SolarCity Says Batteries Reduce Risk of Utility Backlash

SolarCity Corp., the rooftop power producer that’s tripled in value this year, is developing storage systems that will reduce its dependence on utilities within two years.

The company plans to introduce in 2015 a bundled package of solar panels to generate power during the day and batteries that will retain the power for use at night, Chief Executive Officer Lyndon Rive said in an interview today. San Mateo, California-based SolarCity will test it at 100 sites this year.

Adding storage will eliminate the company’s need to sell power to utilities through an arrangement known as net metering, Rive said. The company typically sends power to the grid during the day, when many homes are empty, on behalf of homeowners who get a credit that’s applied to energy they consume later.

“There won’t be a need for net metering when storage is deployed onsite,” Rive said today in an interview in New York. “Storage is going to have a big impact.”

SolarCity is testing 8 kilowatt-hour battery packs provided by Tesla Motors Inc., the electric car company run by Rive’s cousin Elon Musk.

Rive says declining battery prices means he can include the the cost of storage and still provide electricity to consumers in California and Hawaii at rates that beat utilities.

Net metering policies are in place in 43 states. Rive said storage will mitigate the risk that regulators may repeal or revise them by reducing the amount of power utilities must buy or the rates they pay.

Excess Power

“Consumers can still be connected to the grid and get power from the utility if there’s any shortfall, but we won’t need them to buy any excess supply,” Rive said.

SolarCity currently relies on the policies and “the absence of net metering for new customers would greatly limit demand for our solar systems,” the company said in its October S-1 filing with the Securities & Exchange Commission when it registered for an initial public offering.

Utilities in California and Arizona are starting to challenge net metering because it reduces their revenue, Rive said.

California, the largest U.S. solar market, limits the amount of rooftop solar power that utilities must buy to 5 percent of their peak demand and the net metering policy will expire in 2015 unless extended by state lawmakers.

“Solar has a lot of risks and net metering is a big one,” Edwin Mok, an analyst at Needham & Co. in San Francisco, said today in an interview. He has a hold rating on SolarCity shares. “It’s a good idea to eventually add storage but right now I think it’s too expensive relative to retail rates.”

SolarCity increased 3.8 percent to $37.39 at the close in New York. It’s quadrupled since its December IPO.

(Updates with closing share price in last paragraph.)
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