Published on July 19th, 2016 | by Zachary Shahan0
Cost Of Solar Systems From SolarCity vs Sunrun & Vivint Solar, + Cost Per Watt Of Solar Sales/Acquisition
July 19th, 2016 by Zachary Shahan
We’ve written a lot about average solar power prices, especially in the US — utility-scale solar power prices and rooftop solar power prices. But we’ve seldom found or teased out prices from different rooftop solar installers. I think the last time I did so was when I highlighted that SolarCity’s prices (per watt) were about 34% higher than average rooftop solar prices in California, according to a Pick My Solar analysis.
A recent article on Seeking Alpha by “Simple Investment Ideas” puts the company in a different light by indicating that SolarCity’s prices (per watt) are actually lower than prices from top competitors Sunrun (RUN) and Vivint Solar (VSLR). [Full disclosure: I’m a SCTY shareholder, but not a RUN or VSLR shareholder, since I think Silevo solar panels and SolarCity’s market dominance so far include significant competitive advantages.]
The analyst writes: “SolarCity still leads on the cost front at a Q1 cost structure of $3.18 per watt. In contrast, Vivint Solar and Sunrun reported cost structures of $3.34 per watt and $4.11 per watt respectively in the same quarter. To make matters even worse for Vivint Solar and Sunrun, SolarCity’s cost structure in Q1 was unusually high for the company as a result of inflated sales costs….To get an idea of how much SolarCity was affected by rising sales costs in Q1, the company’s Q4 sales cost stood at $.54 per watt whereas the company’s Q1 sales cost stood at $.97 per watt. These rising sales cost resulted in the company’s cost structure to grow from $2.67 per watt to $3.18 per watt QOQ.”
Clearly, one interesting thing there is that simply the process of acquiring/making sales comes to $.54 per watt in a good quarter and $.97 per watt in a bad quarter for SolarCity. With the US average installed cost of a rooftop solar system sitting at , $1 per watt is a sizable “soft cost,” which we noted years ago is a key reason US solar power costs much more than German solar power.
The Seeking Alpha analyst’s key argument is that SolarCity prices would likely drop even further if Tesla Motors acquires SolarCity, and that the result would be a challenging story for Sunrun and Vivint Solar.
The analyst also noted that SolarCity’s installation costs are relatively low. “Given SolarCity’s superior operational capabilities, evident in the company’s incredibly low installation cost of $1.98 per watt, a large sales costs advantage over Vivint Solar and Sunrun could be devastating to these companies. Even if SolarCity just manages to bring its sales costs back down to the ~$.50 per watt range, the company could conceivably have a cost structure advantage of nearly $1 per watt over its closest cost competitor Vivint Solar.”
Given Pick My Solar’s finding that SolarCity’s prices are much higher than the average in California, I’m curious and will dig in further as to why these large solar installation companies cost so much more. I’m assuming it’s a mix of the financing packages offered (all three companies have heavily focused on solar leasing/PPAs up till now) and high acquisition costs, but we’ll see. In any case, these are the three largest home solar installers in the US, so they must be doing something right!
Image by Views from the Lake