As old coal plants go offline the utility guys are replacing with solar that is now just as cost competitve .. Solar 1% of utility industry currently.. 20-30% down the road doable IMO.. That's a lot of room to grow.. Plus that 20-30% is always increasing as energy demand for mankind continues to balloon
thought this article good overview of why so many solar companies have failed over the years.. First solar seems a bit too conservative for my tastes and not sure they will be able to keep up with the new advances.. Sunpower seems more into optimization of existing technologies and keeps up with advanced and at same time has fairy healthy balance sheet while projections of new projects next 5 years look healthy.. Only thing that concerns me on sunpower is recent trend in last few years of falling cash flow.. Still mulling it over..
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the Enemy of Solar Stocks
Rooftop solar is becoming big business, but it costs billions to create the manufacturing capacity to build solar, and someone has to finance the long-term cash flows these systems generate. Image source: SunPower.
On the surface, you would think renewable energy companies that can grow quickly and exploit the industry's massive potential should be the kind of companies investors will want to buy and hold for the long term. But time after time, the companies that grow the fastest have been abysmal investments. Suntech Power, LDK Solar, Yingli Green Energy, and SunEdison (NYSE:SUNE)are just a few of the former industry highfliers that have gone from darling status to bankruptcy, or that teeter on the verge of financial insolvency. They also provide a similar story of growth, debt, and massive losses that couldn't be overcome by even more growth.
So, why is growth such a bad thing for renewable energy companies, and why have slow or no-growth companies like SunPower (NASDAQ:SPWR) and First Solar (NASDAQ:FSLR) been able to survive while others rise and fall around them? The answer lies in what companies have to do to grow in the solar industry in the first place.
Growth adds debt
To fund growth, solar companies have to invest a lot of money in capital projects. Whether you're a solar installer like SolarCity (NASDAQ:SCTY) putting systems up on roofs across the country or a manufacturer like Yingli Green Energy, it takes capital to build out capacity.
In most cases, the capacity being built will pay off over 10 to 20 years, either from selling products like solar panels or from collecting customer payments. So, solar companies are spending billions up front to generate a long-term payoff, and usually that means adding a lot of debt to fund operations.
Debt isn't necessarily a bad thing for growth companies, but solar is different than most industries. Falling costs create a larger market for the solar industry, but they also create challenges in making enough money to pay off debt.
Falling solar costs are bad for growth
For most businesses, growing volume is the path to long-term growth. But in solar, it can be a path down the rabbit hole, because costs are falling so fast. The phenomenal returns you've projected for that new manufacturing plant or fleet of installations in year one can quickly dry up once the growth train stops.
Let's take a solar panel manufacturer as an example. This hypothetical company starts off with a brand-new manufacturing plant that has initial production of 100 MW; over the course of the first four years of operation, that capacity will be increased to 300 MW. Total cost for this plant is $300 million ($1 per watt), and debt used for funding construction has an 8% interest rate.
Assume that the cost of solar panels from the manufacturing plant begin selling for $2 per watt but decline in cost 25% per year and generate a consistent gross margin of 20%.
Metric Year 1 Year 2 Year 3 Year 4 Year 5 Volume 100 MW 200 MW 250 MW 300 MW 300 MW Sales/Watt $2.00 $1.50 $1.13 $0.84 $0.63 Sales $200 million $300 million $282.5 million $253.1 million $189.8 million Gross Margin $40 million $60 million $56.5 million $50.6 million $38.0 million
Author's calculations.
You can see that in year one the company's gross margin was $40 million, and in year two, that grew 50% to $60 million. But by year five the company was generating less gross margin than ever before and had little hope of increasing margins in the future, because solar costs are going nowhere but down.
If we also assume that operating expenses might be $30 million for this company, we can see the dilemma starting to unfold. $54 million in gross margin would be needed to pay for the $30 million in operating costs and $24 million in interest on the debt, so this company goes from a profit in years two and three to losing $16 million by year five.
