Tesla & SolarCity Press Conference Digest

JUL 1 2016 BY TESLAMONDO 24

SOLARCITY/TESLA PRESS CONFERENCE DIGEST

Powerwall Coupled With SolarCity PV Installation

Powerwall Coupled With SolarCity PV Installation

Everything below is a direct quote from Musk during the SolarCity acquisition press conference. TeslaMondo just finagled the questions to make the whole thing more readable and conversational.

Will Tesla ever do vehicle-to-grid?

We’ve debated this since the early days of the Roadster. The early proto-Roasters would do vehicle to grid. But you get a lot of complications with that if you back-flow power through the car into the wall, like when is the car allowed to do that, when is it not, and how much do you allow the car battery to be drawn down. And then people will be pretty upset if the lights are on in the house but they can’t drive their car. So I think the right solution is to de-couple it into vehicle, stationary battery, solar.

Could Tesla use SolarCity to skirt auto franchise laws?

It does open up additional options on the retail front. I think we’ll still be prevented from concluding a car transaction.

What’s the overall rationale for this acquisition?

In order to solve the sustainable energy question, we need sustainable energy production, which is going to come primarily in the form of solar — overwhelmingly in the form of solar, in my view — then combine that with stationary storage, and electric vehicles, and you have a complete solution to a sustainable energy future. Those are the three parts that are needed, and those are the things that I think Tesla should be providing.

How did this come about?

It just became increasingly obvious, that as we’re developing the Powerwall and new versions of the Powerwall, particularly as we integrate the inverter electronics and the intelligence of the Powerwall, it really needs to take the solar panels and the solar system into account when doing that — otherwise you duplicate a lot of hardware, and it doesn’t work together as well, it’s more expensive, the installation costs are substantially higher.

Tesla Emblem On Model S

Tesla Emblem On Model S

An example of synergy?

As you look ahead to Model III, a $35,000 car, that same person at the same moment, we could sell them roughly an equivalent amount of value of solar panels and a Powerwall, effectively doubling, or almost doubling, the sale at that time, and then putting it all in at the same time . . . It’s quite difficult to create an integrated product if you’re forced to be at arm’s length and be two different companies.

It’s absurd to treat SolarCity like a stranger, yes?

If we give a special deal to SolarCity, and SolarCity is not part of Tesla, then why are we doing that? We can do that if SolarCity is part of Tesla. We can’t do it if SolarCity is a separate company.

What’s so enticing about SolarCity, besides your hand in it?

I’d love to talk about what’s going to happen on the product side. That would shed a lot of light on this deal and why I think it makes total sense, really a no-brainer, but I can’t talk about internal, non-public plans . . . While, do date, SolarCity has not been significantly differentiated on the product side, to the solar panels themselves, they certainly will be in fairly near future.

But what about SolarCity’s tenuous financials?

They are headed to cash-flow positive position within the next three to six months at the outside. That’s where the company has been steering itself, reducing their growth rate at some degree to achieve that cash-flow positive position, but they’re very clearly on their way to getting there in short order. So we expect it to be net cash generator, not a user of cash.

Are you trying to change the world or something?

Elon Musk At Model 3 Reveal

Elon Musk At Model 3 Reveal

I think you’ll be telling your grandchildren: Yeah, you wouldn’t believe the things we used do. We used to dig up the liquidized remains of dinosaurs and old plants and put them in cars and burn them to move, and did the some thing with power plants. And they’ll be like: That sounds crazy. We’re trying to have the non-weird future get here as fast as possible.

Talk a little more about the integration potential.

What allows us to offer the most compelling product to consumers and businesses? A seamlessly integrated product that always works together — that’s better. You don’t want to have a heterogeneous systems integration problem. That’s basically where the interfaces break down, and people are pointing fingers  saying: This didn’t work — No, your thing didn’t work. If it’s just one integrated system, there’s no finger-pointing. You can iron out all the bugs, and it just works. And you’re not wondering: Should I blame the solar company, or the battery company? It’s a pain in the butt to try to figure that out if you’re the end customer. I think we can guide the integrated product to just be right. To be better.

How big is the solar market?

Only about one percent of US homes have solar. So you have a massive addressable market that’s unserved. That’s at least 40 to 60 million households that could do solar if they wanted to, if the economics were right, and they liked the aesthetics, and it was easy to do, then they would do it. So the future market there is really gigantic.

You sure this won’t slow down Tesla?

