the overall average for this group.  And once again, our friends over at HelioPower came in with the lowest system price at just $5.85/Watt.  Nicely done, for the second year in a row!  (Full disclosure - while none of our projects were in SCE territory during this period, our system price for the first half of 2012 was just $5.33/Watt.)

True Outliers: Future Energy, American Solar Direct and Galkos Construction (Again!)

While down significantly from the stratospheric heights of last year, three companies continue to soar past the $10/Watt threshold: Future Energy Corporation, American Solar Direct, and just like last year, Galkos Construction, Inc.  Each of these companies is $3/Watt above the average for the residential market segment.  To what can we attribute these crazy prices?  Future Energy and Galkos use Enphase micro-inverters (but so do we, and our prices are approximately 1/2 of theirs) and in any event, American Solar Direct uses SMA exclusively, so inverter price is not driving these costs.  What about panel choices?  No insight there, either: Future Energy uses SunPower, but American Solar Direct uses REC and Galkos uses Sharp (and each uses that brand over 90% of the time).  And they each bought a lot of panels: Future Energy bought 3,091, American Solar Direct bought 6,329 and Galkos bought 7,759.  Surely that much purchasing power can demand tremendous cost reductions to these companies.  Equipment choices are simply not driving these prices.

Cost Caps?

The CSI program has talked about cost caps for a long time, and in the latest published CSI Handbook (from December 2011) we find this provision:

3.4.5 Limitations on Installed Cost

One of the goals of the CSI program is to support a reduction in PV system costs over time as defined by:

Total Project Cost ($)CEC-AC (Watts) = $/Watt

It is the intent of this program to make steps towards this goal. Projects applying and installing PV systems through this program should have their installed cost fall within a reasonable limit. The current average system cost of PV systems ranges from $7.36 to $8.41 per CEC-AC watt, fully installed. To ensure that the integrity of the program is maintained, the Program Administrators may require documentation for why system costs exceed the lower of either of the following:

  • $10.26/Watt; and/or
  • One standard deviations above the average cost per watt of all projects reaching Pending Payment Status within the last 12 months, whichever is less. (NOTE: As of 8/31/2011, the defined reasonable limit was $10.26 CEC-AC watt, but this value changes as costs decrease. The current limit is available at www.CaliforniaSolarStatistics.ca.gov)

Now this cost calculation is somewhere between the number we are using (which includes the design factor) and the nameplate cost (which is what solar companies typically report because it is the lowest and it also masks differences in equipment value).  What would happen if we were to re-jigger our cost values for our three Outliers to present their system costs as defined by the CSI Handbook’s Cost Cap section?  Here are the results:

Cost caps impact?

What do you know about that?  Future Energy’s average price is exactly at the limit stated in the CSI Handbook to avoid scrutiny by the Program Administrator!  What a coincidence!  To be sure, all three of these companies exceeded the $10.26 threshold: Future Energy (99 out of 171 times, 58%), American Solar Direct (68 out of 291, 23%), and Galkos (170 out of 482, 35%).

What to make of that?  For one thing, it shows that Cost Caps work - despite being dollars above the average cost of their peers, they each managed to at least have their average value remain under the cap.  For another, perhaps it would be useful if CSI published those companies that routinely exceed the Cost Cap in a given period?  If nothing else, it would help put consumers on notice in ways that they presently are not (unless, of course, they are reading this blog).

We would love to hear from Future Energy, American Solar Direct or Galkos, and we will be happy to print their explanations for these prices unedited, and in full.  (Of course, those responses are subject to further analysis.)

Not So Fast

Another type of outlier is the large solar company who signs a contract and then disappears for months on end while the customer waits, and waits, and waits (cue the Casablanca soundtrack).  For our same set of big time players, we decided to rank order them by the average time to go from the first filing of a rebate reservation request to the first completion date.  While there are lots of reasons for any one project to get delayed, for companies like these that install such a huge percentage of all systems, you would expect to see quick and efficient operations that deliver quality systems in short order.  Here is what we found:

Days to install - CSI/SCE 1H2012

(Wow - Do-it-Yourself’ers take the longest to get their systems built - who would have guessed?  Yet another reason why solar is not a DIY project!)

