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Will Elon Musk’s SolarCity prove to be the next Solyndra?elon 1

Or is it that already?

Solyndra touted its “innovative” tubular solar panels, which allegedly outperformed conventional flat panels. There were cheers and hosannas, billions in estimated market cap … and hundreds of millions in government (that is, taxpayer) loans to “help” the company get going.

It went, all right.

In one of the epic scandals of the Obama Years, the government-propped “innovator” spiraled into bankruptcy when it was unable to make any actual money (as opposed to taking it from the taxpayers).

Now comes the reboot – SolarCity.

Like Solyndra, it hog-troughs federal (taxpayer) “stimulus” dollars to manufacture a product – solar panels – for which there is no real market demand. Not because the idea of “free” (or even lower cost) energy from the sun via solar panels is an unappealing idea. In fact, it is a very appealing idea. The problem – as with Tesla electric cars, another of Musk’s government-financed ventures – is that the cost, even heavily subsidized, is prohibitive.elon with obama

Which negates any “savings” overall. Which makes the whole thing… stupid.

Form an economic point-of-view.

SolarCity’s “business plan” – air quotes for the same reason you are a “customer” of the DMV’s – is to lease solar panels to homeowners, who then pay a monthly fee to the company over a 20 year period. In theory, the homeowners are supposed to pay less overall because of lowered utility bills. In fact, they end up paying more – because the cost of the panels is too high relative to the real-world energy savings and also because the homeowner doesn’t get the tax break for installing the solar panels, which is where the real money is.

The panels are leased – and so continue to be owned by SolarCity – which collects rebates from Uncle to the tune (so far) of more than $400 million.

Uncle – using your money and mine – is paying SolarCity to install the solar panels, and SolarCity charges the homeowner a monthly fee for 20 years on top of that!

The typical installation cost for the panels is over $20,000 for a residential home. That comes out of the homeowner’s pocket – and goes into Musk’s pockets.solar city van

This is about twice the price of a conventional asphalt shingle roof.

Which is analogous to the problem with the Tesla electric car – which costs twice-plus what a conventional (gas burning) car does. The Tesla may not burn any gas, but it burns money like a ’67 Chrysler burned leaded premium.

As do solar panels – and not just SolarCity’s, either.

No one has been able to make an economically viable solar array. Just as no one has been able to make an economically viable electric car. They both cost more overall than their conventional alternatives – and also have functional/performance deficits on top of that. Electric cars have less than half the range of a conventional car and take at least 4-5 times as long to recharge as a conventional car takes to refuel. Thirty to forty-five minutes vs. five minutes. Maybe 200 miles – under ideal conditions – vs. 400-plus under any conditions. Solar panels, meanwhile, are more vulnerable to physical damage (and cost more to repair when damaged) than asphalt shingles. They only work when the sun is shining. And they are an eyesore, too.

No wonder they need “help” to “succeed” in the marketplace.

Instead of waiting until these technologies are ready for prime time – able to stand on their own two feet, without government (taxpayer) “help” to prop them up – crony capitalists like Elon Musk make dazzling (give him his due) presentations touting the Miracle Technology: No more gas bills! No more Utility bills! But Musk habitually soft-pedals or simply refuses to discuss the inconvenient truths about cost and performance.

There is a reason why people continue to roof their homes with shingles rather than solar panels. It is that shingles cost less – a lot less – such that even if they more every month to the utility company, they still pay less overall than they would if they’d bought – whoops, leased – solar panels.solar ciyt loss

Hence, solar panels do not make economic sense – notwithstanding the emotional appeal of “free” (or even low-cost) electricity.

If this were not the case, people would be lining up to buy solar panels rather than shingles for the same reason they shop at Wal Mart rather than a boutique food store. People are interested in saving money. Solar panels don’t do that – the showmanship and media fawning notwithstanding,

Which is why “businesses” like SolarCity and Solyndra and Tesla always require government financing to remain in “business.” Pull the plug – so to speak – and they cannot survive on the economic merits.

Elon Musk will deny this vehemently. Yet the fact remains: Every one of his “businesses” depends on government (taxpayer) “help” – to the tune of nearly $5 billion so far – without which he’d either have to find private venture capital or dig into his own very deep pockets.

Which begs a valid question: Why doesn’t Musk – the (cough) Great Capitalist – put his hand into his own pockets rather than ours to fund his ventures?

Why can’t he seem to find sufficient private support to back his ventures?

Surely, if Tesla and SolarCity and SpaceX are viable on the merits, they would not need “help” in the form of funds taken by force from people who – if they had a free choice – would probably elect not to “help.”

The question answers itself.

