Energy

Big Issues Facing the Solar Sector

Paul Ausick

Published: January 26, 2016 2:05 pm

Last Updated: January 13, 2020 2:33 pm

SolarCity Corp. (NASDAQ: SCTY) announced late in December that it would immediately stop sales and installation of rooftop solar projects in Nevada following a decision by the state’s public utilities commission (PUC) to impose new rules and higher rates for the state’s net metering customers, including those who had installed solar PV systems prior to the date of the order. SolarCity called the new rules a rates a “massive bait and switch” for the solar industry that effectively shuts down the state’s solar businesses and punishes more than 12,000 solar customers who had installed rooftop solar PV systems.

The state’s largest utility, NV Energy, which is owned by Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A), issued press release on Monday proposing to grandfather existing solar customers under the old rules for up to 20 years. Under the new rules, net metered rates would have been cut to wholesale energy prices even for solar customers who had installed their systems prior to adoption of the new rules.

According to analysts at Credit Suisse, this is a “partial” victory for the solar industry in Nevada, and the state PUC will consider NV Energy’s proposal along with several others that have also been filed.

California’s net metering program even has a high-tech acronym: NEM 2.0. Net Energy Metering 2.0 is scheduled for a vote on Thursday by the California PUC. Under both the California and Nevada proposals, solar customers would pay more to maintain the state power grids, among other fees. The California proposals may try to reduce the grandfather period from 20 years to 10, according to Credit Suisse, although the analysts think that change is unlikely to be adopted.

Credit Suisse has also offered some comments on the proposed $2.2 billion acquisition of Vivint Solar Inc. (NASDAQ: VSLR) by SunEdison Inc. (NYSE: SUNE) and, eventually, TerraForm Power Inc. (NASDAQ: TERP). Here’s Credit Suisse’s comment after reading through recent proxy statements regarding the acquisition:

In a nutshell, we believe the VSLR business is worth less – to SUNE or as a standalone entity – as the business appears to continue to struggle, but also believe that the facts presented seem to contradict some of the public claims that TERP shareholder interests were egregiously disregarded.

The final proxy was released Monday morning and the scheduled date for the vote is February 24. Hedge fund Appaloosa Management’s founder and president, David Tepper, has raised questions regarding the value of the acquisition to TerraForm shareholders.