Now isn’t this interesting - Future Energy has the shortest time to install of all of these companies, taking roughly half the time to complete a project as its nearest competitor.  Maybe Future Energy customers are getting something for all of that extra money!  (Although a little research might reveal some cheaper, faster options…)

The average - which most of these companies cluster closely around - is still in excess of five months, far longer than most solar customers expect to wait.  But two companies - Petersen-Dean and SolarCity - have delays in excess of 7 months!  Perhaps being a huge company, like SolarCity, makes it harder to be responsive, but what is Petersen-Dean’s excuse?  They have 257 systems in this sample (compared to the 1,108 for SolarCity), not that many more than the 171 of our speediest company, Future Energy, and nowhere near the number of systems for Verengo which is actually doing better than the overall average at a delay of 134 days.

This got us to thinking - if we take the average number of days to complete as our benchmark, some companies will be working better and some worse than that average.  In other words, some companies are insuring that solar systems are installed faster, whereas others are, sadly, causing systems to be installed slower.  What is their cumulative impact?

To measure that, we came up with a new metric which we have dubbed the cumulative System-Years of Delay, or SYD (see Notes at end), which is the product of the total number of systems attributed to a company times the difference between the overall average time to complete and the time for this company, divided by 365. Companies that install faster than average under this metric will have a positive value, slower companies will be negative - thus the goal will be to have the largest value possible.  Think of this as whether a company is propelling the overall solar industry forward, or dragging it backward.  Here are our results (companies clustered around the average have been deleted for clarity):

Years of delayThis is a startling result - the two giants of the industry, Verengo and SolarCity, are at opposite ends of this scale!  Verengo, which has 1,791 systems in this subset, averaged 134 days to complete a project, 23 days better than the average for our major players.  Thus, it is propelling the installation of solar forward since it handles so many systems faster than average.  (Future Energy is way faster still, but has a small impact by comparison because it only installs a tiny fraction of the systems Verengo is handling.)  To be sure, Verengo’s 134 days is nothing to brag about, but in this crowd of relative slow-pokes, Verengo is clearly leading the way.

So what can we say about SolarCity?  Well, first, they are really slow - taking on average nearly two months (55 days) more than the overall average (of five months) to get a system installed.  (As with the fastest company comparison, Petersen-Dean takes substantially longer than SolarCity - 73 days worse than average compared to 55 - but they account for far fewer systems - 257 versus 1,108.)  But more importantly, SolarCity’s delays become a real setback for the overall industry given the large number of systems for which they are responsible.

Look at it this way: SolarCity, just in this tiny slice of data, representing just a fraction of their overall industry impact, is responsible for the installation of 1,108 systems representing a total capacity of 5.5 MW of residential solar.  Assuming an average of 5 solar hours per day, for every day that SolarCity delays installing these systems, 27.5 MWh of energy is not being produced.  Factoring in their 55 day delay beyond the average of their peers means that 1.5 GWh of energy was not produced, and instead, 498 additional tons of greenhouse gases were emitted (see Notes at end). SolarCity’s delays are bad for the solar industry, and bad for the environment.

Oddities

Which brings us to the Oddities section of this post.  One year ago we stirred a bit of controversy by observing that SolarCity’s system prices for leased systems were far higher than what they reported for cash sales.  We thought this was odd because there was no similar discrepancy in the data for the other large player in the leasing space, Verengo.  So naturally, we needed to revisit that analysis this year and see if that trend was continuing.

Our analysis last year tried to focus on the most recent projects in the data, and so restricted the data set to just include “pending” systems, eliminating those that were installed or delisted.  Last year, SolarCity charged $10.06/Watt for its 468 leased systems compared to Verengo which only charged $7.63/Watt for its 482 leased systems.

Here’s what this year’s data reveals:

Leasing - SolarCity vs Verengo

First some mundane observations: while Verengo has increased its number of pending systems from a year ago by roughly 45% (consistent with the overall growth in this data set from a year ago), SolarCity actually declined by roughly 24% and Verengo now has nearly twice the share of this segment as does SolarCity.

But of course the shocking data point is SolarCity’s cost per Watt - all the way down to $6.61, and now tied (exactly) with Verengo!  This is a remarkable development given that the overall downward trend in prices over the past year was far, far more modest than the precipitous drop reported by SolarCity.

We decided to investigate this a bit further.  In particular, if the decline in SolarCity’s pricing was simply that they were better able than most to take advantage of lower equipment prices, we would expect to see a gradual decrease over time from last year’s high to this year’s low.  To test that hypothesis, we went back to the overall data set and expanded our analysis to look at all California data (i.e., including PG&E and SDG&E data in our analysis).  In addition, because we needed to go back to 2011 data, we included completed projects (i.e., “installed” in the data) as well as pending projects.  We then aggregated them by month and calculated the month-by-month average system cost from January 2011 to June of 2012.  Here’s what the data disclosed:

Oddity - SolarCity's dramatic price reductionFor thirteen months, from January 2011 through January 2012, SolarCity’s system costs were remarkably stable - at or near $10/Watt.  But then something amazing happened and in the space of three short months, SolarCity slashed its prices from $9.74/Watt in January to just $6.60/Watt in April - a drop of more than a dollar a Watt per month!  Now our buying power is nothing compared to that of SolarCity, but we certainly didn’t see price declines anything like that!

And then we remembered something else that happened back in late Winter and early Spring (although the memory is a little fuzzy given that we haven’t heard anything more about it since).  From Bloomberg.com (April 9, 2012):

Elon Musk, who leads Tesla Motors Inc. (TSLA), said an initial public offering of SolarCity Corp. may occur this year after a review of accounting, with an IPO of Space Exploration Technologies Corp. probable in 2013.

Plans to sell shares in SolarCity, which leases rooftop solar-power systems, won’t advance until “additional clarity on the accounting” for those leases is provided by auditors and the U.S. Securities and Exchange Commission, Musk said in an April 5 interview. Bloomberg reported Feb. 1 that the San Mateo, California-based company was seeking an IPO as early as last month, citing three people with knowledge of the matter.

“There is this question of how do you account for something when it’s a lease,” Musk said. “Not all of them are structured in the same way. We want to just double-check with our auditors and the SEC before we file to make sure the accounting is correct.”

Rumor has it that the SolarCity IPO may have stalled over concerns by the SEC regarding those very accounting practices.  If the need to “clarify” its accounting - specifically the manner in which it calculates the fair market value of its leased systems - is what is driving down this pricing it begs the question:  Will SolarCity voluntarily revisit the accounting for all of its previously leased systems and refund the excess federal tax credits and depreciation that it has received based on what its present conduct seems to concede was an overstated valuation?  Time will tell.


Notes

System-Years Delay

The SYD formula in full looks like this:

formula for system-years of delay

 

Where CountX is the number of systems installed by Company X, AvgInstallDays is the overall average for this group of companies (157 days) and InstallDaysX represents the average number of days to complete an installation for Company X.

 

SolarCity’s Excess GHG Emissions

Excess greenhouse gas emissions attributable to SolarCity’s delay was calculated as follows:  We used the EPA’s eGrid Calculator to estimate the GHG emissions from SCE’s energy production.  That figure comes to 659.6 lbs/MWh.  We calculated in the article that SolarCity’s delay accounted for 1.5GWh (1.512 GWh to be precise,  or 1,512 MWh) of energy not produced by those solar systems during the delay period.  That works out to 997,315 lbs of GHG or 498 tons.

