Does Elon Musk's SolarCity Need Uncle Sam to Survive?

June 3, 2016 – 12:32 pm

Solarcity Rooftop Solar InstallersSolarCity workers install a rooftop solar system. Image: SolarCity.

A L.A. Times article caught the media's attention because it highlighted the $4.9 billion in government assistance that Elon Musk has received to build SolarCity (NASDAQ: SCTY), Tesla Motors (NASDAQ: TSLA), and SpaceX. Musk questioned some of the implications that his company needed the assistance to survive, but the staggering sum of money is worth some thought for investors.

Previously, I looked at the figures in the $4.9 billion, and whether Tesla Motors really needs Uncle Sam to survive; today, I'm looking at SolarCity. Could this solar giant even have built a business without the funding it gets both directly and indirectly from the government?

How much money has SolarCity received from Uncle Sam?
To start this discussion, let's look at the subsidies SolarCity has received.

Elon Musk's Government Assistance

Amount

SolarCity's Buffalo Manufacturing Plant

Solarcity Value Creation

0 million

Property tax avoidance in Buffalo

SolarCity ITC and cash grants

The state of New York is literally building a 0 manufacturing plant for SolarCity, and charging $1 annually in rent. The property's tax avoidance adds to that figure.

The ITC and cash grants are solar subsidies available to everyone, but SolarCity has used them heavily to grow its business, which I'll explain below. It's these tax subsidies that are most important to SolarCity's business now and in the future. It's why Lyndon Rive has lobbied heavily to keep the ITC in place, and has implored competitors to lobby for an extension, as well.

Would SolarCity exist without the government?
SolarCity is the most complicated of Musk's ventures. The company gets an extraordinary benefit from the 30% investment tax credit, or ITC, and of course is getting the free manufacturing plant from the state of New York.


Source: www.fool.com

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