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23 COMMENTS

  1. Back during the Jimmy Carter years (I was about 5), my folks installed solar panels on the house. It was during that last time solar was going to be “big”. The panels only provided heat, as there were few panels for electric generation. They were very expensive (that’s one of the reasons why no electric ones), and they only could do it with some program that the feds were doing back then. Otherwise not worth it, money wise. Some of the neighbors looked into doing panels too, but by then Reagan had come into office and ended the solar program. The company that installed the panels promptly went out of business.

    The installing company promised huge savings on their heat bill. That proved false, as the bill never went down. It did help keep it from rising, as my folks compared bills with the neighbors who had an identical tract house as ours. It did provide heat pretty well (though as it got older it didn’t work as good) even working in partly cloudy sky. It was ugly though, making a house that wasn’t good looking to begin with look really bad.

    But of course it didn’t work at all at night, had no storage ability. So it basically heated the house during the day when no one was home (work and school). We would leave the heat turned up, so the house would sometimes be 90 degrees and the regular furnace wouldn’t kick on until 9 or so at night.

    I doubt it saved one cent, but the taxpayers got hosed more then my folks. The system was removed by a later homeowner when it wore out. That’s another problem with those systems, their lifespan is often too short to recover the costs of it too.

    Replacement windows and extra insulation would have made more sense. Windows would have at least added some value to the house. Both of those things would likely still be present, unlike the solar.

    • I see that some Hindus are taking the Donald’s anti-Muslim rhetoric seriously and praying for his election.

  2. Excellent points all, Eric. What galls the most is how Musk portrays himself as a “libertarian.” How nice — dream up high-cost, politically correct, and economically unfeasible “business ideas”; get the government to finance the scheme; make your “profits” by stealing from the middle class, with the government backing you up at the point of a gun — and all the while championing the “free market.” The American Heritage dictionary oughta have his picture beside the word hypocrite. And “shameless” too.

    • Elon Musk has never been even close to being a libertarian, regardless of what he may say. It’s notable that Elon Musk did not start Tesla, but instead came onboard via investment. He did participate in design of the original Tesla car and became CEO and head designer during the (fed generated) financial crisis of 2008. But here’s the reason Musk is not a libertarian. He gets money directly and indirectly from government contracts. His SpaceX venture has thrived on contracts from NASA in a little bait and switch shell game. I’m not saying the guy is not smart and innovative, just that he’s no libertarian. In a real free market, Tesla would never get off the ground. SpaceX could succeed in a free market but it’s a lot easier to use taxpayer money to bootstrap such a venture. His Solar escapades would go nowhere in a free market…..but that’s how the collectivists work. First they eliminate the competition by creating a doomsday scenario like AGW, then they eliminate the competition through government interference in the marketplace (eliminating coal and nuclear power for example) and then they proclaim how superior their chosen “solutions” are because all the alternative, functional solutions have been eliminated at gunpoint. All that said, the market will have its way eventually.

      • “Elon Musk has never been even close to being a libertarian”

        True. The confusion, I think, comes from Lew Rockwell praising him for something or other, or defending his Paypal system when it was under .gov attack a long time ago.

        Lew has a lot of readers and what he posts tends to stick with his readers. He’ll defend anyone the gov picks on, but that doesn’t equal an endorsement , as he would probably tell you.

    • Yes, you can either pay for and own the system (and get the tax credit), or lease it. If you lease it, SC gets the credit, currently 30% federal plus whatever state or local credits exist for your location. The only way to make solar economically viable is for govt. to subsidize it, and because of net metering, allowing solar customers to sell excess power back to the utilities. Now net metering is being done away with (Hawaii, Nevada, and other locations) as the utilities don’t want, or can’t use, the extra power. This, along with tax credits ending will fundamentally change solar rollout and may bankrupt many companies whose business model depends on these subsidies. But to the main point, market demand is based on the false economics of government subsidies and regulations requiring utilities to buy excess power. Without these the industry may not survive.

      • windplr,

        But to the main point, market demand is based on the false economics of government subsidies and regulations requiring utilities to buy excess power.

        Agreed.

        When solar panels were installed @ home there were several factors that I considered.

        Cost of system (including labor/permits): ~$35,000 (I own my system) for a system that generates ~ 6500 kWh per year.
        Federal and State incentives: ~$10-11k from feds and ~$4k from state
        Would save ~ $1100/yr in electricity costs
        SRECs: Every 1000kWh generated by solar system earns a SREC that can be sold at market value. When system was installed that was >< $500-$600 per SREC. SREC value dropped to ~$65/credit but currently it is ~$280/SREC
        • ROI (Return on Investment) in solar system better than what is available in market with little risk. (This made sense to me – most savings accts earned ≤ 1% interest. The stock markets are relatively riskier with no guaranteed return rates)

        $21,000 out of pocket costs for system would take about 17 years to break even assuming no SRECs, it takes $1.10 earned to save $1.00 due to taxes, steady cost of electricity, and no change in electric usage. (If $1.35 instead of $1.10 then ~14 years)

        If I assume 6 SRECs earned per year @ $150/SREC over 15 years then the solar system would generate ~$13,500 over 15 years. This will reduce the break even point to under 10 years.

