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J*H*M

J*H*M
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  • Implications Of The Interim Net Metering Ruling In Nevada [View article]
    If you think residential rates will fall to 8c/kWh anytime soon, you really ought to be shorting the utilities. Just a 10% rate reduction is enough to make them unprofitable.

    At this point regulations mostly serve to keep competition out of the market. If the distribution market were deregulated, incumbents would become unprofitable in a hurry, and challengers like SolarCity would eat them up.

    So the way I look at retained value of solar financing is that it is a hedges against utilities maintaining the status quo. If there is a breach of the status quo, new entrants like SolarCity will do much better with a much larger opportunity.

    Shorting SolarCity is a bet that the regulatory status quo will continue to protect utilities from competition. If you really believe competition will drive down utility rates, you should be shorting utilities or investing in disruptors.
    Aug 28, 2015. 10:27 AM | 4 Likes Like |Link to Comment
  • SolarCity, Lions And Gazelles, And The ITC Step Down [View article]
    Higher interest rates also impact utilities, raising utility rates. So in your metaphor, even the lions get slower.

    Additionally, ITC step down impacts utility solar as well. So this too would apply upward pressure on utility rates. Again the lions get slower.

    On an unsubsidized basis new utility solar now beats new natural gas in levelized cost and will continue to widen the cost advantage. So to the extent that ITC step down slows the transition to solar, it will extend higher energy rates to all ratepayers. Moreover, slowing rooftop solar will will ease competitive pressure on utilities that help to keep rates in check. Removing this competition allows utilities the confidence to raise rates just as much as regulators will allow. So ITC step down has the potential to increase everyone's power bill, except those who lock in rooftop solar and other distributed energy prior to the step down.

    So in spirit of the lion and gazelle analogy, ITC step down slow down and momentarily fatten the lions. They will take the opportunity to raise rates. Meanwhile, the gazelles continue to pick up speed. Distributed solar will continue to cut the cost per watt, while utilities pull back on utility solar. This perpetuates malinvestment within the utilities, which ultimately widens the longterm market share that SolarCity can capture. It is very short-term thinking on the part of utilities to advocate for ITC step down. The utilities need ITC to keep pace with distributed solar and to avoid massive stranded generation assets.
    Aug 12, 2015. 10:39 AM | 1 Like Like |Link to Comment
  • Solarcity: Misunderstood And Undervalued [View article]
    I'd point out that retained value for MyPower loans is about 95% higher than for leases and PPAs, $3.69/W vs $1.89/W respectively. Moreover, MyPower loans do not have the renewal option as leases and PPAs do. My analysis suggest that PPA/lease retained value needs about a 15% haircut to properly value this optionality, about $1.61/W. So MyPower loans may indeed be worth 129% more to longterm shareholders than PPA/leases. Clearly, SolarCity has a strong motive to upsell to MyPower loans over leases. If more consumers gravitate to owning solar, this would be a good thing for SolarCity.
    Aug 4, 2015. 11:00 AM | 4 Likes Like |Link to Comment
  • Residential Solar Soft Cost Reduction Potential [View article]
    SolarCity's Silevo is targeting a 24% efficiency 400-watt panel. It takes a crew the same amount of time and mounting hardware to install 20 standard 320-watt panels as 20 high efficiency 400-watt panels, but on a per watt basis this is a serious reduction in installation soft costs. This also means that more watts can be installed per roof, so sales and marketing costs per watt should also improve.
    Jul 20, 2015. 10:58 AM | Likes Like |Link to Comment
  • Utility-Scale Solar Is Unlikely To Remain Dominant [View article]
    Transmission is about 31% of the retail price of electricity in the US. Distribution is another 11%. Generation is only 58%. Distributed solar including community solar eliminates load on transmission assets and some load on distribution assets. Additionally batteries both in front of the meter and behind will reduce the amount of copper needed in the grid. The basic problem with utility solar is it requires more long distance grid capacity to be maintained. As the whole system becomes more decentralized perhaps 20% can be reduced from retail rates just savings in a lighter weight grid, less copper, less capital. Then fast approaching price reductions in solar and batteries can knock off another 20% of cost from the generation side. So in time the average US retail price of 12 c/kWh could come down to 7 c/kWh. The time that this transition takes mostly depends on how much the utilities want to resist changing their business model.

