Whenever the topic of solar panels comes up in social conversation, I often hear things like "Yeah, that sounds great, but what do you do when it's overcast or at night?" SolarCity (SCTY) has solved that problem with its announcement of a partnership with Viridian Energy.
SolarCity, as you probably are already well aware, provides solar panels for customers with no money down and sells back to the customers the electricity generated at cheaper rates than their utility company, thereby eliminating the financial capital and risk that often shies potential customers away from solar panels. At the same time, it creates a perpetual cash flow stream for SolarCity as it maintains ownership of the panels, essentially creating a mini, company-owned power station at the customer's home or business. The genius of this business model is that it breaks free the traditional hesitation that many people have who fear the reliability and risk. Now the new partnership with Viridian gives customers a backup option all in one complete package so that cheap, clean electricity will be provided even when the sun doesn't shine. It's always clear skies for SolarCity customers.
Viridian Energy is a relatively new company, starting out in 2009 with $2 million in revenue, growing to $205 million in 2011. It claims to simply use the power of deregulation to supply customers with energy, through their existing power companies, that's cheaper and cleaner. Just like SolarCity's claims, it sounds like a can't lose. Save money and help save the environment. According to Viridian's website:
The deregulation of energy in the United States gave you, the consumer, the ability to choose your energy supplier while remaining with your current utility company for delivery, service and billing. That choice is a simple and powerfully effective way for you to support the things that really matter to your family and community. Viridian is not the only energy company you can choose, but we are the only one that offers "Power with Purpose," allowing you to help the environment every single day, save money on your utility bill over time and be part of a profound local and global impact. Who knew one simple choice could do so much?
While of course it's not necessary to be a SolarCity customer in order to be a Viridian customer, clearly it's a neat, simple marketing package that should help both companies. It reminds me of cable companies success selling phone, internet, and TV all bundled in one package and at a discount. Keep in mind that while I firmly believe this is a positive for SolarCity that will no doubt help increase its sales and backlog, there's still a question of valuation for SolarCity. Frank Carson wrote an excellent article discussing some of the risks associated with SolarCity and its valuation. I recommend investors read it before investing to consider the other side of the trade, and then only invest, if one is inclined to do so, at a price point where the valuation makes sense. It's very difficult this early in SolarCity's young life to pinpoint a proper valuation based on numbers so investing requires a lot of speculation into the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.