Sorry, But Your SolarCity Solar Panel Kit Isn't Saving The World

Source: SolarCity Corporation 

SolarCity Corporation (NASDAQ: SCTY  ) and other rooftop solar companies are soaring on record sales. But is that shining status symbol on top of your roof really doing the most for Mother Nature? Here's what you need to know.

Take it Outside
If you're like many Americans today, you're increasingly concerned with the quality of your food. But do you head to the countryside, buy a 10-acre plot, and plant enough kale, kumquats, and carrots to keep your family fed year-round? No. You go to Whole Foods Market and pay up for some organic arugula.

The same might be said for SolarCity Corporation's rooftop solar panel kits. While your system might serve as a glossy household accessory advertising your environmentalism, there's an alternative that might ultimately be the greener option for the greater good: utility-scale solar.

Big Solar
As solar costs keep dropping, utilities have quickly come around to the idea that solar can and should be a part of their energy portfolio.

In 2010, residential, commercial, and utility solar capacity was almost exactly even. But utility-scale generation has soared over the past few years. In 2013, utilities installed more than 50% of all new capacity. While that's remarkable in and of itself, it's important to note that 2013 solar installations increased our nation's total solar capacity by 66% to over 10,500 megawatts. That's unprecedented growth.

Residential solar isn't without its own records. The number of rooftop solar panel kits currently stands at around 480,000 , compared to just 550 existing, under construction, or planned projects 1 megawatt and larger. SolarCity Corporation lays claim to a massive 25% of all rooftop solar panel kit installations. That's equal to the market share of its next 14 competitors combined, an impressive feat considering its relatively capital-intensive in-house operations. Currently, the company has just 45 operation centers in 15 states (plus Washington, D.C ). But as SolarCity's website notes:

We're going to keep growing and making clean, more affordable energy available to even more homeowners than ever. You can be next.

Source: SolarCity Corporation 

SolarCity Corporation isn't going to let utilities steal the solar show. Although the pipeline for utility-scale solar projects is massive (26,000 megawatts currently under construction or development), SolarCity Corporation Chief Executive Officer Lyndon Rive likes big numbers, too.

Even though Rive's business model is built on mini-systems, he understands the importance of scale. Rive has set SolarCity Corporation a goal of one million solar panel kits installed by 2018.

One million is a big number. But in reality, it doesn't mean much for America's energy infrastructure. 1,000,000 customers translates to around 6,000 megawatts, just 25% of all currently proposed or under construction utility-scale solar projects.

If the relative insignificance of SolarCity's aspirations still isn't sinking in, consider this: Between May 2014 and December 2014, utilities will install 1,728 megawatts of large-scale solar. In other words, utilities will install more solar capacity in eight months than SolarCity has since it was founded in 2006.

Source: SolarCity Corporation; Right-side axis displays cumulative MW deployed 

It's All About the Money
Utilities do it cheaper. According to the Solar Energy Industries Association, electricity from an average residential solar kit costs $3.73 per DC Watt, while utility-scale solar clocks in at less than half that amount: $1.77.

The massive cost difference comes from two main sources: modules and direct labor. And while module prices will continue to decline for both rooftop and utility-scale systems, SolarCity Corporation will be hard-pressed to drop its labor costs on tiny solar panel kits to the same levels as those of a sizable solar farm.

There's a place for residential systems, and rooftop solar panel kits offer an unprecedented opportunity for gridless electricity generation anywhere the sun shines. But if you think SolarCity Corporation is on the cusp of changing our energy infrastructure, you're better off giving credit to utilities going green.

