Let These Companies Turn Your Home Into a Power Plant

The utility industry is changing and one of the biggest shifts is distributed power. That's when a customer generates electricity and sells it back to the power company. SolarCity (NASDAQ: SCTY  ) and SunPower (NASDAQ: SPWR  ) are the leaders in this emerging niche. They are, effectively, building a different electric utility one rooftop at a time.

Not in my backyard
Southern Company (NYSE: SO  ) is building a new coal plant with the latest, cleanest technology in Kemper, Mississippi (580 megawatts). It's also building two nuclear power plants, also using the latest advances in technology, in Georgia (2,230 megawatts). However, these three projects have faced stiff opposition. That's one of the problems with big projects, especially when they involve coal and nuclear power.

Southern's position is that it has to build these plants to satisfy customer power demands, particularly as older electric plants are retired. Opponents vary from those who don't want the plants "in their backyard," to those who want Southern to find cleaner alternatives. While the pros and cons of different power options can be hotly debated, there is a new model taking shape that sidesteps these issues and shows a new way to look at this old-line industry.

The roof, the roof, the roof is on solar
Solar power was once the purview of the environmental fringe, but with advances in technology and price declines, its slowly joining the mainstream. Utilities like NRG Energy (NYSE: NRG  ) , with backing from Google (NASDAQ: GOOGL  )  and others, are building giant solar power plants like Ivanpah in California. Ivanpah is so big it can reportedly be seen from space and generates an impressive 400 megawatts of power.

(Source: Sbharris, via Wikimedia Commons)

But the big solar news isn't happening at that scale, its happening one rooftop at a time. That's where companies like SolarCity and SunPower come in. This pair works with individuals and home builders to install solar panels on rooftops throughout the country. SolarCity expects to have up to 525 megawatts of power installed throughout 2014—that's more power than NRG's Ivanpah produces.

SunPower is well behind that, with just about 150 megawatts of power installed at the start of 2014. However, the company's model is much broader than SolarCity. SunPower makes solar cells as well as building solar installations from the ones on your neighbor's roof to power-plant size facilities. SolarCity focuses mainly on installing rooftop systems.

(Source: BrokenSphere, via Wikimedia Commons)

Although being green is nice, the real benefit for customers is the ability to reduce electricity bills by selling excess power back to the grid. This is so enticing that, according to SolarCity, "12% of new U.S. Generation Capacity in 2013 was distributed solar." That includes more than just rooftops, but it shows that there's a real opportunity for these two industry leaders.


Not in my backyard—the other way round
Part of the opportunity comes from government mandates that utilities buy power from their customers, often at premium prices. Needless to say, utilities don't like that idea. For example, Edison International (NYSE: EIX  ) is pushing back, saying that it has to pay as much as a $0.20 premium per kilowatt hour for distributed power. That means that customers without rooftop solar have to pay more, essentially subsidizing those with solar.

Note that Edison International is happily buying power from NRG's Ivanpah. So it isn't against solar power, just against having to buy it from its customers at inflated prices. But as solar panel prices come down, the government's support should become increasingly less important. On that front SunPower expects solar panel costs to fall by 35% while efficiency increases by 10% between 2012 and 2015.

The new utilities
SunPower and SolarCity are slowly building the solar utilities of the future. While you have to keep a close eye on the regulatory front, this pair is in the early stages of what could be a sea change for the energy industry.

Here's another big change taking place in the U.S. energy landscape...

Have you missed out on the record oil and natural gas production that has been revolutionizing the United States' energy position? If so, it's not too late to start investing in it. For this reason, the Motley Fool is offering a comprehensive look at three energy companies with plenty of room left to grow. To find out which three companies we have identified, we invite you to check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Read/Post Comments (2) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 19, 2014, at 11:43 AM, ronwiserinvestor wrote:

    A leased 4.75 kW system will typically cost the consumer $117.00 per month for a total cost of $28,080. The same purchased 4.75 kW system would cost the consumer $9,642 after applying the 30% federal tax credit. That's a difference of $18,438 wasted when you lease.

    And that's without adding in the 2.9% annual payment escalator that the leasing companies are fond of adding into their contracts. Add in the annual payment escalator and the cost to lease a solar system rises substantially.

    The solar lease and PPA financing models are outdated and might have made sense 4-5 years ago when system pricing was much higher. Today solar system pricing has fallen well below $3.00 per watt before incentives.

    And if you need $0 down financing, a much better option than leasing or a PPA is an easier to qualify for, $0 down FHA solar loan with tax deductible interest that allows you to own your system and keep the 30% federal tax credit and other financial incentives for a much better return on your investment.

  • Report this Comment On March 19, 2014, at 4:03 PM, letitleaf wrote:

    I believe RGSE is an up and comer in this market also. Needs a bit more attention, growing company on SCTY's heels.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2877863, ~/Articles/ArticleHandler.aspx, 9/21/2014 6:30:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement