If Tesla Acquires SolarCity, Success Will Depend on Energy Storage
Tesla won’t just want to sell solar through SolarCity—it’ll want to sell batteries too.
When Elon Musk unveiled his intent to acquire the solar installer SolarCity, many observers and investors balked.
Some have wondered if the deal amounts to nothing more than a bailout for the Musk-supported SolarCity at Tesla’s expense. After all, what does a car company have to do with putting modules on people’s roofs? The business models are very different.
Here’s how MJ Shiao, GTM Research’s director of solar, captured that skepticism shortly after the announcement: “The sales pitches for a three- to five-year lease or loan on a premium car versus a 10- to 20-year lease or loan on energy services don’t match,” he said. “Is the average person going to walk into the store expecting to buy one and then suddenly get upsold on the other?”
A business model based on the combined solar-plus-storage-plus-luxury-EV package might find more customers than an electric Lear jet startup, but not by much. And although SolarCity will get a publicity boost from the association with Tesla — and a physical presence in its 190 retail stores — it’s harder to see how SolarCity benefits Tesla financially right away.
If both companies’ investors approve the purchase (and there’s reason to think they will), corporate leadership will have to show that they can chase the long-term mission of forging a comprehensive sustainable energy company without burning too much cash in the near term.
Luckily for them, Tesla’s not just a carmaker. Its energy division, which manufactures the Powerwall battery, makes for a much more felicitous pairing with a solar manufacturer and installer. The successful merging of the companies will depend on quickly monetizing the additional revenues from selling both solar generation and battery packs under the same roof.
The home-use options from SolarCity and Tesla Energy carry more fame, but let’s start with their larger-scale offerings, which are already afoot. Tesla teamed up with SolarCity last year for a first-of-a-kind 13-megawatt solar/13-megawatt storage plant in Kauai, Hawaii. Long term, this sort of project is where most of Tesla’s batteries will end up.
“We expect that 80 if not 90 percent of all the stationary storage we sell will be the Powerpack, not the Powerwall,” Musk said at the Edison Electric Institute convention in 2015. The Powerpack comes in 100-kilowatt-hour units that can stack for grid-scale applications like peak load management, backup power, demand response, reserve capacity and more.