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SolarCity didn’t invent solar panel, but it invented something more important (slate.com)
79 points by prostoalex on Aug 2, 2015 | hide | past | web | favorite | 48 comments

Holy hell is this a puff piece. Don't get me wrong, I'm a huge fan of SolarCity, but this story is written as if they invented the solar boom that's happening now.

Three major factors contributed to making solar as viable as it is now, none of which Solar City invented (but it is executing on them better).

1. Germany basically subsidizing China (and others) to build the massive solar panel production pipeline it has now that are producing ridiculously cheap panels[1].

2. Financial innovation to allow consumers and installers to pay for panels over time (PPA, leases, loans, etc.). These were originally pioneered by SunEdison[2], and the industry has been innovating on them since (including SolarCity with its MyPower Loan).

3. The California Solar Initiative[3] and Department of Energy's Sunshot Initiative[4]. Both were incredibly well designed to gradually wean solar off of subsidies and foster innovation through strategic grants, and they have worked incredibly well at teaching the solar industry to stand on its own two feet. We are well on our way to $1/watt[5].

SolarCity has executed incredibly well in this industry, so they definitely deserve tons of credit for installing so much solar. But it's a disservice to the rest of the companies, governments, and financiers to say they invented the recent growth. Everyone, including SolarCity, has come together to build a mature and exponentially growing industry that was 1 out of every 78 jobs last year.

[1]: http://qz.com/41166/how-germanys-energy-transformation-has-t...

[2]: http://archive.onearth.org/article/selling-the-sun

[3]: http://www.gosolarcalifornia.ca.gov/csi/index.php

[4]: http://energy.gov/eere/sunshot/sunshot-initiative

[5]: http://cleantechnica.com/2015/07/10/price-solar-hits-record-...

Fictional myth building around Elon Musk is a recurring activity.For example, the hyperloop:

"Two weeks before his Hyperloop announcement, Musk quietly met with the founder of ET3, an even-faster, already patented[since 1999] tube transport system."[1].

That's not to say Elon didn't help the hyperloop - he helped greatly by exciting the public's and investors imagination. But he didn't invent the thing.


"Well I say you are the messiah, and I should know, I've followed a few."

I'd say Elon's learned a lesson from Nikola Tesla. If a genuinely good tech company is also able to market itself really well, I'm not going to complain. I'm going to invest.

Elon Musk simply knows how to advertise for his companies and how to secure enough funding. Neither SolarCity nor Tesla nor SpaceX nor the hyperloop are based on any technological breakthrough. It's just enough money for engineering, right timing and good business strategy.

It was very puffy. Didn't get to the point until the 8th paragraph.

I'm looking for socially responsible investments. Quite hard. What do you think of SCTY (SolarCity) in this regard? Overpriced from overhype, or a decent bet given their execution? I'm ok with trading off increased risk or lower returns for doing (investing in) the right thing.

Why not just invest in an index like one of the Dow Jones sustainability indices? You don't have to bet to do the right thing.

My recommendation is to stay away. There is massive short interest in SCTY -- 39% of the float. What do you know that the professionals don't?

From Wikipedia: In 2008, SolarCity introduced a new solar lease option for homeowners that significantly reduces or eliminates the upfront cost of installing solar power.

Several companies were offering Solar lease in 2007.

The article seem to imply that SolarCity invented Solar Leasing which is inaccurate.

It looks like that was added in 2008[1] by an anonymous editor likely affiliated with SolarCity[2]. This is par for the course for a Wikipedia article about an operating business.

[1] https://en.wikipedia.org/w/index.php?title=SolarCity&type=re...

[2] https://en.wikipedia.org/wiki/Special:Contributions/UVHaight

Five editors with Solar City only editing interests have edited that article, including one called "AvalonPRlosangeles". I put a notice on Wikipedia's conflict of interest noticeboard, which will start the process by which promotional edits are dealt with.

"Mickey D's first introduced a lobster roll — then called the "McLobster" — nationally in 1993" [1]

IMO, no one reads that and assumes that McDs invented the lobster roll. Why then would someone read the Wikipedia quote and assume Solar City was first or assume that's what the wikipedia quote was implying? That was when Solar City first introduced their new product: a lease.

1 - http://www.nydailynews.com/life-style/eats/mcdonald-start-se...

