Tesla wants to buy Solar City, become an integrated sustainable energy business

Musk wants to offer an integrated solution at Tesla stores: Solar to storage to vehicles.

Read the whole story

 

[Megalomania]

It seems odd not to mention that Musk has an ownership stake in Solar City; they also (as far as I know) have not been doing terribly well as of late - their stock is down quite a bit from its all time high - and the optics of this look pretty bad (billionaire bails out own company using other publicly owned company). This is not to say anything untoward is happening, but from my unimportant perspective, I don't see the value in dropping 2+ billion on this when they've got some huge challenges that already put them in do-or-die mode regarding the Model 3 (yes, it could also be a stock deal).

 

[trimeta]

In a way, this explains some of Tesla's recent moves in battery technology (especially stationary batteries)...it already seemed like "if Musk wanted to do this, why is Tesla running things instead of SolarCity?", but perhaps he had been planning the consolidation the whole time.

 

[Digital Dud]

This acquisition makes sense for multiple reason. One other is that purchasers of Tesla vehicles require chargers installed in their homes and electrical modifications made. Tesla refers them to Solar City as an electrical contractor, they have the labor force to go to homes and do this work, but now it'll be all integrated in the same company.

 

[Lonyo]

Megalomania[/url]":5e3lbrmg]It seems odd not to mention that Musk has an ownership stake in Solar City; they also (as far as I know) have not been doing terribly well as of late - their stock is down quite a bit from its all time high - and the optics of this look pretty bad (billionaire bails out own company using other publicly owned company). This is not to say anything untoward is happening, but from my unimportant perspective, I don't see the value in dropping 2+ billion on this when they've got some huge challenges that already put them in do-or-die mode regarding the Model 3 (yes, it could also be a stock deal).

On the other hand, if it's doing poorly it could make for a bargain purchase, especially when it does synergise with Tesla's business.

 

[Statistical]

It seems odd not to mention that Musk has an ownership stake in Solar City; they also (as far as I know) have not been doing terribly well as of late - their stock is down quite a bit from its all time high - and the optics of this look pretty bad (billionaire bails out own company using other publicly owned company). This is not to say anything untoward is happening, but from my unimportant perspective, I don't see the value in dropping 2+ billion on this when they've got some huge challenges that already put them in do-or-die mode regarding the Model 3 (yes, it could also be a stock deal).

Musk has a larger share in Tesla than he does Solar City (both in % and valuation). If the deal is a bad one for Tesla then net net he stands to take a loss. Yes as you point out it almost certainly would be a stock deal it isn't like Tesla just has $3B in cash just lying around.

Musk owns a 21.6% stake in SolarCity, holding more than 21 million shares worth $588 million. Musk owns a 21.9% stake in Tesla, a stake worth $6.08 billion.

Honestly I just see this as Elon and current CEO of Solar City seeing this as a good synergy. I would imagine there is some overlap between consumers interested in a Tesla and consumers interested in getting solar power. The combined company can aggressively target both. Now it may turn out to just be a bad idea but I don't see any way that it could benefit Elon without benefiting Tesla or hurt Tesla without also hurting Elon.

 

[xeromist]

Not really a fan of Solar City. The reps in hardware stores are kinda pushy and when I read customer reviews it seems like service and support is on par with a cable company. Maybe Tesla would rub off? I dunno.

 

[TomXP411]

I dislike the Solar City PPA model (pay us for the electricity generated, not the hardware installed), yet I love Tesla's innovations... still, this seems like a win-win and a natural part of the ecosystem they're building with the PowerWall and the electric car.

 

[beebee]

TomXP411[/url]":2ebhuv52]Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

I don't get your point. Are you thinking Solar City will change their business plan into selling hardware?

 

[TomXP411]

Statistical[/url]":24m3n2fh]I would imagine there is some overlap between consumers interested in a Tesla and consumers interested in getting solar power. The combined company can aggressively target both. Now it may turn out to just be a bad idea but I don't see any way that it could benefit Elon without benefiting Tesla or hurt Tesla without also hurting Elon.

Going solar is definitely the best way to make an electric car worthwhile. I would expect that overlap to be somewhere close to 100%, not accounting for condo and apartment-dwellers.

 

[TomXP411]

beebee[/url]":mpdq1kvz]

TomXP411[/url]":mpdq1kvz]Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

I don't get your point. Are you thinking Solar City will change their business plan into selling hardware?

I think that if Musk becomes the new boss, the company will change its business model to some degree. (turns out he already is and that I'm wrong there.)

Even if it doesn't, they're still a huge seller of solar equipment, so I think this is good for Tesla no matter how you look at it.

 

[chi7891]

TomXP411[/url]":2fbkzslf]Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

This is the only business model that works.