This is just an example, but if you look at what happened to companies that built out manufacturing capacity with debt (Suntech Power, LDK Solar, Yingli Green Energy), you'll see similar story lines playing out. Falling costs in the solar industry lead to falling profits unless you have enough volume growth to make up for the lost margin. And growing margins require even more capital investment.
[COLOR=rgba(0, 0, 0, 0.65098)]Image source: SolarCity.
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Financial engineering works -- until it doesn't
One way many solar installers got around the growth conundrum I described above is by using financial engineering, particularly on the installer side of the business. If I sign a contract with a customer for 20 years, I can divvy up the contract payments and tax benefits, selling them to different parties and taking a profit along the way. This is what SolarCity has done with tax equity and asset-backed securities.
Another method that became popular was funding growth through yieldcos, which could continually issue shares and debt to buy projects. As long as the cost of debt and equity was lower than the returns, these projects providing this structure could go on indefinitely. This is what SunEdison did when acquiring billions of dollars in businesses over the past few years, assuming it could fund acquisitions through its yieldcos.
Both structures make a lot of sense on paper, but they're reliant on strong market sentiment to allow financing to remain open -- and market sentiment can be fickle. When the price of yieldco stocks began to fall, it crushed the thesis that SunEdison could grow indefinitely and just fund projects through its own yieldcos. And when investors started to question how long SolarCity could keep up growth at the margins it promised, and if those margins would ever be realized in the first place, the stock was hit hard.
When you're reliant on financing from third parties to fund growth, then your very business model isn't very self-sufficient. Financial engineering can make solar companies look really good, but until you have the cash in your pocket, the projections these companies put out are just that -- projections. And that's a tough thing to build a business on.
Building a solid foundation is hard
Growth seems like it would be a big advantage in the solar industry, but too often it's been a road to ruin for both companies and investors. Using debt to fund growth built on falling costs and the volatility of businesses built on financial engineering have played a major role in the demise of some of the industry's biggest players.
Left standing are SunPower and First Solar, two companies that won't knock over anyone with their growth but that continue to churn out profits year after year. They do this by managing their balance sheets conservatively and by not overinvesting in growth, even when the opportunity in solar seems too big to pass up.
SPWR Revenue (TTM) data by YCharts.
The dislocations happening in high-growth companies have also become an advantage for First Solar and SunPower, which can sell utilities and commercial customers on their stability and long-term viability, which should help to expand their margins above competitors'.
Yieldcos, which were SunEdison's weakness, could be a strength for both companies because they have financing flexibility. Their lack of leverage in the past means they have flexibility to build projects on the balance sheet, sell them to third parties, or sell down to the yieldco at their leisure.
Sometimes a conservative approach wins in the long term, even in high-growth markets. And it looks like those companies that chose to build a fundamental advantage before growing at breakneck speed will be the ones that pay off for investors in the long run.
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Yeah, at the end of the day the panels are the commodity and they're rapidly dropping in price. Similar to other commodity based businesses that experience big price drops, tough for the companies not to get squeezed. Especially when mass-manufacturing is so new. Then you got big marketing costs as well.
This is why smaller, local installers do better with rooftop, because they don't have the high overhead that a SolarCity has.
I still think SolarCity is the best play because of the vertical integration with Tesla. Atleast it has the highest upside. If TSLA hits a homerun then I'd think SCTY is along for the ride.
20-30% tough to say. In sunny locales it should be 50% or more but then some states it won't be able to crack 10% probably. Depends how fast the technology improves.
Then you also take into account that these wells are in tight non formations not even in a conventional resovoir .
They have little or no bottom hole pressure which means they cannot flow on its own.
They need an extraction process to force the hydrocarbons to the surface. A conventional well has bottom hole pressure which means all you really have to do for the full first half of its life is to open up the wing valve on the well and the well will hit surface on its on.
It not till much later in its lifespan that you have to inject natural gas into the casing through gas lift valves that these wells need any kind of assistance or injection to bring hydro carbons to the surface.