09/28/11

  02:07:00 pm, by Jim Jenal - Founder & CEO   , 391 words  
Categories: Solar Economics, SCE/CSI Rebates, Commercial Solar, Residential Solar

Cost Caps Coming to CSI

We have previously noted some pretty outlandish outliers in the cost of installing solar power systems in California, but now that is going to change. Under SB 585 (Kehoe D-39) that was just signed into law, the Public Utilities Commission (PUC) has 90 days to establish and impose cost caps on residential and non-residential solar installations for the California Solar Initiative (CSI). From our perspective that cannot come a moment too soon.

Senator Kehoe’s bill started out as an urgency measure to refund the CSI program which had exhausted its available funding for projects in PG&E and SDG&E territories.  The bill still does that, directing an additional $200 million into the program and that is a very good thing.  But what we like every bit as much is the amendment that was added in the State Assembly which provides for the following:

Within 90 days of the enactment of this act, the Public Utilities Commission shall establish and impose project cost caps for residential and nonresidential projects under the California Solar Initiative, based on national and state installed cost data.

We believe that this is an important, and long overdue consumer protection feature for CSI and we hope that other rebating entities such as LADWP and PWP will also adopt such caps.

Why is this so important?  Well, take a look again at this chart that we prepared from the CSI data for the first half of this year showing the reported installed costs for the largest solar installers in the CSI program:

The range here is striking, even shocking.  At the low end you see an installed cost of $6.56/Watt, ranging all the way up to an outlandish $13.32/Watt!  And that price is an average over hundreds of installations by Galkos Construction.  If the PUC were to establish a hard cap for residential installations of, say, $10/Watt and if that cap had been in place during the first half of the year, the customers of Galkos Construction would have saved $2.97 million - or on average, $7,618 each!

Wow!

The cap, of course, should be lower than $10/Watt.  We sincerely hope that the PUC will look closely at the abuses evident in the CSI data and put some teeth into this new law.  Only then will potential solar clients be protected from the predatory actions of the few outliers that needlessly inflate costs to pad their pockets.

09/06/11

  11:00:00 am, by Jim Jenal - Founder & CEO   , 1922 words  
Categories: Solar Economics, Solar Tax Incentives, SEIA, SCE, Residential Solar, 2011

The State of Solar California - Outliers and Oddities - UPDATED x2!

UPDATE x2 11/8 - Solar City’s Jonathan Bass adds his perspective on our reporting about Solar City - see his response in the comments.

UPDATE  9/30 - We just heard from Jonathan Bass at SolarCity.  Details at the end.
(Still no word from Galkos!)


Editor’s Note: We have now done an updated analysis showing the same data from 2012.  You can read our 2012 Outliers & Oddities here.


In the first two installments in this series (Part 1 and Part 2) we looked at the most recent data from the California Solar Initiative (CSI) covering the first half of 2011 in SCE’s service area. Using that data we identified trends in cost, equipment and system efficiency.  Along the way, we stumbled upon some Outliers and Oddities in the data that left us puzzled and disturbed.  In this post we name names, specifically Galkos Construction (aka GCI Energy) and SolarCity.

Before we explain to you why they are featured in this post, we would remind our readers of the Solar Bill of Rights created by the Solar Energy Industry Association (SEIA) in the Fall of 2009.  We wrote at some length about the Bill of Rights when it was introduced, but we want to highlight now what then we termed to be, “the most important right of all:”

8. Americans have the right, and should expect, the highest ethical treatment from the solar industry.

Beyond a shadow of a doubt, this is the most important Solar Right of all if we are to build an industry that is respected and trusted by consumers throughout this country. This should almost go without saying - and yet, saying it, and living it, is extremely important.

In our view, if we become aware of situations that don’t live up to that Right, we have an obligation to point them out so that our potential clients can make the most informed decisions possible. 
In honor of that principle we present today’s post.

Outliers: Galkos Construction

In looking at the data, from time-to-time a data point would jump right off the screen.  For example, examining all of the residential projects in our data - both “completed” and “pending” but excluding “delisted” - we find that the average installation cost in CSI Rating AC Watts is $8.43/Watt (in DC or nameplate Watts that average becomes $6.99).  As we noted in Part 1, that number has decreased over time and also decreases as system size increases.  Still, given that the residential sector (as designated in the CSI data) only consists of systems between 1 and 10 kW, you wouldn’t really expect significant price variation between installers over a six month period.

