Posts tagged ‘SCTY’

May 7, 2014

TAN and Hybrids

I chose to focus on the TAN because this ETF is weighted by the likes of First Solar, Sun Edison, and Solar City.

One of the drivers that I’ll be watching is how the major solar companies move from a incentive-based model to what I believe will be a solar-hybrid sector.   In 2016, the Residential Renewable Energy Tax Credit will end.   This means that solar companies will need to have adopted a less dependent sale model within the next year.  In every solar sales proposal today, you’ll find a big chunk of change deducted from the gross cost of the system, presenting a less intimidating net cost.   This net cost is often what will sway homeowners to go ahead and purchase.  The ability to use 30% of the cost of the system for taxes is a big draw.

This change in model means adopting other less “lease-reliant” products.   In recent news, “SolarCity Teams With Carrier to Offer Affordable, Solar-Powered Air Conditioning” gave highlight to some of the changes that I’m talking about.   This is the example of creating the solar hybrid.   What’s interesting about this is I recall when SCTY took their focus off their Energy Efficiency (EE) division.  (I knew a salesperson that was responsible for selling EE for SCTY when they seemed to shut it down).   For SCTY to return to the efficiency realm is curious.   So, some questions/thoughts to consider:

  • Can solar-powered air-conditioning units create a niche for SCTY? or open up the market for Air-conditioning companies such as WATSCO to compete? (WSO has been added to my watchlist, long-term 1 year)
  • SCTY will need to have a new (or improved) leasing strategy in place once the tax credit expires.   Leasing companies will no longer be able to benefit from the tax credit that should be going to the homeowner anyways. (mid-to-long-term 6mos-1year)
  •  I’m expecting TAN to “right-size” before any new stars go Apple on us.

Yesterday I reviewed TAN and assessed a long-term trend, predicting a bearish move to 39.50 (even called SCTY to go with it):

2014-05-06_1758

 

 

 

 

 

 

 

 

Looking at a long-term trend, you can see that it’s still possible for TAN to drop to 34.12.   Keep an eye on that ichimoku cloud.  A crossover will signal the go ahead for the push to that number.   Again, this is a long-term monitor while the US solar industry moves away from incentives.

 

2014-05-06_1809

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