Be that as it may, leasing vs buying is always bad, IMO. We just installed our PV system in SoCal - I get the rebate, I own the system, when selling the home eventually the new owner knows what he/she is getting and isn't encumbered by the lease.... However you slice it, biting the bullet and buying your own PV system is way way better than leasing it.

Maybe there are cases where leasing makes sense...but those are few and far between...or maybe SolarCity counts on people being uninformed/clueless, which is why this 'lease' model works. IMHO, it's total ripoff.

IIRC the argument for the lease is not having money up front, having someone else bear the cost of installing PV, and getting a "free" discount on your PG&E bill in exchange for a monthly payment.

I've always preferred to buy vs. lease rationalizing that I'm taking the profit away from the middle-man for myself. And I'm interested in solar, but I've been hesitant to contact any solar installation outfit because I fear the installer's sales pitches, confusing contracts, phone calls, etc. Can I ask ballpark figure what it costs to outright purchase panels for a typical house? I realize that there are lots of variables such as house orientation, roof size, electric usage, etc.

The guy who did it for me is one of my best friends and he's been at it for a few years - he's been in sales overall for 20+ years, but lately he's been doing PV installations. He's fully licensed and bonded in CA. If you are in the SoCal area, I can send you to him for a friendly rate and I am 99% certain he will beat any other quote you get. Mine was 18k for a 5k system, using Solarworld's Sumodule Protect ... Everyone else quoted me higher.

Post a (disposable) email address where I can reach you with his info if you're in SoCal.

Thanks for the $ info, but I'm in the Denver area. We get lots of sun too!

They were doing that at least 5 years before that

Credit is hardly a new innovation.

Big deal. They introduced the what is now called the "Financialization" of the solar panel. They weren't even the first to do this. https://en.wikipedia.org/wiki/Financialization You can do this to almost anything, here's a goofy example. I hate tying my shoelaces and they always come undone, but I can't justify spending $70 on Velcro shoes because of personal preference: basically I'd rather deal with the annoyances of tying my shoe then to fork out $70 for Velcro shoes at the moment. But, Wal-Mart sells a low quality Velcro tennis shoe for $10. The problem is it only lasts about 6-8 weeks before the it falls apart. But by converting the $10 shoe into a subscription service at $5 a month, a company can turn a shoe into financial instrument, and poof, magically it matches my lower price point and I can justify a $5 subscription instead of a $70 sale. So, for $5 a month, or $60 a year, I will receive replacement shoes in the mail every eight weeks. Like I said, that was a goofy example. Replace shoes with solar panels and subscription with a lease agreement.

Yeah, I don't really understand, "Financialization" of solar pannels has always been quite obvious (because it's an expensive and long term product) and almost every solar company has always proposed some options for that, I has been there since the birth of the industry.

California plans to change to "time-of-use" pricing of electricity [1]. How will that affect the savings currently seen by folks who lease from SolarCity and other providers?

[1] http://www.usatoday.com/story/news/nation/2015/05/20/califor...

There's a lot of negativity around this piece usually in the form of "some other company had a lease program" etc. The author's main point to me was that SolarCity is executing best across a wide range of areas to bring solar to the masses and growing TAM via new markets etc. Pointing out they weren't the first with X is like poo poohing MSFT in the 90's because Apple had a GUI first.

I am interested in what is going to happen to the housing market. These systems typically have a 20 year contract. If the house is sold before that, then the purchaser has to assume the contract and the solar system. Those contracts could be extremely undesirable if the energy rates change a lot, better panels come out, financing/subsidies differs, it is better to use solar for hot water instead of electricity, battery storage turns out better, or a whole host of other scenarios.

If you were looking to buy a house, and it was 7 years into a 20 year solar contract (hence locking in the rates/financing of 7 years ago), wouldn't you want it either removed so you can put in something better, or be compensated for taking on such obligations?

I can't find out how often houses are sold in California, but it seems like ~7 years is normal.

Yeah I have a small investment in SolarCity and I keep meaning to find out how they handle this situation. Imagine in 5 years some stories coming out regarding home owners having trouble selling (or losing value on) homes they equipped under a solar loan. That would likely affect future sign-ups.

Anybody know how these companies continue to get money from investors? SolarCity, Tesla, Sun Edison lose money year after year. None of them are profitable. And they won't be for years. I guess the thinking is that once, or if, they get profitable they will benefit from being the established players.

