SolarCity Corp (NASDAQ:SCTY.DL) is trying to play spoiler in the electricity market, making it easy for home owners and businesses to install solar panels on their rooftops. That, in turn, means lower electric bills and less demand for the electricity that utilities sell. It's no wonder then that surging demand for rooftop solar has been driving SolarCity's shares higher.

Roller-coaster ride

It's been something of a roller-coaster ride for SolarCity shareholders this year. The stock started the year at around $57 a share, but by March it had peaked at over $85. It then proceeded to fall to just under $48 a share by the middle of the year before heading back up again to a recent price of roughly $68 a share. At the end of the day, shares are up about 19% so far this year.

Hidden behind all of this share price excitement is a truly fascinating business model. SolarCity isn't simply installing solar panels on roofs. It's making the process easy, taking on the upfront cost and all of the headaches of approval and construction. Its customers simply lease the systems or buy the power under long-term contracts.

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This alone is interesting and makes adding solar to your house both easy and accessible. However, SolarCity is going a step further. Since it winds up owning solar systems backed by long-term power contracts, it is bundling the payments from these systems up to back bonds. This provides SolarCity with capital to continue its expansion efforts and makes the processes increasingly self sustaining. That said, government largess is still critical to making solar financially viable.

And that's why growth is so important right now. SolarCity needs to take advantage of government solar support while it can, including tax subsidies for solar installations and mandates for utilities to buy rooftop solar at what some consider elevated prices. Not only does this support make the math work today, but it gives SolarCity the chance to scale up its solar business so that it can survive when government support goes away, as it likely will, eventually.

The recent tariffs on Chinese solar panels is just one example of such a shift in this fast moving industry. Tariffs of this nature aren't particularly helpful for SolarCity, which sources panels from that country. But this move by the government just makes SolarCity's decision to buy a panel maker and build its own giant panel plant look that much more prescient. As it ramps up its own production, the issue of Chinese tariffs should fade. Despite having a long-term answer to that industry headwind, however, it doesn't make it any easier to invest in a company that's seen its loss per share increase in each of the last three quarters -- which helps explain some of the share price volatility.

In fact, the loss has grown from $0.05 a share in the fourth quarter of last year to just over $0.50 a share in the second quarter. But earnings aren't the most important factor at a company that's growing quickly in a new, and obviously fast changing, industry. That's why, as investors look under the covers, they are finding a lot to like about this solar installer. And that mostly involves the company's underlying growth.

(Source: BrokenSphere, via Wikimedia Commons)

Getting bigger fast

For example, in the second quarter SolarCity's rate of installations increased over 100% year over year. In fact, it installed over three times as much solar capacity in the second quarter (101 megawatts) as it had installed in total in 2010 (31 megawatts). Clearly, the business is ramping up quickly.

Another example of that underlying growth comes from its customer count. The average annual customer growth rate since 2009 is a massive 99%. Now that's not a sustainable number and comes off a small base. However, SolarCity expects customer growth to average a still impressive 70% between mid-2013 and mid-2018. It's also worth noting that SolarCity's market share in the residential solar market was 29% in the first quarter, larger than its next nine competitors combined.

This solar giant's industry-leading position and strong growth are exactly why the shares are 19% higher this year despite the company's losses, industrywide headwinds in the form of Chinese solar tariffs, and the shares' seesaw action. And this isn't a matter of getting bigger just to get bigger. SolarCity's scale has enabled it to issue its third solar-backed bond, lowering its cost of capital, and to reduce its installation costs by over 27% since the start of 2013.

The future is driving this one

Although SolarCity is losing money right now, that's not the most important issue to watch. SolarCity is very quickly building a formidable position in the power industry. The shares should keep heading higher over the long term as long as the company keeps hitting its fairly aggressive growth targets.

Reuben Brewer 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.