Businessmodel of SolarCity

Customer Segments

SolarCity has a segmented market business model, with customers who have slightly different needs:

• Residential – Homeowners, including those in communities established by homebuilders SolarCity has partnered with.
• Commercial – Organizations of all sizes and in a wide variety of industries, including retail, technology, manufacturing, agriculture, and non-profit.
• Government – Local, state, and federal government entities, including the Army, Navy, Marines, Air Force, the Department of Homeland Security, and numerous schools and universities. ### Value Proposition

SolarCity offers four primary value propositions: price, convenience, performance, and brand/status.

The company makes it possible for customers to install solar systems and lease the technology for a relatively low cost. It accomplishes this by making deals with major corporations to finance the manufacture of the systems and by packaging the leases into bonds that can be bought by individual investors. These corporations include Goldman Sachs, Google, Bank of America, and Honda. The financing enables SolarCity to offer repairs and a production guarantee at no extra cost.

The company offers convenience by providing multiple payment arrangements. These include a fixed monthly fee and a fee based on amount of energy produced. It also makes obtaining and maintaining a solar system simple by overseeing all aspects of the process – from financing to design to permits to installation to monitoring. This means that customers only have to deal with one point of contact. Lastly, the system makes monitoring easy by providing a real-time display of energy consumption.

The company has demonstrated strong performance. It installs more solar power systems than any other firm in the U.S., completing more than 110,000 new installations in 2015 alone. It estimates that the average SolarCity system will offset 178 tons of carbon dioxide over a period of 30 years (the amount of fuel necessary to drive 390,300 miles).

The company has a strong brand due to its success. It was one of the first entrants in the solar leasing sector, making it well-established. It bills itself as America’s top solar power provider, with over 230,000 customers in 27 states. Beyond consumers, clients include over 400 schools, government entities such as the U.S. Department of Homeland Security and the Armed Forces, and major corporations such as Intel, HP, eBay, Wal-Mart, and Walgreens. SolarCity has been recognized with many honors, including placement on lists such as the “Top 10 Most Innovative Companies of 2015 in Energy“ (Fast Company), the “50 Smartest Companies of 2015“ (MIT Technology Review), and the “20 Most Inspiring Companies of 2014“ (Business Insider).

Channels

SolarCity has a national sales organization that consists of four main channels: a direct outside sales team, internal call centers, a door-to-door sales force, and a channel partner network. It also relies on a customer referral program called Solar Ambassador. The company promotes its offering through a wide variety of techniques, including magazine and newspaper ads, radio ads and public radio sponsorships, search engine marketing, online banner ads, e-mail marketing, direct mail, social media, contests such as sweepstakes, and participation in events such as trade and home shows.

Customer Relationships

SolarCity’s customer relationship is primarily of a self-service, automated nature. Customers utilize the system while having limited interaction with employees. The company’s website provides numerous self-help resources, including white papers, reports on the solar industry, and answers to frequently asked questions. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

SolarCity’s business model entails designing, developing, and installing its systems. The company buys key system components from various manufacturers. Its main solar panel suppliers are Trina Solar Limited, Canadian Solar, AUO Green Energy America, Hanwa Qcells America. REC Americas, and Kyocera Solar. Its main inverter suppliers are SolarEdge Technologies, ABB, Fronius USA, and Solectria Renewables. Its mounting and racking systems are manufactured by its Zep Solar subsidiary.

Key Partners

SolarCity has a channel partner network that assists in the sales of its products; partners include:

The Home Depot – SolarCity is the exclusive solar panel provider in the chain’s stores. It sells them through field energy specialists and promotes them through point-of-purchase displays, in-store flyers, retail signage, seminars, and a co-branded website.

Best Buy – SolarCity sells its products in the chain’s stores, providing representatives who assess the possibility of installing a residential system for consumers.

Homebuilder Partners – The company sells its products through a variety of national and regional new home builders, including Pulte, Shea Homes, Del Webb, and Taylor Morrison. They promote the offerings through a variety of techniques, including community signage, newspaper inserts, realtor e-mails, co-branded flyers, online banners, and in-home advertising.

Other Channel Partners – The company sells its products through its relationships with Tesla Motors, Honda, Direct Energy, BMA, and Acura.

SolarCity also operates the Solar Ambassador Program, a network marketing program that invites individuals to promote the benefits of its offering and solar energy in general to their associates. Members receive cash rewards for referrals that result in new installations.

Key Resources

SolarCity’s main human resources are its in-house engineering employees that design and develop its systems and its experienced installation team. Its proprietary software platforms enable sales management, project management, site detail collection, and home energy consumption monitoring. The company places a high priority on its intellectual property, and as of December 2015 it had 76 completed patents and 250 pending patent applications. Lastly, SolarCity has more than 80 operations and maintenance facilities, which allow it to complete many annual installations.

Cost Structure

SolarCity has an “economies of scale” structure, with costs per unit dropping as output expands. Its position as the top solar panel installer in the U.S. enables it to achieve these economies in installation and capital costs. It aims to lower its cost per watt to $2.30 by 2017 and to $2.00 by 2019. The company’s biggest cost driver is sales/marketing expenses, a fixed cost. Other major drivers are in the areas of administration and research and development, both fixed expenses.

Revenue Streams

SolarCity has two revenue streams:

• Revenue from operating leases and solar energy systems incentives
• Revenue from solar energy systems and component sales