{"id":14034,"date":"2016-11-04T17:59:01","date_gmt":"2016-11-04T21:59:01","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/sunny-days-ahead-for-solarcity\/"},"modified":"2016-11-04T18:00:35","modified_gmt":"2016-11-04T22:00:35","slug":"sunny-days-ahead-for-solarcity","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/sunny-days-ahead-for-solarcity\/","title":{"rendered":"Sunny Days Ahead for SolarCity?"},"content":{"rendered":"

\"Micah<\/a><\/p>\n

SolarCity\u2019s Mission: Protecting Your Wallet and Our Planet<\/strong><\/p>\n

SolarCity offers a simple value proposition of lowering its customers\u2019 energy bills by providing solar energy solutions for little to no initial investment. Sounds like a win-win, right? Any rational consumer loves saving money \u2013 particularly in situations where spending less money for a given service (electricity) does not compromise the perception of value delivered to the consumer.<\/p>\n

Washington is taking the issue of climate change quite seriously: on October 3, 2015, President Obama and the EPA announced the Clean Power Plan \u2013 a historic and critical step in reducing carbon pollution from the power sector. The Plan requires a 32% reduction in the sector\u2019s carbon pollution within fifteen years.[1]<\/a> As America\u2019s #1 vertically integrated provider of residential and commercial solar energy solutions, SolarCity has been a clear beneficiary of the nation\u2019s newly energized conversation around sustainability. The numbers also seem to support this thesis \u2013 given the most recent publicly available data, the company maintained 35% market share of the residential distributed solar installation market.[2]<\/a><\/p>\n

Is the Business Model as Sustainable as the Energy Source?<\/strong><\/p>\n

In the United States, federal, state and local governments collaborate with public utility providers to determine policies and regulations that directly or indirectly impact the price of electricity. One key driver of SolaryCity\u2019s value-creating abilities concerns a regulatory policy known as \u201cnet metering\u201d, which currently exists in 41 states.[3]<\/a> Net metering is a billing system that credits individual customers for the full retail value of the electricity that their system generates. The idea is that since your solar panels will typically produce more energy than you will consume during a given period, you should only pay the difference \u2013 or the net amount \u2013 and sell the rest back to the grid.<\/p>\n

A second, more explicit subsidy, known as the solar Investment Tax Credit (ITC), is also instrumental to the viability of the SolarCity business model. The ITC currently offers a 30% federal subsidy to tax equity investors in solar projects \u2013 Congress recently extended the policy through the end of 2019, after which it will taper off to 10%.[4]<\/a> This is truly a game changer: By 2020, the U.S. will be installing 20 GW of solar capacity each year (to put this in perspective, at the end of 2014, 20 GW was the total amount of solar that the country had installed in its history)![5]<\/a> As a result of the multi-year ITC extension, solar prices are forecasted to decline while installation rates and technological efficiencies will rise over time.<\/p>\n

Over the last few years, SolarCity has taken strategic moves to vertically-integrate its supply chain through acquisition. These steps have helped optimize the company\u2019s cost structure (lowering cost per watt), but they alone are not sufficient to generate attractive returns on invested capital without some sort of subsidization. Critics assert that in the absence of tax policy loopholes such as the ITC, SolarCity\u2019s model would no longer be sustainable.<\/p>\n

Can Elon Save the Day?<\/strong><\/p>\n

On July 31, 2016, SolarCity entered an agreement to merge with Tesla Motors, in a $2.6-billion all-stock deal, subject to shareholder approval.[6]<\/a> It is important to recognize that brothers Lyndon (CEO) and Peter (COO) Rive co-founded SolarCity in 2006, along with their cousin Elon Musk, who serves as Chairman of SolarCity AND Tesla. In many ways, the future of SolarCity is inextricably linked to that of Tesla \u2013 both companies share Musk as a visionary leader and \u2018key man\u2019 stakeholder. Tesla\u2019s decision to acquire SolarCity is predicated on the assumption that there is a longer-term, value-creating opportunity to reduce dependence on national grid interconnections by localizing renewable energy through a Tesla \/ SolarCity partnership. \u2018But what do cars have in common with solar cells and backup battery systems?\u2019 you might ask. The next step is to go \u201coff the grid\u201d entirely, by using solar cell systems to generate energy which can do anything from power a home or re-charge an automobile. Storage is essentially the buffer by which consumers can reliably ensure that they have access to energy 24 hours a day, even when the sun isn\u2019t shining. In a surprise move, Institutional Shareholder Services (ISS), an influential shareholder proxy service, said today that it believes the deal makes strategic sense for both parties, and should be approved.[7]<\/a><\/p>\n

Perhaps sunny days do lie ahead for SolarCity.<\/p>\n

(731 words)<\/strong><\/p>\n

 <\/p>\n

[1]<\/a>\u00a0EPA. 2016.\u00a0https:\/\/www.epa.gov\/cleanpowerplan\/fact-sheet-overview-clean-power-plan<\/a>\u00a0. Accessed November 2016<\/p>\n

[2]<\/a> SCTY Investor Presentation. 2016.\u00a0http:\/\/files.shareholder.com\/downloads\/AMDA-14LQRE\/3157059545x0x830612\/1A32ABBC-4024-44B9-8F81-1B5BD77DD00B\/2016.06_SCTY_Investor_Presentation.pdf . Accessed November 2016<\/p>\n

[3]<\/a>\u00a0Ibid<\/p>\n

[4]<\/a>\u00a0SEIA. 2016.\u00a0http:\/\/www.seia.org\/research-resources\/impacts-solar-investment-tax-credit-extension<\/a>\u00a0. Accessed November 2016<\/p>\n

[5]<\/a>\u00a0Ibid<\/p>\n

[6]<\/a>\u00a0WSJ. 2016.\u00a0http:\/\/www.wsj.com\/articles\/tesla-and-solarcity-agree-to-2-6-billion-merger-deal-1470050724 . Accessed November 2016<\/p>\n

[7]<\/a> WSJ. 2016. http:\/\/www.wsj.com\/articles\/proxy-service-iss-endorses-proposed-tesla-solarcity-deal-1478275610 . Accessed November 2016<\/p>\n","protected":false},"excerpt":{"rendered":"

The future of SolarCity remains uncertain, yet promising.<\/p>\n","protected":false},"author":2466,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-14034","hck-submission","type-hck-submission","status-publish","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nSunny Days Ahead for SolarCity? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/sunny-days-ahead-for-solarcity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sunny Days Ahead for SolarCity? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"The future of SolarCity remains uncertain, yet promising.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/sunny-days-ahead-for-solarcity\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2016-11-04T22:00:35+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/scty1-300x179.jpg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/sunny-days-ahead-for-solarcity\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/sunny-days-ahead-for-solarcity\\\/\",\"name\":\"Sunny Days Ahead for SolarCity? - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/sunny-days-ahead-for-solarcity\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/sunny-days-ahead-for-solarcity\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/scty1-300x179.jpg\",\"datePublished\":\"2016-11-04T21:59:01+00:00\",\"dateModified\":\"2016-11-04T22:00:35+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/sunny-days-ahead-for-solarcity\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/sunny-days-ahead-for-solarcity\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/sunny-days-ahead-for-solarcity\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/scty1.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/scty1.jpg\",\"width\":640,\"height\":382,\"caption\":\"Micah Fromkin, right, crew leader for Solar City solar panel installers and Christian Lee, a junior installer, carefully place a solar panel onto the roof of a residential building in San Francisco, Wednesday, March 11, 2009. 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