Tesla’s Acquisition Of SolarCity Is A No Brainer

JUN 22 2016 BY TESLAMONDO 42

SolarCity To Be Acquired By Tesla

SolarCity To Be Acquired By Tesla

SOLARCITY BID: NO-BRAINER OR NO-BRAINER?

Screen Shot 2016-06-22 at 5.54.28 AMTeslaMondo does think it’s a no-brainer. The good kind.

We’re sick of reading headlines about dirty electric cars. True? We’re sick of reminding people that Tesla/Musk pushes clean energy production as well as consumption. True? We’re sick of waiting for the day when zero-emissions cars routinely pull from a zero-emissions source, or at least are paired that way the public mind. True?

Tesla Energy was billed as a missing link for clean-energy storage. Well, now that whole picture “links” to an even bigger picture, which makes even more sense. Assuming Tesla does indeed acquire SolarCity, the Tesla name will mean a complete suite of clean-energy offerings of which cars are just one component.

Screen Shot 2016-06-22 at 6.14.57 AMWe won’t see embarrassing headlines that seem to put Tesla at strategic odds with SolarCity. Because the latter won’t exist.

So let the stock market be confused for awhile. Let Tesla car enthusiasts who don’t give a hoot about green energy complain about this “distraction.” Tesla is simply putting its money where its mouth is, by moving to own both ends of clean transport. It really is a no-brainer.

Besides, TeslaMondo never liked the name SolarCity. The word “city” doesn’t belong. But wait. Now “motors” doesn’t belong in Tesla Motors, unless it means just the auto division of a company that will have Tesla Motors, Tesla Energy and Tesla Solar, each offered through a new Tesla.com site that gives equal weight to all three.

Some knee-jerk headlines say this acquisition defies “common sense.” Good thing Musk has uncommon sense — the kind that brings electric cars and reversible rockets to the plate, and Mars to the on-deck circle.

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

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42 Comments on "Tesla’s Acquisition Of SolarCity Is A No Brainer"

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Tesla the one stop clean energy shop!

If utility scale solutions will save Solar City’s business model, than I’d say let them raise capital on that pitch.

I think the market wants Model 3 real bad, to the point that it will punish Tesla for anything that it believes detracts from that goal.

SolarCity might have to wait a couple years for a merger until M3s are flying off the production line. That is, if Apple does not snatch it away, first.

People can’t comfortably keep up with Musk’s Empire Building.

With the spread of their SuperChargers, Tesla will become one of the biggest “consumers” of electricity. When (not if) they start outfitting those chargers with giant solar arrays, the businesses surrounding those superchargers will also jump on board. Prediction: shopping malls will be literally covered in Tesla-branded solar panels in the next few years.

Back when the Supercharger system was first announced, Tesla grandly announced plans to make the entire network solar powered.

But the follow-through has amounted to very little more than lip service.

Tesla gets no real benefit from using solar energy to power its Superchargers. And doing so would require giant solar farms, perhaps the size of a football field per stall, and impossible to install on-site.

Bottom line: Ain’t gonna happen. Ever.

It can happen, but no way of providing enough power to supply all the SC stations. Also, the upfront financing cost would be huge and it is non-liquid assets that depreciates without offering enough cash flow.

… or roofs the size of… a motorway service station!

Personally I think when Mr Musk was talking about powering his SuCs with solar energy, he was already thinking about buying SolarCity. In fact, I would be very surprised if he wasn’t thinking about this tie-up before SolarCity was even incorporated.

Besides, if you have a big array connected to a SuC station, it doesn’t mean that *all* the energy the SuCs use has to come from the PV array but it still might make economic sense to do it… and the PR effect is priceless.

It would be interesting to see what energy all the worlds SuC stations use on an individual basis and then you could (as you Americans say) ‘do the math’. It would also be useful for trip planning to see when to avoid certain SuCs…

Feel free to start firing at my math and numbers but here we go:

0.285 KWh/mile * 15000 miles/year average * 100000 cars sold = 427500000 KWh/y

With a super conservative 100 KWh/m²*Y of PV that gives 4275000 m² total a roughly a 2 km by 2 km square. But that is for all the electricity, since supercharger is about a tenth you are down to 427500 m² or roughly to a square of 650 m by 650 m.

With 651 supercharger sites at present that mean each one should have 657 m² of PV or roughly a square of 25 m by 25 m.

Sounds reasonable and feasible to get such a cover since the surface of each site is at least as large. An extra benefit would be cover from sun and rain and snow.