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Read/Post Comments (11) | Recommend This Article (4)

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 July 13, 2014, at 1:53 PM, fool1953 wrote:

    Actually without subsidies and government mandates no one would put in solar but hobbyists who want to make an "environmental" statement. The economics is atrocious for installing solar in most areas. The author states utilities can install for $1.77 watt but what he doesn't mention is the solar arrays at best will run at a 15% to 25% capacity factor and can't produce power on demand.(home depot advertises their house systems with an 11-18% for the 6KW line) So in reality when you want to compare it to NG, nuclear or solar multiply that by 4 so realistically the installed cost based on kw-hr production which is the way you can get your payback is over $7 watt. oh yeah that is if the sun is shining. It would be much better to invest in a Natural Gas Combined Cycle which won't be devastated in high winds. Of course the government spends $10's of billions on subsidizing this with a 30% investment tax credit. Much of this money goes to Chinese Solar Panel manufactures from your tax dollars, another injustice for the American Tax Payer. IMHO I think Solar City is going to have problems because I just don't see how their lease agreements are going to make money in the long run unless their installation costs go down significantly or electric rates triple, which may happen as the Government is doing the best it can to make power more expensive for the company. First Solar has a pretty good business model and should continue to make money but will be hurting if subsidies are cut. IMHO

  • Report this Comment On July 13, 2014, at 4:36 PM, StevePierce wrote:

    fool1953 is stuck in 1953 and he is wrong about the numbers. In New Mexico with a installed cost of $3.00 per watt by a licensed contractor, the payback is 10 years for a 20 year warranted service life and no government subsidies. This payback period also assumes no increase in utility costs over 10 years and it assumes you get no money back from the sale of renewable energy credits (REC).

    If you count the government tax credits and still assume no increase in utility costs and RECs, the payback is 6.7 years.

    And before fool1953 says $3.00 a watt is unrealistic, I just has puchased a 11.75KW solar array installed by a licensed solar contractor and the cost was $2.50 per watt installed and commissioned. This was using American panels from Michigan and Canadian-made inverters.

    Also fool1953 is misquoting the whole thing about panel efficiency. When a panel is rated at say 300 watts that is peak output in the lab assuming perfect solar alignment and angle. Peak output on your roof depends greatly on location and angle and the time of year. Typically it will peak at around 260 watts. However, on really cold sunny days it is possible to over generate and get upwards of 320 watts of power from a 300 watt panel. Strange but true, solar panels are more efficient in the cold.

    To account for this variability, there is a national standard of Peak Hours. This is the amount of hours the suns power is standing directly over heard generating the most power. In Detroit, calculating for snow, rain, clouds, seasonal angle of the sun and the angle and direction of your panels and on average you get 4 hours of peak sun per day. In Albuquerque, it is 6 hours per day. You don't have to calculate this, the National Renewable Energy Lab has already done this for the entire country.

    Multiply peak hours (h) by the wattage of your panels and you will get a VERY GOOD estimate of the amount of power in watt-hours (wh) your solar system can generate each day. Look up you average daily use of power, measured in kilowatt-hours (kwh) and you can determine how many panels you need given the wattage of each panel.

    fool1953's 11 to 18% efficiency refers to the efficiency of a panel and it has NOTHING to do with the output. When you talk about efficiency, It means the panel can harness approximately 15% of the total solar energy passing through the cell. More efficient cells means more energy can be generated for a panel of the same size. When you buy a 300w panel given perfect condition, it will generate 300w of power.

    The rated wattage has nothing to do with the solar efficiency of the cell and so his 4X number is bogus.

    I know it is unfair to make an argument using facts and so I apologize in advance.

    Finally, I don't own stock in any of the companies mentioned, I don't work for any solar companies, and I have never shopped in a Whole Foods.

  • Report this Comment On July 13, 2014, at 5:14 PM, dlwatib wrote:

    Even if utilities install more solar power than SolarCity, it's still important to have SolarCity around. First, because the utilities probably wouldn't be installing all that solar power without the competition, and secondly because customers need an alternative in case their PUC lets the utility run amok.

  • Report this Comment On July 13, 2014, at 9:01 PM, CalCase wrote:

    1- The market is all about company growth. Yes large scale solar is more efferent but we all know to it is much harder to raise money for a large scale project than a individual signing a contract. We sell more cars than busses so if it is truly about Growth then seems to me the bet is in favor of Solar City.

    2-Energy costs will easily go up 3 to 5 times in next 20 years you can count on it. So those panels on now millions of roof tops will start printing money like Royalties.