 

[Statistical]

Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

Solar system offers hardware sales as well either as a cash purchase or with in house financing. Still a lot of people like the PPA because they simply pay for the power at a rate lower than PG&E charges, they get to be "green", and they don't have to worry about maintenance, hardware failures, upfront costs, interest, etc.

It is a much easier for the uninformed consumer right now you are paying $120 per month in electricity. We can put a system on your roof which will cost $95 per month. Now me personally I want to own my system but look at how many people lease cars or rent a cable box (instead of buying a tivo) as examples of how many consumers just want to pay for a service.

 

[AutisticGramma]

The more informed people here know of Musk's involvement.

This is simply a castle move.

Vertical integration was always the goal imo. He has drummed up some demand with his cars.

Generation and transport is where the new empire is.

And considering nest's failure to integrate into Google's already deployed power inverter/distribution unit. The market is ready for a generation management/home automation that will really be worth something.

Alexa, siri, cortana etc. are all screwdrivers waiting for the right job. And bringing all this together is it.

 

[Digital Dud]

TomXP411[/url]":3rnbs88v]Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

I like their model. You only pay if their equipment is actually working, makes sense to me, no conflicts of interest.

 

[Uxorious]

Statistical[/url]":11yv4vdv]

It seems odd not to mention that Musk has an ownership stake in Solar City; they also (as far as I know) have not been doing terribly well as of late - their stock is down quite a bit from its all time high - and the optics of this look pretty bad (billionaire bails out own company using other publicly owned company). This is not to say anything untoward is happening, but from my unimportant perspective, I don't see the value in dropping 2+ billion on this when they've got some huge challenges that already put them in do-or-die mode regarding the Model 3 (yes, it could also be a stock deal).

Musk has a larger share in Tesla than he does Solar City (both in % and valuation). If the deal is a bad one for Tesla then net net he stands to take a loss. Yes as you point out it almost certainly would be a stock deal it isn't like Tesla just has $3B in cash just lying around.

Musk owns a 21.6% stake in SolarCity, holding more than 21 million shares worth $588 million. Musk owns a 21.9% stake in Tesla, a stake worth $6.08 billion.

Honestly I just see this as Elon and current CEO of Solar City seeing this as a good synergy. I would imagine there is some overlap between consumers interested in a Tesla and consumers interested in getting solar power. The combined company can aggressively target both. Now it may turn out to just be a bad idea but I don't see any way that it could benefit Elon without benefiting Tesla or hurt Tesla without also hurting Elon.

Please note that Elon Musk is not just an investor in Solar City, he is the Chairman of the Board, and thus he is effectively already the manager of the CEO of Solar City, so as others have pointed out, this appears to be a reorganization of two entities that Musk already controls, directly or indirectly, and not a revolutionary move.

 

[TomXP411]

Digital Dud[/url]":tppt7km9]

TomXP411[/url]":tppt7km9]Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

I like their model. You only pay if their equipment is actually working, makes sense to me, no conflicts of interest.

That's okay. You're allowed to like it. If some people didn't like it, then the company would not offer the product.

I'd rather buy the equipment and own it outright. It's about predictability for me. I'd rather make a $200 payment every month than pay $100 this month and $300 the next.

 

[arcite]

IrishMonkee[/url]":3mimzr5h]

billybeer[/url]":3mimzr5h]Wow, Musk looks pretty cooky for suggesting this. There are so many red flags:

- Musk wanting to use one company he owns (majority shareholder and CEO) to buy another company he owns (majority shareholder and chairman) - yeah, no conflict of interest there....

Sounds kinda familiar, kinda like something Microsoft did with Nokia.

...and we all know how that worked out.

 

[warmonked]

billybeer[/url]":2bhuzs4e]Wow, Musk looks pretty cooky for suggesting this. There are so many red flags:

- Musk wanting to use one company he owns (majority shareholder and CEO) to buy another company he owns (majority shareholder and chairman) - yeah, no conflict of interest there....
....

It's not mentioned here, but he is recusing himself from voting on the board and his shares in this matter.

I agree with your 3rd and 4th points though... I wouldn't call either company cash machines.

 

[billybeer]

warmonked[/url]":2cznt3mj]

billybeer[/url]":2cznt3mj]Wow, Musk looks pretty cooky for suggesting this. There are so many red flags:

- Musk wanting to use one company he owns (majority shareholder and CEO) to buy another company he owns (majority shareholder and chairman) - yeah, no conflict of interest there....
....

It's not mentioned here, but he is recusing himself from voting on the board and his shares in this matter.

Hehe, well at least he's not totally clueless. Still, I'm sure this proposal has definitely raised the eyebrows of some Tesla shareholders.

