The leading residential solar installer in the U.S.
) along with privately held SunRun Inc. has filed a lawsuit against
Arizona Department of Revenue as the state decided to impose
property tax over leased solar panels. This move by the state might
erode customers' savings from solar and eventually restrain solar
power growth in Arizona.
SolarCity focuses on installing and financing solar panels for
homes and businesses. The company allows residential customers to
pay back for their solar installations on a monthly basis over an
extended period of 20 years. This not only helps customers to evade
bulky upfront payments, but also lends top-line visibility to the
company. The monthly payments are generally less than a homeowner's
monthly power bill.
Recently, the Arizona Revenue Department started distributing
valuation notices to SolarCity, SunRun as well as other companies
involved in the business of solar leases to determine the value of
all the property for taxes that will be due in 2015.
The solar companies involved in leasing panels argued that these
panels are designed for generating solar power mainly for on-site
consumption and they are not involved in the business of
generating, transmitting or distributing electricity to customers.
Thus, these products should come under the law exempting rooftop
solar from tax valuations. However, the state department seems to
view this differently, contending that leased rooftop solar panels
were like small power plants providing electricity to homeowners or
businesses. Hence, these rooftop solar installations will not be
exempted from property taxes. The department analyzed the leased
solar panels as renewable energy equipment.
The downstream solar company - SolarCity - has been playing on its
strength, providing renewable power lower than the grid price to
residential and commercial markets in the U.S. SolarCity is well
supported in its endeavors by a booming U.S. solar market. The
company sees installations climbing to as much as 900 MW to 1 GW by
2015. It also expects a million rooftop solar customers by 2018.
Residential solar in the U.S. is now a sizzling story. This market
even outpaced the commercial and utility segments last year and has
already started to attract more conventional electric power
companies that produce power mostly from coal and natural gas. If
the property tax is imposed on these companies, customers would
eventually lose their savings that they enjoy on a monthly basis.
This might impact the uptake of solar power in the state of
Arizona. We note that Arizona secured the second spot after
California in new installations last year, thanks to its hot
Tesla Motors Inc.
) founder Elon Musk, SolarCity presently carries a Zacks Rank #4
(Sell). Other better-ranked players in the sector include
JA Solar Holding Co. Ltd.
Yingli Green Energy Holding Co. Ltd.
). While JA Solar sports a Zacks Rank #1 (Strong Buy), Yingli Green
carries a Zacks Rank #2 (Buy).
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