SolarCity continues installation growth in Q1, but bookings drop on policy issues

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SolarCity reported strong growth in first quarter 2016 installations and revenue, as released today. The company’s revenue grew 82% year-over-year to US$123 million on the back of a 40% growth in installations to 214 MW of combined residential and commercial solar PV, which was 19% above guidance.

Under SolarCity’s business model the company spends more than it brings in every quarter, while amassing long-term value in the form of contracted assets. Q1 was no exception, with $227 million in operating costs.

In its Q3 2015 results, the company instead announced a goal to get cash-flow positive by the end of 2016. This quarter SolarCity’s PowerCo business brought in $28 million in cash, however it also spent $6 million on R&D and $42 million on overall manufacturing expenses. Overall, the company’s cash position fell $32 million to $362 million.

In previous quarters SolarCity has alluded to delays at the facility in Buffalo, New York. During this quarterly call there was little mention of Buffalo, but the clock is ticking for the factory to be completed on time.

In terms of raising capital to support its business model, SolarCity continues to excel and break new ground. The company raised $728 million in project financing during Q1, including what it describes as a first-of-its kind facility to provide up-front financing for solar renewable energy credits, its first debt facility to provide back leverage solely for commercial projects, and $160 million, 4.1% debt facility with three banks.

A dark spot for the company’s report was bookings. SolarCity brought in only 160 MW in new bookings during the quarter, which will doubtless bite into installation numbers in coming quarters. Overall, the company brought down its 2016 installation forecast from 1.25 GW to 1.0 to 1.1 billion.

SolarCity says that this decline in bookings is due to policy problems, which caused customers in key markets to delay their decision to invest in solar. The company specifically cites the uncertainty around net metering in Massachusetts, the net metering 2.0 decision in California, and the dismantling of net metering in Nevada.

However, SolarCity notes that during the quarter the future of net metering in California and Massachusetts has been resolved, and that New York has extended net metering in perpetuity, meaning that its key markets have regained stability. As such, SolarCity expects bookings to increase.

This decrease in bookings also affected the company’s overall cost structure. While base installation costs remain below $2.00 per watt, this quarter customer acquisition costs nearly doubled to $0.97 per watt on the lower booking volume. Along with another $0.23 in general and administrative costs, this caused overall costs to jump from $2.67 per watt in the previous quarter to $3.18 per watt.

Another interesting detail revealed in the quarterly call is SolarCity’s attitude towards utilities and net metering. SolarCity was formerly a member of the Sunrun-led Alliance for Solar Choice (TASC), which has relentlessly fought for net metering as the sole compensation mechanism for distributed generation, even when this put it in opposition to other solar installers and environmental groups, such as during the recent legislative push in Maine.

SolarCity left TASC in 2015, and today revealed that it has been working with utilities and other solar companies on a new policy framework. This framework would seek to preserve net metering to 2020 and after 2020 move to a model which looks similar to Value of Solar Tariff, with excess generation valued at a combination of the value of electricity, the value to the distribution grid, and the environmental assets of solar.

This appears to be related to SolarCity’s recent move to offer grid services to utilities and grid operators.