But you would be wrong.

Who Charges What?

Here is a chart of the Cost per Watt for the largest installation companies in the SCE service area (you can click on the chart to see it full size):

First, let us give credit where it is due.  The low end outlier is HelioPower, Inc., at $6.56/Watt, and they did it with an efficiency factor of 87% - second best of anyone on that chart. Nice.

But who is that way off in left field?  Coming in at a staggering $13.32/Watt - a full $1.40 higher than their nearest competitor and more than twice what HelioPower is charging - is Galkos Construction, Inc., also known as GCI Energy, out of Huntington Beach.  For that money, they must surely be offering only the most efficient and sophisticated technology, right?  Not so much.  To the contrary, the average installation efficiency for Galkos is only 84.9% - the second worst on the chart and well below the average of 86.11%.  In fact, 99% of the time Galkos appears to use Sharp panels - not exactly an exotic solar panel brand - and in particular the Sharp ND-224UC1 panel (66.5%). A quick Google search reveals that the Sharp ND-224UC1 can be purchased, at retail, for $2.65/Watt or less.  Given that Galkos handled 400 projects in this data set, it is hard to believe that their price for all of their equipment, particularly the Sharp panels, would not be heavily discounted.

Quality Counts

Quality, of course, is important, and the data does not reveal - though the Internet hints at - the quality of installations from Galkos.  Here is how the company describes its own product offerings (from the “Services” page of their website):

Solar by GCI [Galkos Construction, Inc.] Energy
GCI Energy is the largest solar company in Southern California with over 30,000 customers. So you get the most knowledgeable professionals, excellent customer service and a better price.

GCI Energy solar offers the highest efficiency solar panels on the market - those manufactured by Sharp. With Sharp Solar Panels, GCI Energy can tailor a solar panel installation to your specific needs and lifestyle, so you get maximum performance without a maximum investment.
(Emphasis added.)

Does Galkos actually have 30,000 solar customers?  Certainly not (nobody does).  Are they providing “a better price"?  It is not clear what their standard of comparison might be - but their price is not better than any of their major competitors in that chart.  And of course, the statement does not define what they mean by “the highest efficiency solar panels on the market,” but it seems unlikely that Sharp would make that claim.  Here’s one chart that concludes that they couldn’t (note the efficiency of the SunPower and Sanyo panels first, then search for Sharp).

All we can say in response is, caveat emptor.

Oddities - SolarCity

Now we turn to the Oddities section of this post.  Unlike the outliers, which were always of interest to us, we were not looking for the oddity we report here - it literally just jumped out at us.

Sold versus Leased

Question: What is the difference in reported cost between systems sold directly to the end customer and those that are leased (i.e., have a third-party owner in CSI parlance)?

The initial difference that we stumbled upon was so startling that we knew we needed to narrow our focus and control for as many variables as possible to isolate that one factor.  To achieve that end we restricted the data to those residential systems (i.e., between 1 and 10 kW) that were “pending” in the CSI/SCE data (thus, the newest proposed systems in the data which, based on our Part 1 analysis should mean the lowest cost systems). That way our project sample would be as homogenous as possible, eliminating cost variations based on system size and timing.

Given those restrictions, the top 5 installation companies in which the system is owned by a third party are: Verengo (482 systems), SolarCity (468), American Solar Direct (124), Sungevity (99), and HelioPower (63).  Of those five, only two also have direct sales projects pending: Verengo (7) and SolarCity (9).  Let’s see how they compare:

Lease impact on costs - SolarCity vs Verengo

What is going on here?  For Verengo, as the number of systems increases - which it does in going from sold systems to leased systems - their cost per Watt decreases - which is what we would expect.  But not so for SolarCity - even though they are leasing 50 times as many systems as they are selling, their cost for the leased systems went up - way up - as in up by $3.12/Watt!

