We published part one of our interview with Lyndon Rive, the CEO of newly public distributed energy provider SolarCity, last week. It included Rive saying, "For the longest period, people used to call SolarCity the largest solar installer in the country. Argh. It would bug me. I would grind my teeth when I heard that."

We spoke with Rive about the treasury investigation on the 1603 grant program amidst questions that companies such as SolarCity, Sunrun, and Sungevity have been embellishing the prices claimed on grant paperwork.

Here are Rive's comments on 1603 and CSI data:

-"Depending on how far back you go with the CSI data -- when you pull out the application, you put in the price -- but we haven't sold it yet to the fund so we don't know what the fund is going to pay for it. So we would put in the maximum price that we could justify based on the income of the asset. Not much later, we may actually sell it to a fund, so that pricing may or may not be the final number [at which] we sold it to the fund. Depending on how far back you go, if you look at the current data, we're using our EPC [engineering, procurement, and construction] prices instead of the number that we are selling to the fund. That's what the market's all focused on. Seventy percent of the market is financed. Because SolarCity is the only vertically integrated company, historically we have put the number that we sold to the fund, not the EPC number. So all the numbers you see are only the EPC numbers."

-"So you see Sunrun buying an asset, you see Sungevity buying an asset, you see Clean Power Finance buying an asset, you see SunPower buying an asset. Those assets being bought are not being sold for the same number -- that's a very bad business. You don't need to be a mathematician to figure that out. To buy a system for $5 and to sell a system for $5 -- you cannot make that up in economies of scale. What they do is they include the overhead and the profit and they sell it for something higher than $5. That data is not available in the CSI, although 70 percent of the systems had a developer, margin and overhead tied to it."

-"So what is the market price of a system when 70 percent of the systems don't show their market price?"

-"That's the first [indication] that the CSI is misleading. The CSI only focuses on the EPC number, not the profit overhead of the developer. The developer has to include his cost and overhead -- otherwise, 70 percent of the systems sold would not be sold. It's a stupid business to be in if you can't include your cost and overhead. Even with that said, if you do an analysis of our pricing, SolarCity's pricing is still within the range of the EPC pricing."

-"No doubt we are in the upper end of the range. Not that I have an ego -- but  we're the Mercedes-Benz; we're not the little Mickey Mouse car. I'm not going to be pricing at the average; I am going to be pricing on the upper end."

-"Look at the turnover rate in this industry. If you had a choice of buying a system -- one from Joe Schmoe who may not even be here next year or from a company that has big infrastructure, a large [number of] employees, who has a long-term vision -- who are you going to buy it from? Wouldn't you pay more for that one? So to say that we have to price at the average -- that statement is wrong."

-"But we are not pricing above the range. Take the average -- we are pricing within one standard deviation of the range -- but it is one standard deviation of the range of the EPC prices. That's key. [...] It's annoying because we're held to a different standard than others because people just think of us as an EPC. But we're not an EPC; we're a fully integrated company. But even within EPC, we're still pricing in the range."


Back to the subpoena itself:

-"The treasury came up with guidance. Since guidance has come up, we started pricing at their guidance. In fact, we priced below their guidance. They recently came out with guidance again. We're now adjusting and will try to price at the guidance again. The subpoena is a broad-based subpoena. It went out to a few companies. It's a documentation request. There are no allegations made."

- Jonathan Bass of SolarCity added, "Bottom line is, we haven't done anything wrong. We're happy to participate in the review. We've provided information as part of it. We haven't been able to discuss it because we've been in a quiet period. But that's the only reason we haven't discussed it."

-"We expect the process to take some time. We're not expecting to see anything probably in the next year. At least that's what we've been told by the lawyers who have gone through many other subpoenas before."

-"They are asking for essentially every single thing for the last six years. We've given them everything for the last six years. And that's what takes time for them to review."

-"Just to be clear -- there are many companies [that are being subpoenaed]."

Tags: rive, scty, solar city, sungevity, sunrun, third party financing