From my standpoint, this makes Tesla’s future execution easier, not harder. The Powerwall and Powerpack need to be designed together with the solar system, so it’s a one-piece thing. We really can’t do that if we’re two separate companies.

Cost of sales. What happens there?

Looking ahead to selling Model III, something on the order of a $35,000 car, if we’re selling Powerwalls and solar systems of comparable value and doing so in the same sales footprint, with the same person, our cost of sales should drop in half, as would SolarCity’s correspondingly. Maybe it’s not entirely half, maybe it’s 30 to 40 percent. It’s a very substantial drop on SolarCity’s side and also a material drop on Tesla’s side. You’re basically selling almost twice as much in a single transaction as you otherwise would. And then on the installation setup side, it’s one crew, and one visit, instead of two or three visits. Ongoing maintenance is one point of contact and not two or three points of contact. The cost of the system itself is lower because we’re not duplicating hardware. I think that all makes lot of sense.

What’s the single biggest benefit to Tesla in this acquisition?

The biggest asset that we’d be acquiring are the installers — the installation team of SolarCity, all the people trained in doing the permitting, and the paperwork, and all the complexities that exist in municipalities throughout the country, and understanding how to deal with 37 different roof types, and having efficient logistics infrastructure for doing installations, and then there are some strengths in the SolarCity sales side that we can take advantage of.

Tesla wants to control the world’s energy and grow very large. True?

I think as a combined automotive, power storage and power generation company, the potential is there for Tesla to be a trillion dollar company.

What’s so great about Tesla?

We’re putting a lot of effort into being to being the world’s best manufacturer. And I really mean that. I’m highly confident we will be the world’s best manufacturer. I’ve said we’d build the world’s best car. We did that. At SpaceX, we said we’d build the world’s best rocket. We did that. We’re going to be the world’s best manufacturer, not by a small margin, but by a margin that people don’t even think is possible. I believe in taking a first principles physics-based approach to analysis, and my analysis of the situation is that dramatic improvements are possible, both on the automotive side and on the photovoltaic side.

How is the Gigafactory coming along?

Our engineering team has worked very closely with Panasonic to make dramatic improvements to the cell manufacturing efficiency. We think we’re probably approaching 3x the efficiency of the best plant in the world. That’s pretty good. But there’s room for improvement. Cells are going through that thing like bullets from machine guns. In fact, the exit rate of cells will be faster than bullets from a machine gun . . . Come to the Gigafactory party. It will be an eye-opener.

How are your biggest investors reacting?

It’s interesting to look at the feedback I’ve received since we’ve made the announcement yesterday. Anyone who is product-focused sent me a congratulatory note, sort of a why didn’t you do it sooner sort of message. The people who are finance-focused are a lot more worried about it. In the long run, the value of a company is defined by the value of its products and services. That’s real important to bear in mind. That’s why companies exist. The value of a company will follow the value of the product.

What about working with other solar companies?

Other solar companies would have to match the SolarCity product in order to use our battery product most effectively. It’s not about trying to shut out other solar companies. It’s about guiding the product where it needs to go, and then we’ll do the right thing with other companies if they guide their product to match. We’re not going to be a jerk to other solar companies. This is about being really laser focused on having the most compelling consumer solution.

What about cheap Chinese products?

One advantage of the Silevo technology is that it has significantly higher efficiency that the very low-cost Chinese panels. So on the same surface-area of roof, you can get as much as a third more power. And aesthetically-speaking, the Silevo panels look better. They look a LOT better. And if it’s done right, we can make your roof look better with solar panels than without. This is a night-and-day difference.

The timeline to efficiency gains?

From the point which the deal is done, it should be meaningful and noticeable by the second full quarter after the acquisition is completed. I’m highly confident that will be the case.

Before we close, can you entertain us by talking like an engineer instead of a normal person? Just once, for the kids?

Let’s say somebody’s got a $400,000 house. If you make the roof look ugly, then arguably you’ve made that house worth five percent less, or some non-zero percent less valuable. On the other hand, if you make the roof look beautiful, you’ve made the house more valuable. And maybe that’s PLUS five percent or some non-zero plus percent in the value of the house. If it is something on the order of five percent, then the value delta there is, call it $40,000, or say it’s something like two or three percent, then it’s $20,000. You know, you have quite a big value delta.

TeslaMondo translation: Beautiful solar panels can pay for themselves by boosting home value.

