How SolarCity and SunPower Are Revolutionizing Energy

Power in the energy industry is shifting from massive companies to homeowner, who can now produce power on their own.

Jul 2, 2014 at 1:04PM

Since Thomas Edison invented the light bulb and built the first electric grid in Manhattan there's been little change in the way we generate and distribute electricity around the world. Utilities build massive power generators that create electricity and it's sent through transmission and distribution lines into your home where you pay a price that you can't negotiate for the energy you consume.

How utilities are regulated and the amount of choice you have depends on where you live, but consumers are still beholden to a utility and have little choice in how they get electricity or where it comes from.

That's what makes rooftop solar power so revolutionary and so scary for utilities as we know them. Today, consumers are beginning to have energy choices, transferring power from utilities to homeowners. They can install solar panels to generate electricity, store energy for later use, and even charge a vehicle all without interacting with the grid. That's something that was nearly impossible even a decade ago but today it's not only possible, but economical for millions of Americans and many millions more the world over.

Spwr Residential New Home Community

Residential solar communities like the one above are popping up around the country. Source: SunPower.

The power belongs to YOU
As recently as 2007, it was incredibly expensive for a homeowner to put solar panels up and generate their own electricity. An installation may have cost over $50,000 and the power generated cost much more than the utility.

But that's when Sunrun began offering solar leases, a business model that put the initial cost on the leaseholder and allowed homeowners to pay for their solar-power system over 20 years. Soon, the business model spread and SolarCity (NASDAQ:SCTY) is now the largest lease company and panel making giant SunPower (NASDAQ:SPWR) has joined the business as well. GTM Research predicts that solar leases will account for 68% of the projected 1.3 gigawatts of residential solar systems installed in the U.S. this year.

Scty Installers

SolarCity has been the most successful in expanding its residential solar installations. Source: SolarCity.

Leases wouldn't be viable if the power generated from a home wasn't cost effective, which is why SolarCity, SunPower, Sunrun, and others can offer solar for $0 down and a lower cost of electricity than the grid in some of the country. As costs fall further, homeowners will have even more choice, like whether they want to pay cash, get a loan, or design their system into the roof itself.

Beyond financing, storage is the next stage of development and it makes it possible for consumers to go without the grid. SolarCity's sister company Tesla Motors (NASDAQ:TSLA) is earmarking a large portion of its gigafactory for energy storage with sights set on dominating the market. SolarCity is already offering Tesla batteries to consumers and SunPower is now installing them in three test KB Home developments.

What's key in the cost reduction of solar is the increase in financing available, and that energy storage makes solar energy a choice for homeowners. If you live in a sunny or high cost energy state, it could even save you money.

Spwr Residential Close Up

Source: SunPower.

Why utilities are frightened by solar
Giving consumers choices about where they get energy from has utilities around the country frightened about their future. Utilities generate rates of return (often guaranteed) on the assets they have in place and if more consumers put up solar energy it limits the need for existing and new capacity. In other words, they'll shrink rather than grow each year.

Utilities like APS in Arizona are fighting solar by charging customers to "net meter" or sell extra electricity back to the grid during the day. But they see storage on the horizon and the potential of consumers and communities reducing demand without net metering, or even cutting the cord of the grid someday.

The solar revolution is here
Revolutionary changes in energy don't happen often but we're watching one take place in the solar industry. A big disruptive force is that solar energy consumers can create their own solar-power systems and store energy for later use.

SolarCity and SunPower are leading the charge from the solar side and Tesla Motors is a surprisingly big player with its gigafactory. These three will be leading the revolution and challenging the status quo along the way.

Buy into a domestic energy boom
Energy imports are falling and solar energy isn't the only domestic energy boom taking place. The good news is that the government is giving you tax breaks to invest in the industry. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Travis Hoium manages an account that owns shares of SunPower and personally owns shares and options in SunPower. The Motley Fool recommends SolarCity and Tesla Motors. The Motley Fool owns shares of SolarCity and Tesla Motors. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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