It is already happening in Holland, at FastNed charging stations. Their electricity is 100% green. True, only a part comes from the solar panels on the roofs of their charging stations. But the rest is bought. You know, you can buy clean energy.

Amazing, yep …. they definitely need another distraction.

We will live in a Tesla-everything world.

Meh. I think this is a bad idea. If one of the two companies (SolarCity & Tesla) collapses as a joint entity, they’ll take the entire company down with it instead of being isolated to that just one company. It is as simple as that.

I don’t see sufficient synergies that they can’t get while remaining separate.

I don’t totally agree.

If Tesla fails, Solar city could never save it.

If solar city fails, Tesla can absorb it, assuming Tesla continues on their current path and raise another round or two of capital.

In fact, I think that is what this merger is. If Solar City limped along another two years, it might hit the end of the road.

The only real upside for Tesla is a ton of trained consumer facing employees. Tesla might need every single one of them for Model 3 deliveries, if they can figure out how to build them to order, per the current plan.

And with the falling costs of panels and batteries still on going I think SolarCity was bound to shift it’s business model anyway. I think they will shift to pushing sales over PPAs or leases. They’ll likely still do both, but I think there is more profit for them to be made in sales when they are a manufacturer (I think their plant goes online sometime in 2017). And consider when the solar factory is complete SolarCity’s cap-ex will drop substantially and they should see some decent cash flow from the installed leases (I read it’s somewhere around 2GW installed capacity).

I think this deal might be a way for Tesla to get some more cashflow.

“If solar city fails, Tesla can absorb it, assuming Tesla continues on their current path and raise another round or two of capital. ”

… and that is exactly what we are seeing now.

Solar city could almost stay alive only by covering all the giant factories Tesla is building; add covering the superchargers and still some house coverings and they are kind of market side fail proof.

I can even see a few very special jokers in the game; although Elon always said he found space based solar panels a bad idea he never said a space based solar sail type reflector was a bad idea. Such a device could be lightweight, launched by Space X and would allow tripling the PV production of the solar cells installed on the gigafactory roof. It would also be handy to provide a Mars base with a continuous production of PV electricity. On Mars it makes particular sense since, coming from Earth, putting mass in Mars orbit is actually less costly than putting mass on the ground. So placing 3 PV panels on the surface of Mars would be more costly than putting 1 PV panel on the surface and having a reflector solar sail remaining in orbit.

The only way I could see SolarCity failing (or Tesla once the two are the same co) is if the (considerable) influence of the US’ existing energy generators/distributors forced them out. Given how disruptive to the energy generating/distributing industry a Tesla(energy)/SolarCity tie-up will be, this is a distinct possibility.

People, fed up with the electrical utility effectively charging *them* to supply energy from their excess PV production, could well eventually stick 2 fingers up to them and go off grid. With the price of PV set to drop considerably in the short term and, with Tesla’s help, the cost of compact and practical electrical storage doing the same, this, too, is a very likely scenario that could play out the world over.

I would love to have solar panels, house batteries and an EV. That would be awesome, especially from one provider.

The problem I have with the whole offering is the size of the house battery. How are you supposed to charge a 60-90 KWh EV (or two) from an 8 KWh house battery?

In order to be more than a novelty, Tesla needs to offer much bigger house batteries at a reasonable cost. I know you can chain more than one battery together, but that still seems inadequate.

Here is the solution. You know all these 40, 60 85 kWh that Tesla made when they started? They will get old and will be used as home storage. Just like BMW is doing now. It makes perfect sens that as new batteries with smaller volume and more energy come out then you swap the old one for home use and use the lighter one for the car! What do you think?

Ah, there you go assuming everyone fully charges their Tesla *every* day (you are in good company). I guess there are lots of people out there that do, but on average they’ll only need about 10kWh (30 miles-worth). I agree 7kWh is not enough for anything other than a bit of peak demand shifting or making more efficient use of excess PV production but, when you consider that an *entire* Nissan LEAF battery pack (24kWh) can be bought, used and right now, for only $5k, that starts making things look a lot more interesting.

Whatever, that is a “fan boy” analysis.

Solar would fit the Tesla Energy empire, but it doesn’t have to be Solar City.

Solar City isn’t price competitive on the solar panels today. There are already other bankrupted solar companies that Tesla can snatch up for even cheaper.

Tesla can even start its own branded company if it wants to or buy other Solar companies.

it is ONLY CHOOSING Solar City because it is failing and Elon has a huge family interest and financial interest in it.

