Why Solarcity Is Succeeding in a Difficult Solar Industry

05-04-2012 • http://www.technologyreview.com, By Kevin Bullis

After a steady stream of bankruptcies, poor earnings reports, and canceled IPOs for clean-energy companies, this week Solarcity bucked that trend by announcing that it had filed the necessary paperwork with the U.S. Securities and Exchange Commission for an IPO.

The key difference between Solarcity and many other clean-energy startups is that it isn't trying to take on incumbents with new technology. It makes money by deploying existing solar technology with a novel approach to financing.

Solarcity designs, installs, and maintains solar-energy systems fitted to homeowners' roofs. Instead of asking for a big upfront payment, it leases the systems. As the panels produce power, surplus electricity is sold back to the local utility. Combined with the savings that come from using less power from the grid, this will typically reduce the homeowner's electric bill by enough to offset the lease payments.

Aided in part by a rapid drop in solar-panel prices over the past few years, this approach has been a success. A market flooded with cheap solar panels from Asia saw prices drop by 50 percent last year. That has eliminated profits for many solar-panel manufacturers, forcing some, including a number in China, to declare bankruptcy or go out of business. But installing solar panels remains lucrative, and when solar prices drop, that helps Solarcity's bottom line.