*Editor’s Note: This and other Tesla-related posts appear on TeslaMondo. Check it out here.

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24 Comments on "Tesla & SolarCity Press Conference Digest"

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“It just became increasingly obvious, that as we’re developing the Powerwall and new versions of the Powerwall… it really needs to take the solar panels and the solar system into account when doing that — otherwise you duplicate a lot of hardware…” Yeah, it certainly makes sense for Tesla Energy to do a complete installation of solar power, not just pieces of it. And maybe, just maybe, it makes sense for Tesla Energy to make its own solar panels, rather than buy cheap ones on the international market. And maybe it doesn’t make sense at all, because somebody else might start making and selling them cheaper. Either way, the idea that Tesla Energy needs to be able do to a complete installation is a very, very long way from saying it’s good business for Tesla to buy out a failing, debt-ridden business like SolarCity. “If we give a special deal to SolarCity, and SolarCity is not part of Tesla, then why are we doing that? We can do that if SolarCity is part of Tesla. We can’t do it if SolarCity is a separate company.” Yeah, that would be as crazy as, oh, KFC / Pizza Hut / Taco Bell,… Read more »

So. Much. Kool Aid.

I love the kool-aid and will continue to drink it. GO ELON GO TESLA…save us from our fossil fuel addiction.

+1

Vehicle-to-grid is a stupid idea that makes no sense. Yes there’s a big battery in the car that could power your house, but you need that to power the car too. It’s not convenient to use the car for both. The PowerWall (and competing products) are much more reasonable because they are dedicated.

Another reason why it’s a stupid idea is that the EV owner would be cycling (and wearing out) his battery pack for the benefit of the electric utility. Consider: It only makes sense for the utility to do this if they’re paying less than fair market value for using (and wearing out) the EV owner’s battery pack.

If the utility needs a battery backup, then let them buy their own. Stationary storage should cost less per kWh than an EV’s battery pack, so the utility buying its own batteries makes even more sense from that perspective.

Couldn’t agree more with Pushmi on this one. I have long thought vehicle to grid is basically a pointless, stupid idea. If you actually need V2grid capability for emergencies, then just outfit some dedicated vehicles with oversized batteries and park them at the fire station for emergency use only and be done with it. Every time someone brings up vehicle to grid, I start to cringe. It’s like someone dragging their finger nails over a blackboard.

V2G is not for personal, selfish reasons, but for larger “altruistic” reasons. The idea is or was to help utilities and that they would pay you (well) to be able to give and take a little from your battery, when needed. It may not “take off”, but I think you have too narrow a view of its original purpose. Also, the range of battery capacity would be fully user-configurable.

My only argument would be in some areas, it might make financial sense for both the utility and the car owner to pay the car owner for access to their battery.

Other than that, I think stationary storage is the answer.

I consider V2G tariffs to be unworkable, but peak shaving on “near brownout” would be a huge benefit. It costs a lot to buy generation (or batteries) that are only used a few days a year (some years not at all). Utilities could pay $1/kWh and still come out ahead in some cases.

V2G is certainly polarizing, and describes the difference in people’s opinion of their power and the company that provides it.

I jump on the opposite bandwagon, because as More cars are plugged in, the instant power provided on demand will -possibly- prolong the need for yet another turbine, and possibly hold prices at current levels – that said, I must say (importantly, IMO) that I -Like- my power company and the efforts that they make to push efficiencies, and they are severely reigned by our utility board.
I cannot Imagine a case where they would be Draining my battery.. we are talking First, shutting Off power for my recharge -On Demand- due to community needs (brownout) Then -Maybe- drawing power From my battery for some minutes if shutting off all the recharging cars did not solve the issue.

This draw continues for some Minutes.
again, IMO, some Minutes of using up to, what, 5% of my battery 3 times a Summer? Ranks in the Big Phargn Whoop category for me, vs purchasing a peak turbine — happy to help, power company, go for it.

“….the potential is there for Tesla to be a trillion dollar company.”

Pure dotcom fantasy squared.

Investors seem to ignore Musk’s megalomaniac statements such as this one – otherwise they would realize all his “dreams” require billions to cover cap-ex and op-ex in EACH FY from now to 2030.

Electric cars run just fine on grid electricity. There is simply no compelling reason to proceed with this merger. Musk needs to stop playing with other people’s money.

If the existing grid is dirty, the grid can be cleaned up. In Norway the grid is 98% hydro and Solar City is redundant there.