    3- Solar City has proven to me their excitability of a sustained growth of over 100% Y/Y!

    4- They currently are only operating in 5 states sooooo looks like we have a lot of room to grow too.

    5- Solar city has all the ingredients:Outstanding Product , Service, Image and operational execution. What more do you want.

    6- Ok lets not forget to mention Musk: Genius, and the leader new concept companies

    aka The Market Disruptors.

    7- Good luck following "The fool"

  • Report this Comment On July 14, 2014, at 12:17 AM, lazaruslarue wrote:

    Hey, love the fool and read your posts a lot, but I have to call you out on missing the greatest reason that SolarCity is going to save the world.

    It's already installing "utility scale" solar, and feeding it back to the grid. Next step is the batteries they'll be adding to the mix.

    Pay attention to their blog for details, I know they mentioned this there before.

  • Report this Comment On July 14, 2014, at 12:35 PM, DWW12 wrote:

    Did you include LAND cost in your utility scale model? What about grid and line losses? Because those are two things utility scale can't compete on with distributed solar. The cheaper panels and install gets the more expensive land and line loss gets in the total cost equation. Added land cost for rooftop is zero, line loss is almost zero.

  • Report this Comment On July 14, 2014, at 1:03 PM, DWW12 wrote:

    "If the relative insignificance of SolarCity's aspirations still isn't sinking in, consider this: Between May 2014 and December 2014, utilities will install 1,728 megawatts of large-scale solar. In other words, utilities will install more solar capacity in eight months than SolarCity has since it was founded in 2006."

    Did you read the graph you posted? Solar City is doubling it capacity every year. So to put that in your parlance. Solar City will install more solar this year than it has since it was founded in 2006. Or Solar City will install 300mw, 20% of what ALL utilities are installing in the same amount of time. Sounds impressive to me.

  • Report this Comment On July 14, 2014, at 2:42 PM, amit442 wrote:

    StevePierce - There is a difference between efficiency and capacity factor (please google). fool1953 is referring the capacity factor as between 15-25% and is absolutely right.

    A 1mw solar site will on an average deliver (.15-.25) * 24 mwh power over 24 hours, where as a 1ms gas based plant will deliver .9 * 24 mwh.

    Your 2.5$/watt installation is at best 2.5* (.9/.25) comparable to a 9$/watt for gas - and the things look even bad for solar when you compare the quality of delivered power.

  • Report this Comment On July 16, 2014, at 8:49 AM, LikeTesla wrote:

    Personally, I like my Solar Panels!! I installed three arrays over three years. One on the roof 60 panels (14.1 kW DC Peak Rated) and two ground mount arrays with 40 panels each (10.2 & 9.4 kW DC Peak Rated)!! Total 33.7 kW DC Peak Rated. I live in Southern Illinois so need overcapacity to cover cloudy low production months of December & January. My system produces enough on average to cover the home's consumption (all electric may average about 2500 kWh/month with Geo etc), the $35/month utility fee (charged even if no power used), and enough extra for 110 miles/day of Electric Vehicle driving (on average). I have a contract to sell all SREC's for 5 years at $20/REC so that brings in on average $60/month. I currently, end of June, have an account credit of $308 so far this year!! I like the system!! I like not paying for power!! I like paying for gasoline only rarely (for long trips). The payoff for the last 40 panels, providing Electric Vehicle miles, is about 4 years when you figure the gasoline offset. No power bills for the next 20 - 40 years is appealing!! No contribution to climate change!!

  • Report this Comment On July 16, 2014, at 8:51 AM, LikeTesla wrote:

    Residential Solar is great and contributes!! Utility scale projects are great too!! Can't always wait for central projects to do what is needed ..., unfortunately!!

  • Report this Comment On July 22, 2014, at 2:56 PM, Solarexpert wrote:

    You're not only "not saving the world" with that leased solar system, your not saving much money either when compared to a purchased system.

    A leased system will cost you nearly three times more than an outright purchase, especially when the leasing company tacks on that 2.9% annual payment escalator. Shop around. Prices for solar are at historical lows. So low in fact, that lease absolutely no longer makes any sense.

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