Yeah, it's called a startup. Amazon has similarly avoided making profits while it can roll money back into expanding its dominance. The key is to articulate and stick to a long-term plan.

WRT SolarCity, and solar generally, you spend something like $2,000 (haven't looked it up) to manufacture a panel that generates a kilowatt at peak, you wire it up, and you generate power (and revenue) every sunny afternoon for the next 25 years. "The thinking" -- or as I prefer to call it, "the physics" -- is that you create value over time.

To quote Schlock Mercenary:

> "Your kind began as self-repairing distributed storage systems for our supercomputers. [...] No, I didn't create you. Engineers did.

> I created something far more powerful... The marketing campaign that made you profitable."

The processes mentioned still sorta basic but I think it's always useful to point out that innovation extends beyond tech.

Also, I wonder where any of this (solar city, spacex and tesla) would be without government help?

1) Government help seems to be a factor, but not a guarantee of success. Solyndra, A123 and Fisker Automotive all were recipient of government loans or grants, yet for various reasons are not around today.

2) This comes up in libertarian circles frequently, and is usually meant as deriding comment, but it's important to keep in mind that all energy business has government involvement in some ways. Nuclear and hydro are frequently government-owned, coal was subsidized back in the days when it got its start, there are natural monopolies involved in grid and energy distribution. Solar, however, enables such a great level of autonomy, that it might just be the last sector where government and private interests are intertwined.

Also, I wonder where any of this (solar city, spacex and tesla) would be without government help

Has any world-changing industry gotten anywhere without government help?

Many world-changing industries have not needed $10^8 loans or $5,000 per-unit consumer subsidies to take off.

I'm not arguing (here, at least) that those are bad ideas, just that there's a broad spectrum in what constitutes government "help".

>Many world-changing industries have not needed $10^8 loans or $5,000 per-unit consumer subsidies to take off.

Industries such as what?

If you don't throw subsidies at key industries (energy, automotive, aerospace, computers), some other countries will, and those countries will inevitably come to dominate.

Most countries that do this might try to hide it, but they still do it.

The typical home PC was not bought with a tax credit.

If government-directed industrial policy were the deciding factor in a sector's success, we'd all be in awe of the massive, globally dominant Japanese software industry, or the French Minitel business.

>The typical home PC was not bought with a tax credit.

A tax credit isn't the only way to give a subsidy. In the case of the microelectronics industry, much like aerospace, subsidies were (and still are) supplied via enormous levels of government spending on military/space technologies - all the way from the Manhattan project, to defense funded Bell labs projects, to the space race.

No NASA and no ARPA and no Bell labs = no PC.

>If government-directed industrial policy were the deciding factor in a sector's success, we'd all be in awe of the massive, globally dominant Japanese software industry

No, we'd be in awe of the massive, globally dominant Japanese automotive industry.

Oh wait...

>or the French Minitel business.

Minitel may very well have been the dominant 'internet' today had it been an open technology like Arpanet. The technology landscape of the time is littered with the corpses of companies who tried to own the Internet.

I think if you look at anything on the scale of what Musk is doing, then you'd be hard pressed to find many for whom $100,000,000 isn't a drop in the bucket. Aerospace? Energy? Transportation? All of these have had extraordinary subsidies in terms of loans, grants, tax breaks, etc.

Did you have something specific in mind?

Musk has said Tesla didn't need the government money, it was just used as a cash buffer (which of course was repaid early with interest). As for SpaceX, they've been profitable for 7+ years and NASA is a client so not sure. As for Solar City unsure, but government money doesn't make a business succeed. No matter how much. (Solyndra) c

Didn't they almost go out of business completely due to a cash shortage, I thought the govt loan was instrumental in keeping that from happening. That seems quite different than a "cash buffer".

They probably would not have taken the risks that put them in that situation if they didn't have that buffer.

In other words, the buffer allowed them to be less risk-averse, and accelerated their growth.

I don't believe this is true, can you provide a source? Tesla was running out of cash at the end of 2008 and private investors saved them. The government loan was in early 2010. I don't believe that there is any evidence that Tesla was running out of cash after the 2008 private investment.