Ford went to Brazil and tried to grow rubber trees to make tires for his cars. On paper it sounded like a great idea, but it failed.
The Solar City – Tesla merger may sound good on paper, but……

In truth, the Solar City merger doesn’t even sound good on paper. Musk should leave the rubber plantations to Henry Ford and just learn how to build electric cars better, faster, cheaper and many more of them.

“Electric cars run just fine on grid electricity. There is simply no compelling reason to proceed with this merger. Musk needs to stop playing with other people’s money.”

They run a lot cleaner off solar power.

“If the existing grid is dirty, the grid can be cleaned up. In Norway the grid is 98% hydro and Solar City is redundant there.”

The grid is dirty and ain’t gonna get cleaned up quickly. Residential solar is a great way to reduce the load on the existing grid for all the EVs coming soon and reduce overall emissions from power plants. Norway is an exception, of course, but then again solar doesn’t work well there either.

“Ford went to Brazil and tried to grow rubber trees to make tires for his cars. On paper it sounded like a great idea, but it failed.”

Why did it fail? Why is that a parallel here?

Ford made an error in judgement trying to get into the tire business just as Musk may be making an error in judgement in buying Solar City and getting into the solar business..

That’s the Musk to Ford connection.

Rooftop solar has virtually nothing to do with building electric cars. Musk knows this, but he’s a big fan of solar and that’s why he’s trying to bail out Solar City by diluting Tesla Motors stock.

The most glaring overlap is not Tesla Motors but Tesla Energy, the stationary battery division of Telsa, which mates with solar installations. Did you forget about that?

Tesla Energy is a logical outgrowth of the engineering work done at Tesla Motors, designing the battery that sits in the floor of the Model S & X.

The car battery was simply turned up on edge and housed in a plastic case and hung on a wall. Presto !! You have a Tesla Power Wall.

Of course the wall battery design is not exactly like the car battery, but you get the idea. It a fairly simple engineering challenge. If you insist on calling this synergy, then I’ll agree with you. If you were building standard ICE cars, the Power Wall idea would not be a natural synergy for the company. In the case of Tesla and the Power Wall there is indeed symbiosis.

However, the tie-in between electric car manufacturing and installing solar panels is a lot less obvious. Electric cars can run just fine on grid electricity quite apart from solar. They can even run on hydrogen. How much carbon is created making the grid supplied electricity or the hydrogen varies.

Musk, of course, is on a crusade to save the world from carbon and this clouds his judgement.

Integrating the wall battery with solar panels is apparently much more of a pain in the neck than we non-electrical-engineers think it is.

Musk was pretty clear that he wanted to have only one solar panel design which he had to mate the battery with, so that he could make all the other solar panel manufacturers do the compatibility work on THEIR end instead of his.

Ford successfully integrated iron mining, steel manufacturing, and timber harvesting into his business — I can see why he tried rubber plantations too, even if it didn’t work. Something is always a step too far.

Tesla’s aim is not to earn money for stockholders with cars. Their aim is to make energy and transport greener, as fast as possible, by exemple, by doing it as good as possible, so that the competition is forced to go the same road. And it’s the competition, the followers, that will deliver the volume that indeed will make energy and transport cleaner. Tesla is a catalyst.

If your primary reason for being is stock value, you will tend towards mediocrity and risk adverse behaviours like GM throughout the 70s and end up needing bailouts from citizens like in 2009.

Tesla is on a mission and my money (divested from Oil & Gas) is placed there to aid the electrified future. For what it is worth, Musk has my vote of confidence.

“prolong the need for yet another turbine”

Postpone.. not sue what happened there (I did check, lol)

ah hell, I give up.. lol

Perhaps there is one thing that has potential.
Solar panels produce a DC current, batteries use DC current, in between you have an inverters.
You lose going from DC to AC and you lose again from going from AC to DC.
To make things worse you lose again when you batteries are now giving current since you need to go from DC to AC again.
If that wasn’t enough, things get really nasty when the car comes into the game because that one is using the AC to make DC once more (which will then be made AC again for the motor! Sick!).
If solar panels are manufactured to produce a standard voltage by subset of panels combination, the DC voltage could be directly fed to the storage batteries organized to the same standard voltage. You thereby gain two inverter passes. Further on, it would be possible to have a direct Tesla car DC feed line coming straight from the solar panels. This would cut four inverter stages losses in one go.