SolarCity is making solar power pay

  @FortuneMagazine March 1, 2013: 3:35 PM ET
CTD18 lyndon rive solarcity
(Fortune)

SolarCity CEO Lyndon Rive talks about what makes his company unique among solar ventures.

Q: There's a stigma attached to solar firms, but not for SolarCity (SCTY). Your stock has leapt from its IPO price of $8 last December to $19 recently. Why?

A: Most of the taint is around solar manufacturing. Our business model is totally different. We're an energy company. We install solar systems for free, and we sell the electricity at a lower rate than you can buy it from the utility. So given the option of paying more for dirty power or paying less for clean power, what would you take?

How did you choose the 14-state territory where you operate?

We first look at the functional economics: What is the current cost of electricity? Then we look at how much sun that market gets. And then we look at the state's [tax] incentives.

Sunshine isn't enough?

It helps a lot. As an example, the cost of electricity is relatively cheap in Arizona. But they get an incredible amount of sun. Oregon is a state where the sun's not so great. But Oregon has a strong state incentive and wants to see residents adopt clean energy, so the economics still work.

Home Depot is a big part of your sales process.

Someone might go to Home Depot (HD, Fortune 500)to buy dirt, and they'd speak to one of our solar consultants, who explains, "Hey, you can get a solar system for free and pay less for the electricity."

Do you pay rent?

No. We pay Home Depot per customer we sign up.

In February, you announced a partnership with Honda for a $65 million fund to help its customers and dealerships finance solar. Why?

It's the first time they're promoting a non-Honda product. Honda has a mission to reduce its carbon dioxide footprint and to educate its customers too.

How will tariffs on Chinese solar panels affect your business?

Tariffs have already affected panel pricing from China into the U.S. That's built into the cost. The cost reduction was a larger number than the tariff itself. So if there wasn't a tariff, the price would be even lower.

You went public during a tough time. Investors initially were unreceptive, forcing you to lower your share price. Why didn't you wait altogether?

We decided to take the hit to get out, show the market that this is a different business, with a growth potential that is almost infinite based on the market size. We'll let investors grow with us.

--Connected is an interview series with leaders of innovative companies. For a video, go to fortune.com/connected.

This story is from the March 18, 2013 issue of Fortune. To top of page



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