Federal Credits are crucial for SolarCity. Most of the SolarCity customers do not own their Solar plants and SolarCity quotes a "very high" price if any one asks for a SolarPV to own.

> "SolarCity quotes a "very high" price if any one asks for a SolarPV to own"

My rooftop solar (I believe it'll be ~6kw; installation is soon) is around $20,000 to own outright, which includes 30 years of maintenance, whether or not I pay it off early. Once it's paid, it's mine.

That's actually not a "very high" price compared to decades of electricity, particularly not once you include the federal tax credit (30% of the system price). So you're right that the federal tax credit is a big deal, but I wouldn't have described the system as a "very high" price (it's around the same amount as the average "minor" kitchen remodel.)

EDIT: the big deal with the federal tax credit is that it can be used as a down payment, which makes the overall system payments begin at a lower price than grid electricity rather than a slightly higher price. This means monetary savings is immediate.

In 2013, for 10.5KW plant I was quoted $40K+ and I ended up with 20 year leasing (paying entire amount upfront) for a notch less than $10K. Even adding all the credits the ownership would have cost me 25K+. That is a huge difference.

Of course the numbers vary a bit by state.

So California has a capacity factor of about 17.5% as far as I can find, and a residential cost per kwh of 17c roughly. Considering that, a 10.5KW system saves you $2.65k per year, that is if you use that much energy, if not you sell some at a slightly lower feed in tariff than the 17c retail rate.

That's pretty sweet. It kind of boggles my mind why this stuff isn't more popular...

For example, imagine instead of using the $25k to cover your entire electricity budget (let's assume it's $2.5k a year) for decades to come, you earmarked it to be invested in a different project, with the returns going towards paying the utility bill.

Had you invested the same $25k and got a typical long-term average stock return of 7%, you'd net $1.75k every year, assuming your utility bill was say $2500 and it was 100% covered by your $25k, 10.5KW system, you'd be short $750 on the first year compared to having put that money into a solar installation.

Which would mean it'd have to be made up, so you reduce the $25k stock investment by $750, added to the $1.75k stock return, to pay for your annual bill, and go into year two. Same story for year two, only now instead of making 7% on $25k, you make it on $24.25k, and so your return drops from $1.75k to $1.7k. As the years go on, your $25k cash becomes smaller and smaller, and by year 17 it has evaporated entirely, and you start the bear the full cost of paying $2.5k a year to your utility, without any equity or investment or $25k cash left.

Instead, the solar installation of $25k probably still has $10k of equity locked up in the value of your home, and is still generating about 85-90% of your annual bill two decades in.

Not to mention electricity prices have gone up every decade (not necessarily in real terms, but in nominal terms still), meaning your 10 KW system will save more and more in nominal terms, while the $25k investment isn't inflation adjusted. (it it was, the 7% return would probably drop to about 5%, making it even worse off). -- edit: the 7% return is already inflation adjusted actually, sorry.

And none of this even mentions the taxes that cut into your stock returns, again making it a worse off venture, while it appears saving money on your utilities with self-production is largely untaxed (?), just like making a sandwich at home or doing your own laundry isn't taxed.

I know you ended up leasing but I don't know the terms of your lease, but simply running some numbers for a buy scenario looks really appealing.

Of course it is very contextual. In cities where the kwh rate is just 9c instead of 17c, and where the credits, rebates and tariffs aren't very appealing, and where the capacity factor due to fewer sunshine hours is a third lower (e.g. in the UK it's closer to 10%, as opposed to 17% in places like California or Hawaii), it's a totally, totally different story. But it feels like in California it's a giant no-brainer. I mean I know solar is rapidly growing as an industry but we're also hearing of bankruptcies, of Solar City having lost hundreds of millions this year and last year, of solar still being a moral rather than a financial decision etc. And I can't seem to square it with the numbers I'm seeing which look really appealing.

Let me know if you'd like to share some of the terms, numbers, expenses etc for your lease by the way, would be curious to hear some real life cases!

Not just federal credits but state run "renewable energy" credits (RECs In industry parlance). The biggest subsidy for solar is net metering.

Solar is still not really cost effective without massive subsidy. But those subsidies exist for a reason and taking advantage of them is not weakness.

The amazing part of it imo is that no matter the industry, a high tech company with the high tech standards of IT, customer service and efficiency will win, as long as it completes against classic industrial/commercial companies

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