 

[Statistical]

Digital Dud[/url]":s09l0r4d]

TomXP411[/url]":s09l0r4d]Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

I like their model. You only pay if their equipment is actually working, makes sense to me, no conflicts of interest.

That's okay. You're allowed to like it. If some people didn't like it, then the company would not offer the product.

I'd rather buy the equipment and own it outright. It's about predictability for me. I'd rather make a $200 payment every month than pay $100 this month and $300 the next.

What are you talking about?

1) You can buy hardware from Solar System instead of signing a PPA.

2) Even with a PPA there is no $100 this month and $300 next month. Unless you routinely use 3x as much power one month over another month. In a PPA the rate of power is fixed prior to signing the contract. That is the whole point. The day after you sign your PPA, PG&E could double the price of electricity and your rate with Solar City wouldn't change a single penny, it couldn't change a penny.

3) Alternatively if you want to neither own the system nor have a PPA you could have a solar lease. You can opt to have the exact same monthly bill for the next 20 years if you want. So in your example 240 consecutive payments of exactly $200.00 never a cent more or less.

It is like saying you hate a car dealership because they give you the option to lease a car and ignoring you could finance the same car or even just pay cash.

http://www.solarcity.com/residential/ho ... anels-cost

 

[Illinoisan]

...the company has 100MWh-worth of contracts with commercial customers.

What? That's like $7000 worth of electricity (at least with what we pay here). That's nothing. Do you mean MW rather than MWh?

 

[Oz7]

arcite[/url]":a3fhx0sy]Sounds like something Trump would do to save a failing Casino

Comparing Musk with Trump...

really?

 

[Statistical]

Statistical[/url]":1f338ue6]

What are you talking about?

1) You can buy hardware from Solar System instead of signing a PPA.

2) There is no $100 this month and $300 this month. In a PPA the price of power is fixed. That is the whole point. The day after you sign your PPA, PG&E could double the price of electricity and your rate wouldn't change a single penny.

1) I'm obviously not talking about.

2) Have you ever actually paid an electric bill? No two months are the same, because you use different amounts of energy each month. Therefore your bill will have different amounts each month.

Oh, and Solar City does reserve the right to raise your rate by a small amount annually, at least according to their web site. So if you rent and I buy on the same day, I'll get 100% free energy in (pick a number) years, and your rates may have risen every year, thanks to the "annual escalator" that can run up to 2.9%.

How does it make sense to charge 2.9% more next year for a product that costs them no more to make? After all, it's the solar panels on your roof producing the power, isn't it?

The annual escalator is fixed in the contract. It is a way to remove upfront costs but you could opt for a lease with 0% escalator if you want flat payments.

Do you also dislike Tesla because they give you the OPTION not requirement to lease a Model S instead of paying cash or getting a loan?

 

[SLee]

Illinoisan[/url]":2jgt8qnh]

...the company has 100MWh-worth of contracts with commercial customers.

What? That's like $7000 worth of electricity (at least with what we pay here). That's nothing. Do you mean MW rather than MWh?

It sounds like its for their storage products and storing electricity is extremely expensive. It's probably worth several tens of millions of dollars.

 

[Statistical]

Statistical[/url]":82ha4mk1]

The annual escalator is fixed in the contract. It is a way to lower the early year payments but you could opt for a lease with 0% escalator if you want flat payments.

Do you also hate Tesla because they give you the OPTION not requirement to lease a Model S instead of paying cash or getting a loan?

I didn't say I hate Solar City. I said I didn't like the PPA business model. The whole concept seems backward to me. I want solar to get a fixed monthly cost that is hopefully lower than my current electric rates, not to simply trade masters.

As to leasing a Tesla... no, I don't like leasing cars, either.

Like I said, it's okay for you to like that if it's what works for you, but arguing about it is pointless, because you're not going to make me like the idea of paying for energy by the watt-hour, no matter who I write the check to.

I wasn't trying to make you like it. Just pointing out it is an option nothing more. If you like leasing you can with Solarcity. If you like leasing you can with Tesla. If you don't like leasing you can purchase with Solarcity. If you don't like leasing you can purchase with Tesla.

What exactly makes you think anything is going to change after the merger? Will you now dislike Tesla's business model because they give consumers the option to lease solar power in addition to cars?

 

[TomXP411]

Statistical[/url]":2e0qxlwv]

Statistical[/url]":2e0qxlwv]

The annual escalator is fixed in the contract. It is a way to lower the early year payments but you could opt for a lease with 0% escalator if you want flat payments.

Do you also hate Tesla because they give you the OPTION not requirement to lease a Model S instead of paying cash or getting a loan?

