SolarCity makes another acquisition to increase its competitiveness

SolarCity is on a tear to lower costs in the rooftop solar supply chain. In September it purchased Paramount Energy Solutions for a mix of cash and stock adding up to $120 million. The purpose of the acquisition was to cut marketing costs, which remain a key issue for all installers. German rooftop solar systems are less than half of what they cost in the U.S. because soft costs associated with permitting and marketing are much lower.

Well, SolarCity took another step at the end of last week, picking up Zep Solar for $158 million in stock. Zep supplies racking systems for attaching the panels to a roof and SolarCity says the technology cuts install times from 2 or 3 days down to one day. SolarCity’s Lyndon Rive has also said the racking systems looks better aesthetically.

And with SolarCity’s share price quadrupling since it’s its IPO, why wouldn’t the company pick up whatever value there is in the rooftop solar supply chain in stock deals. I’ve long wondered if rooftop solar will become increasingly vertically integrated. That remains to be seen but certainly it makes sense for stronger installers to pick up pieces of the supply chain that can stretch their margins and help them reach new customers.

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Adam Lesser

Analyst Gigaom Research

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