        Without the federal/state incentives and SRECs the break even point would be about 24-30years depending on your tax bracket.

        This does not factor in the cost of getting a new roof if needed. Fortunately, our house had an under 7year roof when the panels were installed.

        If factors change then the breakeven point changes. However, I think that if the people in government did not distort the market, then it would not have made good economic sense for me to put panels on my house.

  3. Amory Lovins is a “big thinker” in a think tank called the Rocky Mountain Institute. He’s an Aspenite, owning a large (likely tax deductible, not just because of solar subsidies -do you have a “visitors guide” for you house? Maybe you should) home in Old Snowmass village. His message, accompanied with a lot of hand-waving and not much factual information, is that society can run on 100% renewable energy. He’s been spouting this message since the 1970s. The folks in Congress love this guy, I’m sure it has nothing to do with any free “fact finding” trips to his RMI office in Aspen. That and he offers a very seductive message: That if we just give up all control to the central planners we can have an energy utopia. Sure, there’s a big upfront cost to building this stuff out, but that can easily be solved by (yep, you guessed it) taking some more money out of the productive peoples’ pocket and giving it to the unproductive. Tax credits for make-work jobs, penance carbon credits for those who transgressed against Mother Earth make products that create a lot of CO₂, and flat out transfer payments to goose up the technology that Uncle says is the best.

    But let’s look at the facts about this energy utopia: We can build houses more energy efficient. Extremely thick walls, closed cell insulation, solar panels, solar hot water, geothermal heat pumps, triple (or more) plane argon filled windows, etc. We know how to do that. But who pays for it? How do you retrofit existing homes? What about rentals? And remember kids, once that super efficient home goes in it becomes obsolete. What happens when better technology comes along? Do you tear down and start over?

    And that’s what this is all about. I’m not against solar power where it makes sense. And increasingly it makes sense in more places. There are quite a few ranches out here that are 100% solar powered, because the cost of extending the grid to them is more than the cost of solar and battery banks. But with Uncle putting his thumb on the scale the market distortion is making valuations of these products a big unknown. China’s subsidy of solar panel manufacturers is especially bad. But the real winners in an energy efficiency future will be (wait for it) the banksters! Now they can sell you an even bigger mortgage, and keep you a debt slave for even longer! Who would have thought you could get a 7 year car loan? Are we going to see 50 year mortgages so that we can save a few bucks in electricity? Oh, but it’s not about the money, it’s all about saving Gaia from our wicked ways.

    • Point being, you don’t get Elon without first having Amory. Elon would have never been able to launch his schemes without Amory selling Uncle a fairy tale about efficiencies that while possible are hardly practical.

  4. One place – probably the only place – where solar panels make sense is if you are off the grid. They may cost less than hooking up to the grid, depending on how far off you are. Of course, there is the added appeal of not being dependent on the grid. But that has no economic benefit. In the meantime, old Sol is undependable, so unless you can afford a large battery bank, you must also have some sort of back up.

    • Austin Energy has solar rebates. But only if you grid-tie your system. Going off-grid means no rebate for you.

      Installing a system geared for energy independence (aka large bank of batteries) makes a lot of sense if you’re in a rural area, or in an area with natural disasters. Having hot water and enough juice to run some lights, the refrigerator & TV makes going through the aftermath of a hurricane much more tolerable.

      • A portable generator and several 5 gallon gas cans make more sense. One hour running, two hours off will preserve food and conserve fuel as long as you keep the fridge shut.

        • I was in the heat/hot water business in New England in the late seventies, early eighties. We installed hundreds of solar hot water systems when the tax credits made them basically free to the homeowner. These systems saved people 50, 75, maybe even a hundred dollars a month. 10 to 15 years later, when they failed and needed replacement, not a single customer ever replaced the solar units. Without tax credits, you were in the neighborhood of 20k, versus a thousand, maybe 1200 for a conventional gas or electric water heater. Even a clover could figure out that he’d be dead before he could recoup the cost of a solar system. Just doesn’t make financial sense unless you can get somebody else to pay for it.

    • Someone posted a comment yesterday with a link to an article where research as done on hybrid vehicles. Due to their average weight about 25% more than an ICE vehicle their toxic footprint of throwing more rubber and bitumen into the air as well as brake pad dust, is greater than a diesel car. They musta missed it in Hawaii.

    • In a retail buyback scenario the poor (who can’t afford homes with big roofs) end up subsidizing the rich (who can afford homes with big roofs). Good for NV to get rid of the program. Most states who do net metering are talking about giving poor people subsidies (tax money).

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