It was time to choose a solar installer.
My first call was to SolarCity, which bills itself as “the world’s largest solar provider.” The chairman of the company’s board is Elon Musk, the man behind Tesla Motors, the maker of beautiful (and expensive) electric cars. So I was excited to talk to SolarCity. I suppose I was expecting a glimpse into the future of solar.
Instead, I was routed to SolarCity’s “call center” where I spoke to a guy named “Russ.”
“Do you hate utility companies?” Russ told me excitedly. “Good. Because this is your chance to do something good for the environment and stick it to the utilities!”
“Our partners include the U.S. Armed Forces, Google, Walmart, BMW, Bank Of America, Tesla, Ebay, Paypal, Hewlett Packard and the list goes on…”
“There’s a reason why every 36 seconds we do two of every three installs in America today.”
SolarCity would be happy to send someone out to my house, Russ told me. But first I had to sign a contract.
I wasn’t comfortable signing anything. By this point, I had called a few other companies. SolarCity was the only one that wanted me to sign a contract before they sent someone out to my home.
“Smaller companies will do that all day,” Russ told me. “They don’t carry our overhead, nor are they responsible for the type of partnerships we are. We spend $2,500 every time we schedule a site survey. That cost is absorbed by SolarCity. However, our partners demand accountability. So to re-cap, I can help you. In fact your, deal is a no brainer. But you have to help me help you.”
Help me help you? Was I talking to Jerry McGuire?
If Russ’s pitch rang alarms, a closer look at the company’s SEC filings sent me running. SolarCity was losing money at alarming rate. The company’s after-tax losses went from -$113 million in 2012 to -$375 million in 2014. And losses in 2015 were on track were on track to be even bigger.
Revenues were growing fast, but they were not outpacing the cost of attracting new customers like me. SolarCity spent nearly every dollar in revenue in 2014 on sales and marketing, including the sales team that pesters me in The Home Depot.
SolarCity’s business model was to sign up customers with little or no up front costs to 20 year leases on solar panels. In exchange you receive a lower bill. However, these bills can increase by as much as 2.9 percent a year, much like a utility.
In essence, your power bill becomes a mortgage to SolarCity. These leases are bundled together and sold to investors, along with the federal solar tax credit for your panels. Or you can buy Solar Bonds. SolarCity has started lending money to buy your panels outright.
SolarCity’s growth has been heavily subsidized by taxpayers. The company has collected $400 million in federal solar tax credits. When the federal tax credit eventually goes away — along with net metering — what will become of the company? Will bonds fill the void? Who knows?
What was Elon Musk doing putting his name on this company? SolarCity’s founders are Musk’s cousins, and I wondered whether that relationship was hurting his judgement.
I might have been willing to overlook all of this if the price was right. SolarCity likes to tell investors that its position as industry leader gives it “economies of scale” that allow it offer lower prices than its competitors. As it turned out, that wasn’t true.
SolarCity wanted to charge me $18,900 for a 3.71 kw system.
The best way to compare solar contracts is to look at dollars per watt. SolarCity’s offer worked out to more than $5 per watt.
A fair price for a solar system is $3.50 per watt. Even better if you can get it for less.
So much for the “economies of scale.”