Tesla looks for a place in the sun
Electric cars and rooftop solar panels go together like red beans and rice. CleanTechnica recently surveyed over 2,000 EV drivers in 28 countries, and found that 28-40% of respondents said they had home solar panels. Solar power was part of Elon Musk’s Master Plan from the start. He helped Lyndon Rive to launch SolarCity in 2006, and after a decade of ups and downs, the company became part of the Tesla empire.
Above: Tesla Solar signage/displays are hitting Tesla stores (Image: Electrek)
The new subsidiary, now called Tesla Solar, is offering its own branded solar panels in Tesla stores, including a new low-profile panel made by Panasonic exclusively for Tesla. The company’s new solar roof tiles are now on sale as well, and deliveries are expected to begin soon. It’s the final piece of Tesla’s complete energy ecosystem. You can generate power, store it, and burn it up in Ludicrous fashion - all using Tesla products.
In a recent in-depth article in Fast Company, Austin Carr tells the history of SolarCity and explores the rationale for the merger. The SolarCity that Tesla acquired in 2016 is a very different company from the one that Elon Musk’s cousins, Peter and Lyndon Rive, founded in 2006. In a way, the original concept was similar to those behind Tesla and SpaceX - the idea was to revolutionize an industry by changing the cost equation of the product (Tesla went through three iterations to bring the cost of an EV down to a mass-market level, and SpaceX slashed the cost of space travel by making rockets reusable).
The main barrier to solar adoption was, and still is, the upfront cost. A solar system can save customers money, but most don’t have the capital to purchase the system. SolarCity sidestepped this problem by offering a lease, whereby homeowners could have a system installed with no money down, and make lease payments that would be lower than their existing utility bills. The company also made several moves to squeeze costs out of the installation process. For one, it acquired Zep Solar, a startup that had developed an innovative panel-mounting system that cut installation times.
Above: Tesla is bringing together solar and EVs (Image: MIT Technology Review)
By the time SolarCity went public in 2012, it was riding high - sales were doubling every year. In early 2014, it had around 70,000 customers, the stock price peaked, and Lyndon set a Muskian goal of a million installations by 2018. However, signs of trouble soon appeared. Aggressive sales tactics, exotic financing instruments, cancelled lease agreements, and increased competitive pressure all created problems for the company.
Meanwhile, as rooftop solar became more popular, electric utilities began fighting back, using their political influence at the state level to scale back incentives and invent new fees. In several states, including sunny Florida, SolarCity’s leasing model is illegal, and the utilities’ cozy relationship with state regulators insures that it will probably remain so. In Nevada, utilities hit homeowners with a reduced net metering rate and a new annual fee, causing SolarCity and other operators to pull out of the state altogether (in late 2016, the utilities softened the blow by agreeing to grandfather in existing solar customers). In late 2015, federal lawmakers unexpectedly extended the 30% solar tax credit - good news in the long run, bad news in the short, as it eliminated the urgency for SolarCity customers to install systems before year-end.
In February 2016, Musk decided the time was right for Tesla to formally adopt its sister company. A few months earlier, Tesla had introduced the Powerwall, but it soon found that the sales and installation processes were “incredibly clunky and awkward,” as Musk told Fast Company. Tesla had no installation teams, so Powerwall customers had to rely on local independent installers. To assemble the complete energy ecosystem, they would have to turn to SolarCity or one of its rivals. “It was like having to buy your laptop and your laptop’s hard drive separately,” said Musk. It would make more sense for Tesla to control the experience from start to finish.
Above: Tesla solar panels and Powerpack battery storage (Image: Tesla)
Furthermore, Musk is known for taking an interest in the details of the products he sells, and he places a high value on aesthetics (it’s easy to forget now, but one big reason for the success of the Roadster was that it looked like a stylish sports car, not like a boxy, gas-saving “dorkmobile”).
Since the acquisition, Tesla designers and SolarCity engineers have been collaborating closely on the development of the Solar Roof, something that wouldn’t have been practical when the two were separate public companies, required to operate at “arm’s length.” “Every time we wanted to do something, it had to go through two org committees. It was incredibly slow,” Musk says. “Now we can make decisions immediately instead of it taking a month.”
The company also hopes that vertical integration will give it a huge advantage. Other companies have attempted (or are attempting) to produce a solar tile. But, as Peter Rive puts it, “If you just created a solar shingle, you’re kind of f***ed. I don’t think anybody but the combination of SolarCity and Tesla can pull this off.”
Above: A look at Tesla's solar roof (Youtube: Bloomberg)
Tesla and SolarCity shareholders seemed to believe that they will indeed pull it off - they approved the $2.8-billion merger with a majority of 85%.
Of course, not everyone is convinced. Many in the financial media believe that the real rationale behind the deal was to bail out SolarCity. But Lyndon Reeve isn’t having any of it. “It is crazy to think that we needed any type of bailout,” he told Fast Company. “We had massive recurring revenue and access to liquidity since we had one of the highest-volume traded stocks in the solar industry. If we needed to raise capital, we could have.”
More skeptics are to be found in Buffalo, where Tesla is building a new plant - to be called Gigafactory 2 - to produce solar panels and the new Solar Roof tiles. SolarCity inherited the factory when it acquired Silevo, a solar technology and manufacturing company, back in 2014. The local and state governments were delighted to welcome a high-tech manufacturing facility to the 88-acre site, a typical link in the Rust Belt, and ponied up $750 million in funding. SolarCity later brought in Panasonic, an experienced solar panel producer, which invested $256 million.
Above: The plan for Tesla Gigafactory 2 in Buffalo (Image: Teslarati)
The Buffalo News notes that the factory has fallen behind schedule, although equipment is being installed, and there are signs that it’s getting closer to opening. “The delays so far largely stem from ownership changes, SolarCity’s deteriorating finances and shifts in the technology the plant will use and the products that the factory will make. With those issues now largely settled under Tesla’s ownership, the plant appears to be on track to open sometime this year, first making conventional solar panels and then the new solar roofing tiles that Tesla introduced last fall.”
It all sounds like a typical chapter in the turbulent tale of Tesla: hyper-ambitious goals, inevitable delays, huge risks and an equally enormous reward - not only for Tesla, but for workers in Buffalo and energy consumers all over the world. Rooftop solar is currently on the edge of a major tipping point. Costs are dropping, but they still aren’t quite at the point where the numbers work out without subsidies for most homeowners. What’s really needed to break through that barrier is a more efficient solar panel, which would reduce the labor costs to install a complete system - precisely what Tesla Solar will be producing in Buffalo.