    BTW, if utilities want to keep the likes of SolarCity from stealing market share, all they need to do is reduce their retail rates to about 12 c/kWh. SolarCity only markets where prevailing rates are above 16 c/kWh. So if a utility can use solar to drive down their residential rates, they should do so. If advocates of utility solar really want to make their case, they should demonstrate how utility owned solar is driving down utility residential rates. Until that happens SolarCity, Vivint Solar and hoards of smaller installers will eat away at utility market share.
    Jul 17, 2015. 01:24 PM | 1 Like Like |Link to Comment
  • The Electric Utilities' Fight For Survival [View article]
    Gas peakers will become stranded assets by 2020. Currently 60GW of peaker capacity is added worldwide. 60GW of peaker capacity provides about 42GW of dynamic range. Because batteries both discharge and charge and because they do not need to idle at 30% capacity as gas peakers, 21GW of batteries provides the same dynamic range as 60GW of peakers. The cost for 60GW of gas peakers is about $60B, but at the price of Tesla's Powerpack ($500/kW, $250/kWh), batteries can satisfy this market for about $15B, while improving the utilization of baseload power plants. Tesla alone should be able to satisfy this market with 42GWh /21GW of Powerpacks by 2020. Many other companies will compete to do the same. Once the demand for new gas peakers is satisfied by batteries, existing peaker plants will be retired on an accelerated basis. We could see such write downs within a few years in certain markets, but past 2020 stranded assets will be widespread. Of course, utilities will survive, but investors could be deeply burnt having to write down so many assets.

    Demand from electric vehicles will not be strong enough soon enough to keep gas peakers in business. The declining cost of batteries is what will drive both the advance of electric vehicles and the undercut of gas peakers. Tesla expects to drive the cost down to $100/kWh by 2020. This will make EVs cheaper to produce than conventional vehicles, but it will also cut the price of Powerpacks in half. So in 2016, gas peakers are 4 times as expensive as Powerpacks, but in 2020 they are 8 times as expensive. At the Powerpack price of $125/kWh, even baseload generators will have a hard time competing with batteries charged from wind and solar. But even if 100% of new cars were EVs by 2020 (and this will not be the case), it would take another 15 years to replace the fleet of conventional vehicles. Electricity demand from EVs cannot come fast enough to keep baseload generators from suffering the same fate as peak generators. So early retirements of the fossil fleet of generators will continue through the 2030s.

    Solar and batteries will scale up faster than electricity demand coming from transportation. Installed solar has been growing at 47% per year for the last ten years. Batteries and solar can continue to grow at 50% per year for the next 30 years. Even if EVs grow at a slightly faster pace, it will create enough demand to consume incremental solar energy. Owners of fossil power plants will get burnt.
    Jun 12, 2015. 02:26 PM | 3 Likes Like |Link to Comment
  • Taking Advantage Of The Oil And Solar PV Disconnect [View article]
    The National Bank of Abu Dhabi says that solar PV is competitive with crude oil at $10/barrel for power generation. Globally only 5% of power is generated from petroleum, but this tiny share will shrink rapidly. Even remote communities in Alaska are using solar to offset diesel generators. PV beats oil hands down.

    http://bit.ly/1xFQHUu
    Mar 20, 2015. 11:09 AM | 1 Like Like |Link to Comment
  • Patent Portfolio Sharing Allows Standardization Which Profits The Gigafactory [View instapost]
    There are.many advantages. One is to focus battery tech research across the industry and academia on those innovations within Tesla's platform. A second is to concentrate the addressable market using that platform. Basically if the size of the market using Tesla's platform is larger and expected to grow faster, then it will attract more research investment. This is critical because the intensity of research investment drives how quickly the technology advances. A key performance metric for Tesla is energy denisity, Wh/kg. This drives both the range.that a battery pack is able to deliver and the cost per kWh. Energy density has been doubling every 10.years. This pace needs to continue or accelerate. Opening Tesla's patents has the potential to focus and attract the research that may well accelerate the technology. This is a huge potential benefit for no meaningful cost.
    Jun 17, 2014. 07:05 PM | 1 Like Like |Link to Comment
  • Tesla's Gigafactory Will Be A Grand Slam [View article]
    The GF will probably breakeven before it reaches nameplate capacity. Consider that battery packs currently cost $200+ per kWh and that the GF should reduce the cost by 30% or more. This is a savings of at least $60M per GWh of battery packs. So they need to produces 83.3 GWh to breakeven on $5B for the factory.

