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Can SolarCity Reach 1 Million Customers by 2018?

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March 19, 2014 – Comments (0) | RELATED TICKERS: SCTY

Yesterday SolarCity released its official 4Q 2013 numbers (which had previously been delayed due to accounting reasons). Pretty cut and dry, but one thing I was interested to see was an update on the company's total customer count. CEO Lyndon Rive mentioned this in yesterday's press release: 

"Finally, we signed our 100,000th customer earlier this month and expect residential MW booked to surpass 100 MW in Q1 2014, putting us on a clear path to achieve our target of 475 MW - 525 MW Deployed in 2014." - http://investors.solarcity.com/releasedetail.cfm?ReleaseID=8...

We know that SolarCity had 92,998 customers at the end of December 2013. According to Rive, SolarCity hit customer number 100,000 early this month. As reported in the company's preliminary 4Q 2013 press release and conference calls over the several weeks, this January the company signed a record number of energy contracts, and that record was broken the following month in February. 

This is important to track, primarily because the Rives have the ambitious goal of obtaining 1 million cumulative SolarCity customers by 2018. The company just reached the 10% milestone of this goal. By my calculations, this leaves 59 remaining months -- between March 2014 and December 2018 -- for SolarCity to reach the Rives' goal of 1 million customers by 2018. This means SolarCity will need to add an average of 15,254 new customers per month between today and December 2018 to reach 1 million customers. 

SolarCity added roughly 7,000 customers this January and February combined to push SolarCity to the 100,000 customer mark in early March. We can estimate that SolarCity is currently adding approximately 3,500 new customers each month. Of course, we should expect this monthly customer growth to increase over time as SolarCity improves its internal efficiency and scales the business on a national level. The company does have quite a way to go, understandably, before it is close to bringing on new customers at a quick enough rate to meet the Rives' 2018 goal. This will be a key item for us to follow going forward. 

If SolarCity does come close to 1 million customers within the next four years as the Rives are projecting, it is safe to say that utilities will no longer treat SolarCity as a mere inconvenience or very minor competitor. Right now, SolarCity's 100,000 customer count spread over 14 states is probably not turning many heads. If this number comes close to 1 million, though, SolarCity will likely be treated as a serious contender in the energy delivery business. 

I hope SolarCity can expand its strategic partnerships to include more traditional utilities. Without utility partnerships, the company will face more roadblocks especially as the business expands and captures a greater percentage of the energy delivery market. In other words, if SolarCity is facing push-back now, you can bet that push-back will increase as the company nears 1 million customers. Partnering with utilities today may help alleviate some of these competitive pressures. 

SolarCity tends to have more political and public support than utilities, so I do not expect any regulations to be significantly changed in such a way that prevent the success of SolarCity's business model. Heck, if SolarCity is signing cities up for solar installations and saving city governments thousands of dollars each year (in cash-strapped California, no less), that's got to count for some diplomatic sway: http://www.solarcity.com/pressreleases/231/-SolarCity-Helps-...

Still, if the company continues to face delays or push-back from utilities, SolarCity may have a tough time bringing on new customers at a fast enough rate to justify such a premium to the stock price. This isn't so much an immediate problem as it is something to keep an eye on down the road, but something worth keeping on the radar nonetheless. 

Anyway, just a few thoughts running through my head. SolarCity is still a fledgling pioneer in this field and, as I've stated many times before, has hardly scratched the surface of its potential. Between the Rives, Musk, and the leadership team these guys have assembled, I am confident they can find ways to begin collaborating with willing utilities across the country. It will be interesting to watch how this progresses in the coming months and years. 

Best,
David K

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