Why This Utility Could Become SolarCity’s Biggest Competitor

Utilities could become SolarCity's biggest competitors, and NRG Energy is leading the charge with some innovative technology.

Mar 17, 2014 at 9:10AM

Editor's note: A previous version of this article stated that SolarCity's primary business is off-grid electricity. In fact, SolarCity's solar systems are grid-connected. The Fool regrets the error.

SolarCity (NASDAQ:SCTY) has an interesting and unlikely competitor that many people won't see coming. It's NRG Energy (NYSE:NRG), an old line utility and power plant operator that is positioning itself to be SolarCity's biggest and most aggressive competitor.

Under its visionary CEO and power-grid basher David Crane, NRG is moving into the off-grid electricity business in a big way. Crane is an advocate of distributed, or small-scale, electricity generation for homes and businesses. He has teamed up with the man who created the Segway, Dean Kamen, to create the Beacon 10 home-energy appliance.

Why the home-energy appliance is a threat to SolarCity
Despite its wonky name, the home-energy appliance is actually a home-power system designed to compete directly with SolarCity's system. The difference between the two systems is that the home-energy appliance can generate electricity with or without the sun.

The appliance combines a 5 kilowatt photovoltaic solar-panel system with a natural gas burning Stirling, or hot air generator; it can make 10 kilowatts of electricity and battery storage. The appliance can do something that SolarCity's system cannot: It can make electricity at night or on a cloudy day.

That means the Beacon 10 can make electricity 24 hours a day, seven days a week, which solar panels cannot replicate. If it works as advertised, the appliance will also be able to heat your house, heat your water, and even melt snow.

If current energy trends -- with the price of natural gas falling and the price of electricity rising -- continue, NRG could have a real money maker on its hands here. It could also put SolarCity in a real tough spot. The hip green-power company might have to bring out a natural gas solution of its own to stay competitive.

Energy appliance might not pan out
There are some problems to this scenario; after all, the Beacon 10 energy appliance is an untested technology. Supposedly, there are only two of them out there: one at Kamen's house and one at Crane's. The NRG website doesn't even mention the device, even though Crane and his public relations crew have been hyping it up.

We really don't know much about the Beacon 10. We don't know how much it will cost, how much it will cost to install or operate, or how well it will work. If it burns large amounts of natural gas, Beacon 10 could be an energy hog that drives up utility bills.

It should also be noted that NRG has some other off-grid electricity solutions that could threaten SolarCity. For instance, its website mentions a "solar canopy." The canopy is a photovoltaic deck awning or umbrella that can generate up to 7.2 kilowatts of power. The NRG website shows a variety of canopies, including covers for gas pumps, a backyard deck cove, an office building entrance way, and even a bus-stop shelter. This technology could be a real menace to SolarCity or a complement for SolarCity's products.

NRG and SolarCity as investments
Okay, that's the hype -- but how does NRG Energy pan out as an investment compared to SolarCity? Actually, it does fairly well when you look at the financials. On Dec. 31, NRG reported full-year 2013 revenue of approximately $11.3 billion, representing an increase of nearly $3 billion; for 2012, NRG reported revenue of $8.4 billion.

SolarCity reported trailing-12 month revenue of $141.8 million on Sept. 30. This translates to a 1-year revenue growth rate of 52%, while NRG reported a 1-year revenue growth rate of 35.5%.

There are many people who will call this comparison unfair because NRG is a well-established utility. Both companies are in the same basic business of providing electricity, however, so on some level they are competitors.

NRG's Beacon 10 plans and solar canopy also present a question for SolarCity and its investors to answer: What happens when utilities and other large companies start marketing electricity solutions in competition with SolarCity? After all, these companies have more resources and a ready-made distribution network staffed by experienced technicians. Elon Musk needs to address that question now if he wants SolarCity to survive.

Don't follow the crowd
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

 

Daniel Jennings has no position in any stocks mentioned. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers