Yingli Green Energy Hold. Co. Ltd. (ADR) (YGE), Sunedison Inc (SUNE): Before You Invest in Solar…

One compelling reason to consider SolarCity is its ability to solve industry problems. Most recently, the company began to explore options of power storage. Under current laws, when rooftop solar output exceeds usage, this excess is sold back to the power grid. This power could be saved, but batteries are typically cost prohibitive and somewhat inefficient.

But now SolarCity is teaming up with Tesla Motors Inc (NASDAQ:TSLA) to experiment with batteries from Tesla’s cars. It will test them out at around 100 sites to see how they perform. If all goes well, these batteries could become part of standard installation by 2015. This shows me that SolarCity has been and continues to be a company that seeks answers to industry problems, which will keep it ahead of the pack.

This news is also good for Tesla. The company plans on manufacturing 21,000 cars this year. SolarCity added 7,000 customers in the first quarter alone. As SolarCity continues to ramp up installations, and if Tesla’s batteries become part of the package in 2015, Tesla will actually sell more batteries to SolarCity than it installs in its vehicles. This could prove to be a decent revenue source.

Conclusion

I believe that SolarCity is the superior company in the solar industry. I’m only hesitant with the current valuation. It has already quadrupled this year and currently totes a market cap of nearly $3 billion. I’m not sure the market will continue supporting this.

The company expects to achieve positive cash flow in the second quarter, which could send investors into a new frenzy. But given the 2013 installation goal of 250 megawatts, I believe it will be hard to maintain positive cash flows in the latter half of the year. This could cause investors to get impatient. I’m waiting for a more significant pullback before getting in.

The article Before You Invest in Solar… originally appeared on Fool.com and is written by Jon Quast.

Jon Quast has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors Inc (NASDAQ:TSLA). The Motley Fool owns shares of Tesla Motors Inc (NASDAQ:TSLA). Jon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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