I would have been more okay with it if there isn’t so much personal conflict in the deal.

It was a family affair from the start Elon influenced his cousins a lot. Biggest distributor in the US, 1 mega-factory in the works, advanced technology from Silevo. This company is for the most part Elon’s wishes. It is only normal he buy this one and tweak it a little more instead of starting from scratch.

He just didn’t had time for a car company, a rocket company and a solar company. Now hethat he has acquired more confidence and experience with those big businesses, he will handle it. And seeing what he is capable of, he will handle it very well…
We will soon ask ourselves how it could have work differently.

Why now?

It is time critical right now. To get Model X production numbers up. If you are trying to manage quality issues at Tesla by sleeping at the end of the line and trying to finalize Model 3, you don’t need to manage Solar City also.

Solar City isn’t doing well right now. That is the timing of it. Solar City has one of the highest cost per kW installed in the industry today and it is only surviving because financing. It “NEEDS” Tesla to keep that financing stream going. Its own name isn’t good enough to keep up the financing. Once the interest rate moves, it is end game for Solar City.

Tesla is saving Solar City. Not the other way around. Tesla will do just fine without Solar City. But Solar City won’t survive without Tesla’s help. That is the simple case here.

“Elon Musk: I really want to encourage people to think about the long-term where this is all headed. If you think about it long-term, there’s really no question about the convergence of Tesla and SolarCity. It’s really just a question of what timing is appropriate for that convergence. It’s basically that SolarCity’s product roadmap and Tesla’s product roadmap, which obviously contain very specific non-public information I wish I could tell you about but I can’t, but the timing, if anything, maybe we should have done this sooner. But I certainly don’t think we’re doing it too early.” – Elon Musk, this morning.

That is just BS PR to cover it up.

Solar City rejected the power wall early on when it was released.

Elon could have done it last year or earlier this year.

He is only doing it now when SCTY tanking so bad from last quarter’s earning…

Of course, if you are a fan boy who loves Tesla coolaids, you will believe any PR twist there is.

Tesla could have bought any other “Solar companies” out there. It doesn’t have to be Solar City.

Solar City got the HIGHEST COST per KW in the industry today. That isn’t a good thing.

Elon Musk: I don’t think it’s a bail out. Tesla isn’t deciding what the market value of SolarCity, the stock market is. SolarCity could certainly raise capital and equity on its current valuation without any problem. SolarCity is headed to a very healthy place from a cashflow standpoint in short order, certainly in the next three to five months getting to cashflow positive. If the company’s on its own course to being cashflow positive and has the ability to raise equity capital on its own, I don’t see how an acquisition is in any way a bailout. That’s obviously a false description.

“mega-factory in the works, advanced technology from Silevo.”

I have close friends that work in various Solar industry companies from Enphase to Sunpower, from Sungevity to Solar City…etc.

The problem is all about cost. Advance technology in efficiency doesn’t help if the panels cost so little.

Those “inferior” Chinese panels have very low price, even if it has less efficiency, all you need is to add another panel to compensate for the output. Unless you have limitation in roof space, cost per kW installed is all that matters…

That is why solar industry is cut throat right now. Cash flow and cost is all that matters… Solar City isn’t doing well in any of those metrics.

Shall we say you are in turn a “HateBoy” of SolarCity? Tesla? Everything Musk?

HateBoy? Is that the latest pejorative that you Tesla fanboi are using?

It DOES matter if you can have the same number of kW with less panels. For the company putting up the panels, a.k. SolarCity. Putting up the panels is a large part of the total cost. If you can do it faster, with less materials, it makes a difference. Don’t forget SolarCity is both the panel producer and the installer.

“it is ONLY CHOOSING Solar City because it is failing and Elon has a huge family interest and financial interest in it.”

Unfortunately, that’s the way I see it too. 🙁

Here’s hoping Tesla stockholders vote down the plan.

More FUD. This merger is amazing!

You are probably shorting the stock for profits and/or don’t get Elon’s vision.

Long-term shareholders staying strong will be rewarded with a trillion-dollar market cap:

http://fortune.com/2016/06/22/teslatrillion-dollar-company/

Full of it…

TEsla doesn’t need Solar City. Solar City has high cost problem and low cash flow. That is a baggage for Tesla, not a help.

Elon is doing it to save his investment in Solar City and help out his family investment.

