SolarCity has been in the news a lot lately. The company has been expanding on the residential front and in the commercial market, jumping on the solar loans bandwagon, getting into manufacturing, trying out new marketing ideas like a Groupon — and even offering solar bonds. And SolarCity just reported strong growth and record-setting bookings for Q3, despite a loss for the quarter.
That can lead one to wonder, What is SolarCity not doing? We posed that question to Jonathan Bass, SolarCity’s Vice President of Communications, recently at Solar Power International. While it may not be possible to say what SolarCity won’t get into, Bass was able to fill us in on the advantages the company sees in doing everything under one roof.
We already know that SolarCity is looking to be “the most vertically integrated solar company in the world,” in the words of CTO Peter Rive. So we didn’t need to ask where SolarCity would side in the debate between vertical integration and the network model.
“At SolarCity, we always believed we should vertically integrate as much as possible,” said Bass. Even in its early days, he said, while other companies provided financing and left the installation to partners, SolarCity offered both functions. That gives the company a distinct advantage. For one thing, it increases customers’ comfort level to know the installation is being done in-house. That customer relationship — one that SolarCity is well aware is a long-term one — is worth nurturing.
Bass added, “Vertical integration is good not just for SolarCity but for the industry to grow.”
It’s helping the company to scale and solidifying the chain of communication among the various functions. And it was one of the key reasons, he said, that SolarCity was able to securitize, in what was not only a big step forward for solar but also one of the first securitizations since the financial crisis.
On the subject of scale, we asked Bass how SolarCity is looking to educate consumers and expand the customer base. “All of the above,” he said. “A retail presence, canvassing, online, partnerships.” The educating and selling should be done through many avenues, but the message should be simple. Customers face a lot of distractions and choices.
The message the solar industry needs to convey: “You can pay less for solar power than you pay for utility power.”
“Everyone accepts that solar is sustainable and renewable,” Bass noted. But he said that the depth of how solar can help is not well understood. One example is the associated water savings, particularly relevant in western states facing severe droughts. And then there’s the misinformation about cost.
“On the whole, everybody understands that solar is better,” he said. “But people still have the association that it’s expensive. People think of it like a $30,000 bathroom remodel. From a branding standpoint, we’ve achieved something great already in that people understand that solar is better, renewable. On affordability, people are less aware.”
A key point to convey to customers, Bass pointed out, is that we’re not asking them to change their behavior. They can make a payment each month just as they now pay their power bill. SolarCity’s new MyPower Loan offers a prime example of this, providing an easy path to ownership. “Loans needed to offer the same benefits of a PPA or lease,” said Bass — with the added benefits of ownership. “People value ownership.”
With the winding-down of the Investment Tax Credit (ITC) being such a hot topic at SPI, we asked Bass for SolarCity’s take. “An extension or more gradual reduction would be better,” he acknowledged. But like many in the industry, he feels the coming changes can be weathered — a sentiment that was echoed in the company’s latest earnings call.
“We are preparing for the ITC. It’s one of the reasons we’re moving aggressively to vertically integrate. Scale is key,” he added.
Speaking of the earnings call, SolarCity representatives on the call were optimistic in tone. But as Greentech Media noted, it would take a “ninja-level forensic accountant” to make sense of its complicated balance sheet.
SolarCity CFO Brad Buss said in the call, “Retained value is a very strong indicator for the long-term value that we’re creating…. Go do the math like I did before I joined for the next three to five years, and I think your jaw will drop regardless of the assumptions that you will use.”
Some analysts have been asking if SolarCity’s retained value will hold, given the assumptions that customers will renew leases at 95% of the rate they are paying when the lease ends. Since we don’t know how solar lease customers will act over 20 or more years, and SolarCity’s retained value assumptions are generous, some say the true value earned might be significantly lower than what the company is projecting.
Only time will tell, but SolarCity has a positive outlook on its future, and the future of solar. “We don’t have a choice, we have to move to sustainable energy,” asserted Bass when we spoke. The good news for solar? “The more light you shed on these issues, the more favorable they tend to be for us. Once people understand what that is, they tend to support it.”
How do we get there?
“Everybody in the industry has to participate in educating consumers,” he said. “There are tens of millions of empty rooftops to be filled. The rising tide will lift all the other boats. We will try to be one of those.”