Thursday, September 18, 2014

Solar: Meet the New Boss, Same as the Old Boss (SCTY; SUNE; TERP)

Amid heartfelt We Shall Overcome's and speechifying about decentralized solar sticking it to the man-in the form of your local utility-is the dawning realization that the panels going on residential rooftops are owned by financial forces that are orders of magnitude larger than the utilities they replace.
From Bloomberg via Yahoo Finance:
Musk Solar Strategy Used as Model for Record Investments
Private equity and venture capital firms are pouring record investments into rooftop solar, following a model popularized by billionaire Elon Musk's SolarCity Corp. (SCTY) -- sell power, not panels. 

They're on pace to supply $5 billion this year for residential and commercial solar projects, up from $3.3 billion in 2013, according to the researcher Mercom Capital Group LLC.

The funds are going to companies such as Sungevity Inc. and Sunrun Inc. that sell electricity, a shift from the last boom year of 2008 when venture capital and private equity investors provided $4.97 billion, mostly for solar-panel factories. That helped spur a price war that bankrupted dozens of companies including Solyndra LLC. 

"It's become clear that it's a legitimate asset class, a legitimate source of electricity," said Tom Athan, a managing partner Altus Power America Management LLC. The Old Greenwich, Connecticut-based company finances commercial-scale solar projects and expects annual returns of 8 percent to 10 percent for the next several years from selling electricity.

"Questions from a few years ago -- ‘How do I know the sun is going to shine enough to make the amount of power you say?' or ‘What if the solar panels don't work?' -- nobody asks those anymore. They accept it's going to happen," he said. 

Rooftop Power
SolarCity transformed the industry by giving investors a way to take advantage of the declining cost of solar cells. Often for no money down, the San Mateo, California-based company installs panels atop homes and commercial buildings, leasing the systems back to property owners who save on their electricity bills. 

SolarCity's stock has increased more than eightfold since its December 2012 initial public offering, buoyed by strong demand from consumers seeking to produce their own electricity and reduce their monthly utility bills. That's outperformed Musk's better-known company, the electric carmaker Tesla Motors Inc. Musk is SolarCity's chairman and biggest shareholder. 

"We knew that in order to maintain quality and be able to scale, you have to build up your own infrastructure," said SolarCity Chief Executive Officer and co-founder Lyndon Rive. "Our competitors are now realizing that." 

Private-equity companies invested $2.4 billion in rooftop solar plants in the first half of 2014, and the total may reach $5 billion for the year, according to Austin, Texas-based Mercom.
‘Nice Returns'
"There are very nice returns to be had, especially given the scarce number of ways investors can really get good returns that don't have a lot of risk to them," said Cynthia Ringo, a managing partner at DBL Investors, a San Francisco venture-capital company....MORE 
Or maybe the realization isn't dawning. All the better.
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