    At nameplate capacity, the GF will produce 50 GWh per year. So two years at nameplate is worth $6B in savings. But payback will come even sooner. Ramping up from 2017 to 2020 should suffice to produce at least 83.3 GWh. For instance, a modest ramp up of 10, 20, 30, 40 from 2017 to 2020 accumulates to $6B in savings by 2020. A more aggressive ramp up of 15, 30, 45 would yield $5.4B in savings by 2019.

    The faster Tesla moves on this, the sooner the GF will pay for itself and amply reward shareholders.
    May 15, 2014. 09:36 AM | 4 Likes Like |Link to Comment
  • Tesla's April Sales Begin Flowing In [View article]
    The April to January comparison is fair given intra-quarter logistical issues.

    Moreover, the story is bullish if you summarize. Jan 997 total. Apr 1376 total. This is an increase of 38%!

    Tesla is clearly moving more inventory at head of the quarter. This bodes well for the rest of the quarter.

    The author claims this is "inconclusive." Actually, this is quite good for Tesla, but the author is too biased against the company to admit it.
    May 13, 2014. 03:14 PM | 2 Likes Like |Link to Comment
  • Will Tesla Go To $180 Or $239 After Earnings? Doesn't Matter To Me [View article]
    EVs don't have to compete with each other. They only need to compete with gas vehicles.
    May 5, 2014. 10:19 PM | 1 Like Like |Link to Comment
  • Chinese Solar Panel Prices Set To Increase: Who Will Benefit? Who Will Be Hurt? [View article]
    If it were to become advantageous for SCTY to make their own panels, I'm sure they would acquire a panel maker. But otherwise, panels are pretty much a commodity product and so far not worth the added risk for SCTY to manufacture.
    Apr 17, 2014. 11:12 AM | Likes Like |Link to Comment
  • Tesla Sales In Norway Blowing Records Out Of The Water This March [View instapost]
    Simpleton shorts just can't believe that "demand" doubled in one quarter. Must be a trick of the Devil.
    Mar 31, 2014. 07:33 PM | 1 Like Like |Link to Comment
  • Tesla's Deflationary Creative Destruction Has Not Even Begun [View article]
    Wealth destruction is seriously overstated here. Ordinary depreciation of most business assets destroy wealth at a faster rate.

    Suppose you open brand new gas station today. Depreciation of the building will be over 30 - 40 years, or about 3% per year. All of the equipment in your gas station will depreciate at a much higher rate than that.

    Now let's consider how much demand destruction EVs will have. Suppose by some miracle Tesla and other EV makers come to capture 20% of new car market in 10 years. (If this were the case I'd make millions on my TSLA stocks alone, but that's just my wealth.) Now about 5% of the auto fleet is replaced with new vehicles each year. So 10 years out the fleet of ICE vehicles is declining by no more than 1% per year (20% of 5%). This means demand for your service station product is declining by about 1% year due to EVs.

    So 10 years out, your gas station building and equiment has depreciated by more than 30% and continues to decpreciate around 3% per year. Meanwhile, demand for your business is falling 1% per year. So as service stations depreciate, they will not reinvest at the same level. Maybe reinvestment in service stations will fall off to 65% of full replacement. The entire industry will contract about 1% per year.

    This is a slow enough transition that no service station owner will need to suffer any loss of wealth. Rather they can progressively reinvest their wealth in new market opportunities that emerge as consumers shift spending dollars that once went to gas and ICE maintenance to other more satisfying consumer goods.
    Mar 19, 2014. 01:39 PM | 1 Like Like |Link to Comment
  • Can New Jersey Harsh Tesla's Mellow? [View article]
    “We need to talk about the fact that we are for a free-market society that allows your effort and ingenuity to determine your success, not the cold, hard hand of the government.” -- Gov. Chris Christie at CPAC, March 6, 2014

    http://onforb.es/N68q6l
    Mar 12, 2014. 09:39 AM | 23 Likes Like |Link to Comment
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