Elon Musk “To date, SolarCity has not been significantly differentiated on the product side, the solar panels themselves; they certainly will be in the very near future. Looking carefully at what SolarCity’s been saying in its earnings calls and announcements, that should also pretty clear — SolarCity’s saying that there will be significant part differentiation. There’s the Silevo acquisition, which I think it the best technology out there for high efficiency, low-cost solar panels. And at the same time, very significantly improving the aesthetics of the solar panels. I think there’s quite a radical difference between having solar panels on your roof that actually make your house look better versus ones that do not, I think it’s going to be a night-and-day difference. We can’t go into the details of those because making future product announcements that are really exciting obviously effects future product sales and a portion of that is not yet public information, but I do believe it fits together very well with Tesla’s plans on the Powerwall and Powerpack side. “

“There’s the Silevo acquisition, which I think it the best technology out there for high efficiency, low-cost solar panels. And at the same time, very significantly improving the aesthetics of the solar panels. I think there’s quite a radical difference between having solar panels on your roof that actually make your house look better versus ones that do not, I think it’s going to be a night-and-day difference.” Efficiency doesn’t matter nearly as much in solar panels as in cars. The lower cost Chinese panels are in the 15%-18% efficiency range. The Silevo panels are “claimed” to be around 20-22% range. That extra few % might look big, but one more two more panels will more than make up the difference. It is all about cost per kW that matter. So far, the Silevo panels don’t show any significant cost advantages. Of course, Maybe Elon is good at twisting the state of NY to “pay” for some of that cost and it might help the case since Elon is good at dangling carrot in front of the horse so to speak. Lastly, as far as “looks/style” is concerned, this isn’t cars. So, the style/color/looks matters far less to solar panels… Read more »

No. As I wrote higher up, if you are an ENERGY company, efficiency DOES matter. SolarCity isn’t just another panel maker, nor an installer. It is both. And most clients buy electricity, not panels. Therefore it makes sense for SolarCity to install less panels for the same amount of kW, because the installer side of cost is important (salaries are expensive, panels are cheap).

So higher efficiency is not about the few extra clients with small roofs. It is about margin (what they get paid for the electricity contract minus the TOTAL costs).

Tesla Motors has valuable IP (to say the least).

SolarCity is just an installer, no IP at all. Their entire business model is based on creative financial trickery or borderline abuse of the Federal Tax Credit.

Recently, SC realize the ITC party won’t last forever and have tried to reduce their costs (especially BOS). Yet the numbers have not been good. Utility scale solar is very competitive and pricing is below 4cents/kWh.

So yea, dilute Tesla stock to save a company that brings nothing new to the table (other than personal investment and indirect personal investment in the form of SpaceX’s stake in SC). Best they can hope for is to give SC Tesla Energy products at a steep discount to make SC’s financial numbers a lot more palatable.

In regard to the oft repeated old saw by Tesla detractors that its stock was just being kept up by Wall Street.

Well, Wall Street has almost to a man/person universally condemned this deal. Not merely coming out against it, but slamming it in the harshest of terms. Jim Chanos, an infamous short-seller, even suggesting insider selling on Musk’s part.

So I would request that people quit using that, it’s being kept up by Wall Street, as an excuse as to why Tesla stock is so highly valued. Respectfully.

Maybe the tweets went something like this:
@lreeve: Wusp!
@emusk: A video game.
@lreeve: Right. Life’s a vg.
@emusk: I mean. I am playing 1. Wusp SCTY?
@lreeve: SCTY Sux!
@emusk: No worries, Brah, I’ll by it. IANB.
@lreeve: Cool!

What happened to buying Scty and taking it private?

Who was talking about doing that? Elon?

Great post. I fully approve this great merger. Go Elon!

I can imagine this merger makes sense. Most people don’t understand what SolarCity is doing (some think it is a panel maker, some think it is an installer, but it is both in the sense that it is an ENERGY company). And many people don’t understand what Tesla is doing (it is not just a car company). Many things get better when SolarCity becomes Tesla. For instance, SCTY doesn’t need to buy Powerpacks anymore and sell them for a profit, it will become a one-step sale. Therefore the total energy offer to the client can be more interesting (cheaper contract, good for us) while in the same time the margin can go up (Tesla sells to private people directly, without SolarCity inbetween). Other exemple. If Tesla produces its own panels and run their factories on the electricity delivered by these panels, they only pay the cost to MAKE the panels, which is much lower then the cost to BUY the panels somewhere. The same is true for the superchargers. Because of the superchargers, Tesla was already an energy company. The price for that energy was included in the price of the S and X, with the Model 3 people can… Read more »