While we were all out watching fireworks and flipping burgers on the on our nation’s Independence Day, solar installer SolarCity quietly turned 2. The startup’s birthday also came in a week when San Francisco began offering residents rebates — $3,000 to $6,000 per solar power system — and SolarCity is one of the installers that has been working with San Francisco’s Mayor to get the program (finally) passed. Here are 10 questions we wanted to ask SolarCity’s CEO Lyndon Rive about the company’s business model, community programs and power purchase agreements:
1). San Francisco just passed one of the most aggressive municipal solar project in the U.S. How will SolarCity capitalize on this project?
SolarCity has been working with Mayor Gavin Newsom’s Office of Economic and Workforce Development on getting this incentive passed since Day 1, so we are thrilled to see the city realize its goal of making solar power affordable for San Francisco residents. We’ve committed to opening a training academy in the Hunter’s Point neighborhood to help create green jobs in the city, and we’re on track to open this summer. The incentives vary by neighborhood and income level, but the most aggressive incentives can allow us to offer our lease program to San Francisco residents for as little as $24 per month.
2). The solar installation business seems to be based more on traditional business tools, like marketing and efficient business processes, than many other technology companies in Silicon Valley. How does SolarCity differentiate itself from other installers?
SolarCity’s founding mission was to make solar a more realistic option for everyone by making it as affordable and easy to use as electricity from the utility company. Technology actually plays a bigger role in our business than may appear on the surface. My brother/co-founder and I founded and ran a technology company for 10 years prior to starting SolarCity, and we leverage a number of proprietary technologies to create efficiencies that we feel are unique in the solar industry.
Beyond technology, we believe our SolarLease program — which eliminates solar’s upfront cost and can allow residents to start saving money from the moment their solar system is connected — is the most affordable way to adopt solar power, period. SolarCity’s primary differentiation, though, is as the only company that is truly a single source for financing, design, installation and support. I think that attribute, more than any other, has allowed us to become the no. 1 residential installer in California, with more recorded installs and reservations in the California Solar Initiative (CSI) database than any other company.
3). Is SolarCity able to make a profit off the plan that features the zero-down-payment plus a monthly fee that’s lower than standard energy bills? And if so, what are the margins of that payment plan?
Yes. We leverage volume purchasing from multiple suppliers, and we’ve created a number of efficiencies in the sales and installation process that allow us to install zero-down systems profitably. We’re still private and have the luxury of not discussing our margins. But I will say that while SolarLease is an incredible deal for our customers, it’s still a very sound business for us as well.
4). Has SolarCity been looking into (or already using?) thin-film solar technology? If so what technologies and companies are most interesting to SolarCity?
Thin film is a very interesting and promising technology. Thin film’s efficiency is not at a place today where we think it makes sense yet for our residential or smaller commercial installations. Thin film is a great technology for utility-scale installations, where available space is not an issue. We’re not a manufacturer, which allows us to be technology agnostic. Photovoltaic still makes the most sense for us today, but we’re continuing to explore new technologies all the time.
5). What percentage of SolarCity’s business is residential vs. commercial and government installations? Do you expect this to change over the coming years?
We’ve been the market-share leader in residential in California since the beginning of 2007. Commercial and government have picked up dramatically, and we have the largest commercial installation in San Jose at eBay, and we’re wrapping up the largest privately owned commercial installation in San Francisco, which we’ll unveil later this summer. We don’t break down the percentages, but we’re experiencing healthy growth in all three areas.
6). SolarCity has raised over $30 million; does the company need to raise any more? And if so, what stages of fund raising are you in?
We’re well capitalized, and right now we’re focused on meeting the demand for SolarLease and expanding to support new geographies.
7). Will SolarCity change its business model if the ITC is not renewed by the end of the year?
We expect the ITC to be renewed—more than 75 percent of the population and the Congress support extending it in some way. However, we do have a strategy in place in the event it is not. It would be very bad for the industry in general, but we would still have a viable business model.
8). A few companies are starting to offer PPAs for residential solar. Does SolarCity already or plan to offer this financing model?
SolarCity does offer PPAs and you can expect to see more from us on this topic. Fundamentally, the lease and the PPA are different ways to accomplish similar goals for the customer. The problem with the other residential PPAs offered today is that they still require the customer to pay 40 percent or more of the upfront cost of the system, which can range anywhere from $5,000 to $30,000 or more depending on system size. We designed SolarLease to deliver an immediate, positive return on the customer’s investment. The larger upfront cost of today’s PPAs means that the positive return on the investment in solar doesn’t come for many years down the road.
9). How successful has your community program been? How many group installations has the company done?
We’re proud to have invented the community program, and it has been tremendously successful for us. We’ve done roughly 1,000 installations based on those programs. I think the best indication of the model’s success is how many other solar companies have adopted it, and that’s great for the consumer and great for the industry.
10). The company just moved into Arizona. Will we see SolarCity getting aggressive in other states this year? Are there international plans in the works?
You can expect to see further expansion from us this year, but we’re more focused on maintaining a consistent, quality customer experience as we grow. We employ all our own installers, designers and customer care staff, and all of our employees have an ownership stake in the company. We were No. 1 in California in our first full year of operation, and we expect to be No. 1 in Arizona by the end of the year. Expansion is part of our plan, but it’s more important to continue to deliver the quality of experience we’re known for today. That will serve us best in the long run.