Several weeks ago, SolarCity announced that they would be abandoning their flagship solar loan product, MyPower. Considering the product was a pretty poor deal for their customers, this announcement should be cause to celebrate. However, such a celebration might be premature. Though SolarCity did announce development of a new revamped loan product, it seems unlikely that it will translate to any significant benefit for prospective customers. Let's take a look at why this is the case.
MyPower Was a Tough Sell
In 2014 when MyPower was initially rolled out, SolarCity anticipated that 50% of their company's solar installs would be financed by solar loans by the end of the next year. However when that time eventually came, loans only covered a meager 13% of all installs. MyPower didn't perform as well as anticipated due to several obstacles that deterred its widespread acceptance.
First and most significantly was the fact that many potential customers couldn't qualify for the 30% Investment Tax Credit that MyPower was designed around. Even if customers did qualify, there was the matter of the highly undesirable 2.9% annual escalator to contend with. Last of all was MyPower's, entirely nonsensical 30 year loan term. Generally, loans have a term of about 10 years, with the more iffy loans carrying a term of 20. Add the outcomes of recent net metering rulings, with even more pro-solar states such as California only grandfathering net metering for 20 years, and it becomes clear that the 30 year loan term was wildly off mark. When considering these factors, it's almost surprising that MyPower sold as well as it did.
Not a Good Deal for Anybody
Even if MyPower was widely adopted, that may not have been good news for SolarCity. In their analysis of the product, Seeking Alpha called MyPower "a proven value destroyer [that] must be discontinued sooner than later". According to them, this is because MyPower is riddled with even more flaws than the PPAs that it was meant to replace. Chief among these flaws is the fact that SolarCity sells their MyPower systems for a minute up-front cost. When combined with the fact that it is easy for customers to keep their federal tax credit rather than surrendering it as intended to SolarCity, it becomes highly possible that SolarCity could lose big with MyPower.
SolarCity Facing Uncertainty in Changing Market
The last few months have not been kind to SolarCity. Seeking Alpha and Investors.com have noted that the industry heavyweight has been facing diminishing growth in the face of plummeting stock value, and unfavorable net metering rulings in several key solar states. Nevada's PUC ruling in particular has hurt SolarCity, as they were forced out of the state due to a quickly evaporating solar market, leaving SolarCity hurting for cash.
Considering MyPower's significant flaws, making it difficult to market and a questionable investment for both customers and themselves, and the increased pressure to perform provided by slowing growth and the latest net metering rulings, it's only logical that SolarCity move to eliminate MyPower. The question left to us is, "What will it be replaced with?" While we know little in regard to the specifics of what the new loan product will look like, we can venture an educated guess based on the situation SolarCity faces, and what their executives have stated.
Based on increasingly dire straits they find themselves in, as well as their own stated issues with MyPower, it seems they will do their best to make MyPower's replacement a simple and easy sell in order to expand their pool of qualified applicants. To ensure this, the new product certainly won't rely on the investment tax credit that many failed to qualify for. It will have a shorter loan term, to be more in line with industry standards of around 10 years, rather than the outrageous 30 year term that deterred so many customers from their last product. Also potentially up for review is the unattractive 2.9% escalator, that was acknowledged as being a "mistake". These changes will remove the three main obstacles SolarCity faced while selling the MyPower product. However, the changes do nothing to address the aspects of MyPower that made it such a miserable deal for their customers.
In fact, it seems unlikely that SolarCity will do anything to make MyPower more financially sound. SolarCity executives continue to allege that MyPower is the "best savings [they] can offer", and assert that the new product will be "no better for customer in terms of financials". Thus it seems that changes being implemented for MyPower's replacement will only make the new product simpler (for SolarCity to sell). Considering the incredibly unfavorable financials of the original MyPower product, we wouldn't hold our breaths in hopes that SolarCity will put out a new loan product that will turn out to be a solid investment.