Solar Energy for the Next Generation

The challenges facing solar are financing. The technology is stable, proven and becoming less expensive all the time. But financing projects on a scale to compete with Germany, which gets from 20% to 50% of their energy from solar, is not going to be a public project — it is going to be financed by us.

An important new development is solar bonds, by SolarCity. The company is creating the first solar bond, which is for sale to large and small investors. The bonds are created by aggregating the fees being paid to SolarCity, either from rate payers or utilities. Since these fees are on-going, the company can return a reliable income stream, as well as principal at term. The solar bonds have several benefits for SolarCity. The first is that they diversify capital sources, which in turn reduces the overall cost of capital, according to Tim Newell, Vice President of Financial Products at SolarCity

“Part of our ability to attack the expanding solar and distributed solar market is insuring we have the capital that we need to grow and install more. Solar Bonds are a way — a very successful way — to work with large institutional and corporate investors, while bringing smaller investors into the market.” He added that not going through financial intermediaries has helped keep the costs down and returns high.

Mr. Newell, in spite of his hard-nosed financial side, is also an idealist. He is excited to be offering a product that brings small investors into the market, where they can participate directly in the growth of solar while earning good returns. Anyone can log onto the SolarCity Bond site and buy a bond if they are 18 or older, and a U.S. citizen or resident with a U.S. bank account. (Floridians need to participate through a registered broker dealer).

One of the advantages of the bond offering is the potential that it has to help SolarCity stay competitive in the face of some challenges facing the US market. 

Production Tax Credits

As the Production Tax Credits (PTCs) are set to expire, SolarCity has been working to bring down their cost structures by investing in smaller companies that reduce the costs of deploying solar. As an example, they acquired ZEP, a company that has a system that provides for rapid, drop-in module installation. Although SolarCity will have a competitive advantage by using ZEP at cost, other installers will continue to be ZEP customers.

US Tariffs on Asian Solar Products

In anticipation of proposed US tariffs on products from Asia, which are likely to raise the costs of PVs, the company is building an advanced manufacturing plant in upper New York State, through their purchase of Silevo. The plant is expected to be producing 1 gigawatt of solar panels by next year. 

When asked if the company expects to use all the product produced by the plant, Mr. Newell replied by saying, “Just take a look at SolarCities’ growth, which is around 100% per year.” Today the company has more than 7,500 employees, as well as over 50 operational centers around the country. He concluded by saying, “Frankly, we’re working as fast as we can.”