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Solar City Corp. (SCTY) – Buy or Sell Deep Dive Analysis and Review of IPO

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Solar Stocks have performed terribly in the past couple of years and have been a very painful experience for long term solar investors. The bad performance has not been restricted to the solar industry but also to other green sectors like wind energy, biofuels, energy storage etc. Only Energy Efficiency has performed relatively better thanks to acquisitions by big industrial and electrical conglomerates looking to expand their offerings.

Solar City Corp is a major US solar installer/integrator that is offering around $200 million of shares to the public for an estimated 13% stake in the company valuing the solar system integrator for around $1.5 billion.

Solar City Business Model

Solar City is the business of installing solar systems for residential and commercial customers either outright or through leases in partnership with financial and other companies (Citi, Google, U.S. Bancorp). The company has diversified into providing energy audits and retrofits as well.

The company’s investors include Draper Fisher Jurvetson, DBL Investors, and Generation Investment Management. Tesla Motors’ CEO Elon Musk also is an investor and is SolarCity’s board chairman.

Solar City Pros

1) One of the largest solar installers in the US with presence in 14 states and a topline growth of 84% in 2011.

2) Solar integration is a growth industry with falling solar system prices making solar energy increasingly affordable to a greater size of the population.

3) Elon Musk is a major figure in the Green Industry being the CEO of Tesla Motors which is the only successful independent Electric Vehicle company in the industry currently.

4) Company benefits from solar panel prices selling for below cost as it is in the business of installing solar systems and not manufacturing them.

Solar City Cons

a) The company has made losses for the last 5 years.

b) Other listed US solar system installers like Real Goods Solar and Akeena Solar have proven to be terrible investments.

c) Solar Installer Industry has low barriers of entry and very low margins.

d) Valuation does not look cheap for the company considering that the largest solar panel manufacturer can be bought for less than $200 million. First Solar which is not only one of the biggest solar panel manufacturer but also a bigger solar developer and installer has a market cap of less than $2 billion and is much more profitable.

e) Its not a great business to be in. Some of the top German solar installers like Conergy and Phoenix have lost huge amounts of money as the solar shakeout has affected them badly as well.These companies lost money on falling prices of solar panels inventory and diversifying into solar panel production.

Solar City Buy or Sell

Given the above facts, it makes no sense to buy Solar City at the above valuation and considering the hugely competitive nature of the solar installer industry. It is very hard to make money in green investing and Solar City does not possess any competitive advantage that would justify buying it at the price that is being talked about. 5 years of annual losses does not augur well despite a growing topline. The business of installing solar panels systems is a low margin business.

Solar City Competitor Analysis

Here are a list of Top US Installers/System Integrators. Note the list will keep expanding in the coming years as the size of the US Solar Energy Market Grows.

The Large Vertically Integrated Solar Panel Installers

1) SunEdison/MEMC – US Polysilicon and Wafer Producer MEMC bought SunEdison which was one of the largest solar installers in 2008. Now MEMC is strongly expanding the system installation business not only in the US but other parts of the world like India, Europe, Korea, Canada and other places. The company recently installed one of the biggest solar plants in the world in Rovigo, Italy.

2) Sunpower – Sunpower is a vertically integrated solar energy company known more for its highest efficiency solar panels. The company bought Powerlight a few years ago to enter the solar systems market and has bolstered the business constantly to become a major global installer. Sunpower is present in all 3 segments of the solar system business namely a) residential, b) commercial and c) utility. It is one of the largest US installers and has recently won a number of large utility contracts for building solar farms.

3) First Solar – First Solar is the largest producer of solar panels in the world using its proprietary thin film technology. The company is also one of the biggest utility solar system developer in the world focusing mainly on the North American Market.The company has built and sold the world’s largest solar farms in Sarnia, Ontario.The company has beefed up its solar installation business by buying project development teams and pipelines from Ausra, OptiSolar Turner etc.

4) Sharp/Recurrent Energy – Sharp recently bought Recurrent Energy one of the large independent solar power developers and system integrator in the US.Sharp already had a big presence in the California market where it is now facing increasing competition from the low cost Chinese players like Trina Solar, Yingli etc.

5) REC Solar – The Norwegian based Solar Company REC has started it solar system in the US a year or two ago and has managed to win some contracts. It is targeting all the 3 segments and is present in the major solar states of the US like New Jersey and Californa. It claims to be the largest residential solar installer in California with 17 MW of installations in 2010.

6) Solarworld – Another European company like REC,S olarworld is mainly targeting the utility and big commercial market recently winning a 11.6 MW order from LADWP. The company has a big manufacturing facility in Oregon and has aggressive expansion plans in the US as its domestic German market slows down.

7) Mitsui/Sunwize – Mitsui, the giant Japanese tradings house bought Sunwize in 2006 to enter the solar system market in the US. Note Mitsui is not a big solar panel producer like Sharp, Panasonic and others. The company sells mainly in Oregon and California and targets all the 3 segments of the market.

The Solar Financing/Leasing Companies

8 ) Sungevity – Sungevity is a California company targeting the residential market through a solar leasing plan. It extensively uses the Internet to design the system and has a JV with US Bank to provide financing to its customers.

9) SolarCity – SolarCity is a full-service solar provider for commercial and residential customers and does solar power system design, financing, installation and monitoring services from a single source.SolarCity is introduced a new solar lease option, called SolarLease. It also has other options like PPA .The company’s footprint extends to Arizona, California, Colorado, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Texas and Washington D.C.

10) SunRun – SunRun is one of the newer solar installation and solar financing companies that target the residential market mainly. The company is present mainly in the Western part of USA operating in 7 states Arizona, California, Colorado, Hawaii, Massachusetts, New Jersey, and Pennsylvania. The company uses a PPA model to sell solar systems and has partnered with a number of pure play solar installers.

The Solar EPC/Installation Companies

11) Akeena/Westinghouse Solar (WEST) – The first US Solar Installer to list on the US Stock Exchange,the company’s operations are based mainly in California. The company also sells solar system through retail outlets which was a first. The company also has a unique solar system which reduces solar installation costs called Mandalay.

12) Real Goods Solar (RSOL) – The second US Solar Installer to list on the Stock exchange, Real Goods Solar is present in California and Colorado and it targets the residential and commercial segments of the market.

13) Verengo Solar – The company also provides solar financing solutions and is present in the California market.

14) Borrego Solar – The company is similar to Verengo Solar but mainly concentrates on the commercial market. The company signed a deal with Chinese solar panel producer Yingli for procuring solar panels. The company is headquartered in California like most others.


The US Solar EPC Market has a good mix of large vertically integrated solar companies as well as independent solar installers. The leasing and PPA companies have added another dimension to the Solar System Market by making it easier for customer adoption of solar energy. There a a large number of solar system installers in the US and its tough to include most as most of them remain private companies.

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Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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