(One possible explanation for this discrepancy would be that SolarCity uses much more expensive equipment in their leased systems than they do in the ones that are sold.  But they don’t.  On their sold systems, SolarCity always selected a Fronius inverter and their panel choices were split among Yingli (56%), Kyocera (33%) and Sharp (11%).  On their leased systems, SolarCity selected Fronius inverters 98% of the time and again split their panel choices among Yingli (68%), Kyocera (28%), and BP (3%)  with the remaining 1% scattered among Suntech, Sharp and Sanyo.  In other words, there is no significant difference in SolarCity’s equipment choices between sold and leased systems.)

Why Does this Matter?

Why does this significant cost differential matter, you might ask?  After all, customers aren’t paying that price - they are paying on a lease so the “cost” of the system doesn’t matter to them, all they care about are their lease payments.  True enough - unlike the case with our Outlier above, the end customer is not the victim here.

Recall, however, that for systems that are leased, the third-party owner - presumably SolarCity and its investors in this case - receives both the rebates and the tax benefits associated with the installation.  While the rebates are independent of the system cost (they are paid based on CSI Watts), not so for the tax benefits.  Commercial operators   (even though these are residential installations they are treated as commercial projects for tax purposes) are entitled to both a 30% tax credit as well as accelerated depreciation based on the cost of the system.

For the 468 systems that SolarCity is leasing, their total cost is $24,261,735 to install 2,412 kW.  If those installations were billed out at the $6.94/Watt they are charging for their sold systems, the installed cost would be $16,739,280 - a difference of $7,524,037.  At 30% for the federal tax credit, taxpayers are giving SolarCity an extra $2,257,211 - just from six months worth of installs in only the SCE service area.

Wow!

In the words of the 70’s pop song, How long has this been going on?

How Long Indeed

We decided to find out.

Although all of our analyses up until now in this series have been restricted to the first half of 2011, the actual data set contains entries from the inception of the CSI program.  Thus we can look at all of SolarCity’s installs going back to 2007 and compare them as we did for the 1H2011 pending installs above.  We will use the First Completed date to group these by year and analyze only “installed” - and not “pending” applications.  Here’s the data:

SolarCity Installed cost 2007-2011 - sold vs leased systems

The answer would appear to be, almost from the beginning!  Back in 2007, Solar city sold ten times as many systems as it leased.  By 2008 the ratio was down to 4-1 and ever since then leasing has been SolarCity’s predominant business strategy with the ratio of leased to sold now standing at nearly 16-1 in 2011.

Bottom Line

What, then, is the cumulative impact to SolarCity’s bottom line from this trend throughout California?  We aren’t in a position to calculate the depreciation benefits (since that is a function of the system owner’s tax bracket) but we can readily calculate the added value derived from the 30% federal tax credit due to this increased cost per Watt.

Here is our plot of the cumulative effect of those year-by-year increases:

SolarCity additional federal tax credits year-by-year and cumulative

After a slow start in 2007-08, SolarCity’s “model” really took off and has garnered the company an extra $3,000,000+ each year since 2009 (and, of course, 2011 is not yet over) for a total excess accumulation of $10,619,000.  Depending on the investors’ tax bracket, the depreciation could be worth nearly as much as the tax credit.

Double Wow!

UPDATE 9/30 - We have now heard from SolarCity

We just heard from Jonathan Bass, Director of Communications at SolarCity who took exception with our report, although he did concede that he could see how we could have reached the conclusions we published in light of the CSI data.  We encouraged him to please send us a written response in as much detail as he chose and we would publish it in its entirety.  While he agreed that SolarCity would be publishing its response, he did not commit to publishing the information here.

In any event, when we hear more we will update this post again.

What’s Next?

No doubt there is more that we could do with these revelations - but wouldn’t it be better for those with actual oversight obligations to examine this data as closely as we have and to take appropriate action?

As always, we welcome your comments - and if we hear from any of the folks named in this series we will be sure to update the appropriate post.

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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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