Elon Musk’s SolarCity is hurting as state governments cut back on lucrative green energy subsidies and reform regulatory schemes.
The future of the SolarCity, where Musk serves as chairman and in which he has huge investments, and the entire rooftop solar industry is deeply uncertain.
The bank JPMorgan recently downgraded projections about SolarCity’s stock and lowered the company’s target price from $44 to $29. The financial services company Barclays also downgraded SolarCity’s stock early in February, lowering the price target from $49 to $20.
The company’s stock has managed to drop below even that and currently hovers around $18 per share, down from its high of $86.
Musk hasn’t been deterred though, and doubled down on SolarCity by purchasing 569,680 shares of stock Feb. 12 for more than $10 million, according to filings with the Securities & Exchange Commission.
Additionally, the Supreme Court’s decision to stay the Clean Power Plan creates uncertainty about the future of solar power, and is likely reducing opportunities for SolarCity.
SolarCity’s problems really began when the government of Nevada introduced sharp cutbacks to its net metering program. The policy shift occured when Musk lost a regulatory battle to fellow liberal billionaire Warren Buffett. The change caused Musk’s SolarCity stock to devalue by roughly $165 million in a single day.
Net metering policies force electrical utilities to buy the electricity produced by rooftop solar panels at retail rates. Rooftop solar companies have pushed these policies as a way to encourage solar power, but utilities argue net metering shifts the costs of maintaining the electrical grid onto households that don’t have solar panels.
Without net metering payments, rooftop solar “makes no financial sense for a consumer,” Lyndon Rive, CEO of SolarCity, admitted to The New York Times in February.
Nevada’s recent decision to cut net-metering credits sent a worrying signal to investors. Other net metering policy changes in 20 other states could also change, which would dramatically alter the economics of rooftop solar, according to MIT Technology Review.Without net metering and other such subsidies, rooftop solar power is only likely feasible in two states, California and Massachusetts.
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