SolarCity's Latest Target: 28 Million American Businesses

Source: SolarCity Corporation

SolarCity Corporation is the leader in rooftop solar panel kits. But with only so much residential room to grow, the solar company is constantly on the lookout for new customersand it just found 28 million. Here's what you need to know.

Go Small or Medium or Go HomeSolarCity Corporation is leaving no roof untouched in its search to expand its market. In June, the company announced new moves to add historically excluded renters to its customer base via "community solar gardens." That's 108 million people throughout the nation. Less than 10 days later, the company issued another press release announcing a partnership with Tesla Motors Incto offer rooftop solar panel kits and Powerwall home energy storage solutions for new homebuilders across America. That's equivalent to around half a million additional new single-family homes every year.

And now SolarCity Corporation is doing it again. But this time, it's going for businesses. The company recently announced it will start offering solar services to owner-occupied small- and medium-sized businesses (SMBs). According to the U.S. Small Business Administration, a U.S. government organization, there are around 28 million SMBs throughout America, collectively accounting for around 99% of all businesses and about half of all private-sector employment.

Dream Big, Smart Small

Source: SolarCity Corporation

Not only was "Dream Big, Start Small" the theme of this year's National Small Business Week (May 4-8, in case you were wondering), it's also SolarCity's strategy for this latest initiative. The solar company will start offering packages to SMBs in California, only, with plans to expand to the east coast and elsewhere by early 2016. California is the company's old stomping grounds, and it makes sense to treat California as a proof of concept: a failure in California bodes badly for other states.

SMBs could be especially good business for SolarCity for one big reason: scale. Targeting SMBs allows SolarCity to scale its operationsnot by number of installations, an approach that it has admittedly had unprecedented success with, but by size of installations. SolarCity Corporation will initially target solar energy system sizes with between 30 and 500 KW capacity for roof spaces between 5,000 and 50,000 square feet. That's around five to 80 times the average capacity of its residential systems. And while the per-KW earnings for commercial projects aren't necessarily any better (or worse) than for residential ones, the sheer scale of these opportunities makes them lucrative for SolarCity to grow its absolute top and bottom lines.

While investors might think of SolarCity as a residential solar company and First Solar, as its commercial counterpart, SolarCity is doing a lot to dispel that distinction. For fiscal 2014, SolarCity installed more U.S. commercial and government solar capacity than any other provider. That's a solid start, and SolarCity is quite keen to grow its commercial market share well beyond the approximately 8% it claimed in fiscal 2014.

Bigger, But Still BetterAs SolarCity scales and expands its operations, its value add for customers remains the same as it has been for homeowners: zero money down and instant electricity bill savings. According to SolarCity, SMBs in California should expect to pay around 5% to 25% less once they switch to solar, with a guarantee that those rates will stay flat and fixed for 20 years. That cuts costs and removes riskmusic to investors' and businessowners' ears. For SolarCity, its shareholders, and its customers, this moves represents a smart move to expand, diversify, and further entrench SolarCity as a solar leader in America.

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Justin Loiseau owns shares of SolarCity and Tesla Motors.He also likes sun more than rain.. The Motley Fool recommends SolarCity and Tesla Motors. The Motley Fool owns shares of SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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