100 Ways SolarCity Is Burning Chinese Solar Stocks

Source: SolarCity

SolarCity (NASDAQ: SCTY  ) , the leader in residential solar installations, is off to a bright start in 2014. Expanding into Nevada, the 15th state in which it operates, the company recorded 136 MW of bookings in the first quarter -- an all-time record. Sourcing its PV modules from a variety of Chinese companies, SolarCity offers its customers competitive pricing by mitigating the risks associated in dealing with only a few suppliers. An invaluable customer to companies like Trina Solar (NYSE: TSL  )  and Yingli Green Energy (NYSE: YGE  ) , SolarCity dealt its Chinese suppliers a crushing blow when it recently announced an agreement with REC Group.

Why the bears are growling
Earlier in the week, the U.S. Department of Commerce dealt the first blow to the Chinese PV suppliers when it announced, in a preliminary ruling, that the Chinese companies unfairly benefited from government subsidies. The U.S. International Trade Commission is expected to make its final ruling on the issue in October. According to the Commerce Department, the Chinese products affected by the ruling amounted to approximately $1.5 billion in 2013.

Source: Trina Solar.

Imposing a preliminary duty of 18.56% on imports of Trina Solar, the Commerce Department imposed a duty of 26.89% on most other Chinese companies. Following the news, shares of Yingli Green Energy dropped nearly 10% while shares of Trina Solar dropped nearly 6%.

Salt on the wound
In an effort to diversify where it sources its panels from, SolarCity announced an agreement in which it will purchase a minimum of 100 MW and up to 250 MW of solar panels from REC Solar during a 12 month period beginning in Q4 2014. Addressing the deal, Tanguy Serra, SolarCity's chief operating officer, said, "The availability of competitively priced, U.S. trade-compliant PV modules is an important development for the global solar industry."

Following the Commerce Department's preliminary ruling, SolarCity's decision to move away from Chinese suppliers was expected. In the company's 10-Q SEC filing, it states: and financial results may be harmed as a result of increases in the cost of solar panels or tariffs on imported solar panels imposed by the U.S. government." Furthermore, the company states that "the declining cost of solar panels and the raw materials necessary to manufacture them has been a key driver in the pricing of our solar energy systems and customer adoption of this form of renewable energy.

The deal with REC Solar will not fully meet SolarCity's expected demand for solar panels in 2014. Having booked 136 MW in the first quarter, this translates to an annualized rate of 544 MW. Should SolarCity deem the supply agreement a success at the end of the year, REC solar could benefit substantially in that SolarCity is guiding for a range of 900-1,000 MW to be deployed in 2015.

The Foolish conclusion
I've been bullish on SolarCity's disruptive business model for a long time, and the recent findings from the Commerce Department are not changing my opinions in the slightest; nonetheless, it is something to definitely keep an eye on. SolarCity's customer base is growing by leaps and bounds. From 2010 to mid-2015, the company is guiding for a CAGR of 98%, and it will be critical that it find solar panel suppliers to meet that demand. 

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Read/Post Comments (8) | Recommend This Article (2)

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 June 15, 2014, at 7:14 PM, ronwiserinvestor wrote:

    "Competitive pricing" ? Competitive with what ?

    Less than $2.35 per watt which is available across the country from many dealers after applying the 30% federal tax credit, now that's competitive. SolarCity's pricing is much higher than $2.35 per watt.

    And REC solar may be U.S. trade compliant, but they're not U.S. made.

    Today, you can buy, very high performance solar systems with high quality U.S. made solar panels for less than $2.45 per installed watt after applying the 30% federal tax credit which even though U.S made is still much lower priced that SolarCity's offerings.

  • Report this Comment On June 16, 2014, at 9:16 AM, Markitos wrote:

    ronwiser your comments just don't add up. Many residential solar customers that I know do extensive shopping around before they choose a solar installer or service. How could it be that SolarCity is dominating US installation market with uncompetitive pricing?

    Either: they command higher margin/value because they provide attractive financing options, a better customer installation and maintenance experience, or they actually ARE price competitive once customers factor in the time and money of their own installation, permitting, incentive application, and maintenance.

    So, which combination is it?

  • Report this Comment On June 16, 2014, at 9:42 AM, Waldo wrote:

    ronwiser is just here to push his companies product. The article also doesn't mention that Solar City gets their panels from a variety of sources. Canadian Solar's best outside customer for their panels is Solar City. Sorry ron, just can't trust what someone says when they have a HUGE vested interest in the news spin.

  • Report this Comment On June 16, 2014, at 12:06 PM, Garn333 wrote:

    Well put Waldo!

    ("just can't trust what someone says when they have a HUGE vested interest in the news spin.")

  • Report this Comment On June 16, 2014, at 6:22 PM, jargonific wrote:

    Sunpower much more promising.

  • Report this Comment On June 16, 2014, at 10:36 PM, ronwiserinvestor wrote:

    @markitos Well they're obviously not shopping on the web and are simply falling for the door to door canvasing pitch or the cold call pitch that the leasing companies are good at.. We control over 900 active websites that place well on all the search engines that all advertise these pricing levels and we post the brands that we sell.

    It would be almost impossible to search on Google, MSN or Yahoo and not run into one of our websites. We've sold our systems across the U.S. for over 16 years and take SolarCity customers away every day of the week with our higher performance system at our much lower pricing. A $1.69 per watt before incentives for a complete kit or less than $2.35 a watt installed after the 30% federal tax credit.

    Those numbers scare people like Waldo and Garn333 to death because their precious SolarCity can't touch that pricing.

  • Report this Comment On June 16, 2014, at 10:48 PM, ronwiserinvestor wrote:

    @Waldo, I could care less that you don't trust me. Thousands of customers across the country have put their trust in us and have turned their backs on the expensive solar lease and PPA model.

    And just out of curiosity, how is it that I'm " pushing my company's products" when I haven't even provided my company's name or phone number or website address. That sounds like a neat trick.

    You don't fear my company, you fear the truth that hundreds, maybe even thousands of dealers across the country can now beat SolarCity's pricing and you want to censor that truth. Well sorry but this is America. If you want to censor the truth then you'll have to move back to the country that you came from.

  • Report this Comment On June 18, 2014, at 12:24 PM, Waldo wrote:

    I have no sacred cow in Solar City. Don't own their stock, although after yesterday, I wish I did. My comment was about how every time a solar article pops up on Motley Fool, you chime in with an advertisement for your company. I even recall you stating that you feel obligated to toot your own horn because you feel you are the best. I do not fear your company or want to censor you. Just want people to know you have a financial gain to make from your comments. I don't know what country you are referring to, but I was born in Chicago. Last I checked, it was still part of the U.S.

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Scott Levine

A member of The Motley Fool since 2006, Scott began contributing content in 2013. He focuses primarily on the energy sector, specifically renewable energy companies. Follow him on Twitter for the most recent renewable energy news. . .

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