These are issues horizontal shale wells in tight formations have to deal with from day one.
They have little or no bottom hole pressure which means they cannot flow on its own.
They need an extraction process to force the hydrocarbons to the surface. A conventional well has bottom hole pressure which means all you really have to do for the full first half of its life is to open up the wing valve on the well and the well will hit surface on its on.
It not till much later in its lifespan that you have to inject natural gas into the casing through gas lift valves that these wells need any kind of assistance or injection to bring hydro carbons to the surface.
These are issues horizontal shale wells in tight formations have to deal with from day one.
That type of partnership is kinda the beginning of the end though. Once the manufacturer is assisting you in selling cars with them, then what really is your value? The business is just antiquated in a lot of ways, it isn't really trying to reveal that.
I could be wrong on this but I'm pretty sure the way the big automaker supply chain works wouldn't really be able to allow for that type of on-demand customization. It would definitely create some challenges. They would rather just produce a shit ton of cars and let the consumer do the legwork.
I really don't recall hearing that fracking is cheaper than conventional drilling in popular media. Although I guess cheaper fuel costs = cheaper methods to get the fuel is probably the simple calculus that media and consumers are doing, if that is what you meant. Oil cheap = must mean we found cheap oil! seems to be the thought process.
The main thing I recall was what I told you earlier when I said that I thought the process of stopping/starting fracking was easier than conventional, that seems to get played as setting a cap on prices.
No chance.
The starting stopping thing is 100% false.
Its the opposite.
I will link some stories from some people when I have time in the next day or 2 to prove it.
The drilling takes longer .
The completion takes longer .
The upkeep is much more expensive .
Shuting in a frack well does much more damage then Shuting in a sand zone well.
As a matter of fact Shuting in a sandzone well for a long period of time is good for a well it's the opposite for a frack well .
Its very common for a company to shut in a sand well for several years after years of flowing and come back years later.
What happens in that case is the oil will go to the top of the formation above the water and greatly reduce the amount of water coming to surface and the bottom hole pressure will increase from years of being shut in.
There is no advantage to Shuting in a frack well. Only negatives.
This is another reason why the next spike is going to be like you have never seen.
Cause back in the day once oil prices started coming up we all these sand zone wells that have been shut in for a long period of time producing higher levels of production then they had before Shuting in for a period of time.
Its not going happen like that next time.
The excess will be absorbed quickly and there won't be any immediate way to make up for the loss.
Misperception #8: You can turn shale on and off. That’s wrong. Shale takes time like any other industrial activity. Slowing down its progress is a bit like stopping a supertanker. You can do it, but you need a lot of room. Most drillers require contracts and breaking them can be painful. Sand can pile up at rail sidings and result in demurrages. Layoffs can take time. Regulatory penalties may force an operator into activity whether he wants activity or not. All this takes time to work out. And then there’s always the stronger balance sheets that will drill regardless of price or that will drill and create a “fracklog” which is a newly minted MBA speak for a backlog of wells to frack. There is no switch you can flip.
The above is from a story titles "The 12 biggest myths about low oil prices.
The above is from a story titles "The 12 biggest myths about low oil prices.
There is just nothing to support shale wells acting as a cap for oil prices.
There are some people on the internet you can find who really knows what they are talking about if you do the correct search .
But you won't find anything from yahoo or the wall st journal that speaks the truth for whatever reason.
There are some people on the internet you can find who really knows what they are talking about if you do the correct search .
But you won't find anything from yahoo or the wall st journal that speaks the truth for whatever reason.
But you won't find anything from yahoo or the wall st journal that speaks the truth for whatever reason.
Same goes for most things nowadays, there are simply too many vested interests.
Nowadays you've got to do your own research.
Even interesting articles are "buried" in public news sites if they don't tow the party line, this case was front page stuff when they were getting creamed by the establishment
Same goes for most things nowadays, there are simply too many vested interests.
Nowadays you've got to do your own research.
Even interesting articles are "buried" in public news sites if they don't tow the party line, this case was front page stuff when they were getting creamed by the establishment
Trump in 99
TRUMP: Well look, I’m, I’m, very pro-choice. I hate the concept of abortion. I hate it. I hate everything it stands for. I cringe when I listen to people debating the subject. But you still, I just believe in choice. And again, it may be a little bit of a New York background because there is some different attitude in different parts of the country, and you know I was raised in New York and grew up and work and everything else in New York City. And I am strongly for choice, and yet I hate the concept of abortion.
Today as a liberal plant to ensure Hillary gets in liberals get control of Supreme Court..he says women who get abortions should be "punished".. Just comical.. And dumb white trash actually think he's their savior.. Political system sure knows how to put on a good shit show for the masses..
TRUMP: Well look, I’m, I’m, very pro-choice. I hate the concept of abortion. I hate it. I hate everything it stands for. I cringe when I listen to people debating the subject. But you still, I just believe in choice. And again, it may be a little bit of a New York background because there is some different attitude in different parts of the country, and you know I was raised in New York and grew up and work and everything else in New York City. And I am strongly for choice, and yet I hate the concept of abortion.
Today as a liberal plant to ensure Hillary gets in liberals get control of Supreme Court..he says women who get abortions should be "punished".. Just comical.. And dumb white trash actually think he's their savior.. Political system sure knows how to put on a good shit show for the masses..
Musk said 115k already reserved before anybody even saw the car lol
now comes the hard part producing these things at a decent clip and making money on them.. Says standard comes with features I figured would be add ons.. Fast acceleration, autopilot, and some other stuff...
Like the glass ceiling too will differentiate from the pack.. Futuristic look..
will be interesting to see how they do it..produce 500k a year and Hit that price point without losing lots of money... Demand definitely there..
now comes the hard part producing these things at a decent clip and making money on them.. Says standard comes with features I figured would be add ons.. Fast acceleration, autopilot, and some other stuff...
Like the glass ceiling too will differentiate from the pack.. Futuristic look..
will be interesting to see how they do it..produce 500k a year and Hit that price point without losing lots of money... Demand definitely there..
115k pretty strong before the unveiling event even happened. I am surprised those features aren't add-on's either. I figured that stuff would push the car over 40 easily.
Yeah, demand is definitely there. Especially when you factor in Europe/China.
Musk always said the goal was 500k by 2020 but it seems like the demand is insatiable.
I'm sure you will see some production delays. Cult following he has built is impressive though. People willing to wait.
Yeah, demand is definitely there. Especially when you factor in Europe/China.
Musk always said the goal was 500k by 2020 but it seems like the demand is insatiable.
I'm sure you will see some production delays. Cult following he has built is impressive though. People willing to wait.
people finally waking up to fact that mankind is totally fucked if we don't change our ways soon (probably fucked regardless but..) ..plus people like being early adopters to new technology and tesla is the one bullying their way in forcing the change while the rest play catchup.. Tesla is to electric car what Apple was to smart phone.. There will be other players but tesla will be the cool cult like leader for a while going forward.. Assuming they can pass the the biggest challenge yet.. Figuring out how to churn these things out at this price point and not lose their ass.. Gigafactory already having issues.. We shall see.. Guess they need pretty much zero advertising so that helps ha
I would need a charge to last at least 700 miles before I could buy one.
From what I hear takes about 75 mins to give it a full charge.
I would imagine the batteries hold less and less charge the older they get just like any other battery
From what I hear takes about 75 mins to give it a full charge.
I would imagine the batteries hold less and less charge the older they get just like any other battery
Can pay more than base mode to get extended range.... Yeah battery will die eventually.. Supposedly heavy supercharger use (vs slow charge overnight at home) will kill it faster (tesla claims it doesn't but)..
early tesla models with little over 100k miles on them supposedly have 80-85% of original capacity left..
early tesla models with little over 100k miles on them supposedly have 80-85% of original capacity left..