I didn't say I hate Solar City. I said I didn't like the PPA business model. The whole concept seems backward to me. I want solar to get a fixed monthly cost that is hopefully lower than my current electric rates, not to simply trade masters.

As to leasing a Tesla... no, I don't like leasing cars, either.

Like I said, it's okay for you to like that if it's what works for you, but arguing about it is pointless, because you're not going to make me like the idea of paying for energy by the watt-hour, no matter who I write the check to.

I wasn't trying to make you like it. Just pointing out it is an option nothing more. If you like leasing you can with Solarcity. If you like leasing you can with Tesla. If you don't like leasing you can purchase with Solarcity. If you don't like leasing you can purchase with Tesla.

What exactly makes you think anything is going to change after the merger? Will you now dislike Tesla's business model because they give consumers the option to lease solar power in addition to cars?

My point was that I thought it was good for Tesla, despite the fact that I don't like Solar City's PPA model.

Do I expect Solar City to stop selling on the PPA model? No.

Any changes are likely to be based solely on the fact that Tesla as a major consumer of Solar City's hardware would increase Solar City's sales volume, and that could result in lower costs to the consumer. It also offers the potential for integrating things like the PowerWall into Solar City's product line.

Those are both good for the consumer, which is part of the "win-win" scenario I was talking about.

 

[CraigJ ✅]

AFAIK the biggest problem that Solar City is having is that local and regional power companies (owned by the likes of Berkshire Hathaway, etf) are getting the net metering rules changed because they are eating into profits. Over the last few years they have been able to buy seats on the regulatory commissions that oversee the utilities. Regulatory capture says hi!

In Central Arizona SRP was able to change their rating to actually make solar more, not less, expensive for a lot of consumers. I ran the numbers and at best solar would be break even for me. It sure wouldn't save any money.

Looking at ownership, Musk owns about 20% of the outstanding shares of both SCTY and TSLA. Not surh how the deal would be structured, but I can't imagine that a lot of cash will be involved. Probably most if not all a stock swap.

 

[Statistical]

AFAIK the biggest problem that Solar City is having is that local and regional power companies (owned by the likes of Berkshire Hathaway, etf) are getting the net metering rules changed because they are eating into profits. Over the last few years they have been able to buy seats on the regulatory commissions that oversee the utilities. Regulatory capture says hi!

In Central Arizona SRP was able to change their rating to actually make solar more, not less, expensive for a lot of consumers. I ran the numbers and at best solar would be break even for me. It sure wouldn't save any money.

Looking at ownership, Musk owns about 20% of the outstanding shares of both SCTY and TSLA. Not surh how the deal would be structured, but I can't imagine that a lot of cash will be involved. Probably most if not all a stock swap.

Powerwall would be a way around that. If you are right this would be another area where synergies make sense. Granted net metering is better for most consumers so lobbying to keep net metering in effect makes sense but having storage is a fallback when they lose a territory to the ruinous powers.

 

[ProphetM]

Statistical[/url]":1iktk0d9]

Considering how much I hate the Solar City business model (pay us for the electricity generated, not the hardware installed), and how much I like Tesla's innovations... this seems like a win-win.

Solar system offers hardware sales as well either as a cash purchase or with in house financing. Still a lot of people like the PPA because they simply pay for the power at a rate lower than PG&E charges, they get to be "green", and they don't have to worry about maintenance, hardware failures, upfront costs, interest, etc.

It is a much easier for the uninformed consumer right now you are paying $120 per month in electricity. We can put a system on your roof which will cost $95 per month. Now me personally I want to own my system but look at how many people lease cars or rent a cable box (instead of buying a tivo) as examples of how many consumers just want to pay for a service.

As a SolarCity customer, it's not that I'm uninformed or that I prefer to pay for a service; it was just the only feasible way to go solar. Sure, I will save less over time than if I did the whole thing myself, but that assumes I'm financially capable of the outlay, and of waiting for the positive results to appear years down the road. The deal I got allowed me to save money starting immediately, and I don't mind giving them a cut of my savings when they are assuming the risk - they own the hardware and must maintain it. Plus, with the way the solar industry is progressing, it's probable that when the deal is done at the end of 10 years, solar will be cheaper and easier and I'll be better able to buy a more advanced system. (Or they can offer me an even better deal.)

As a Model 3 reservation holder as well, I'm pretty happy with this turn of events.

I'd rather buy the equipment and own it outright. It's about predictability for me. I'd rather make a $200 payment every month than pay $100 this month and $300 the next.

The swing is not that large, even here in Las Vegas where we can go from using the heat one month to massive AC use the next. In fact the charge from SolarCity has been more consistent than my power bill was.

Oh, and Solar City does reserve the right to raise your rate by a small amount annually, at least according to their web site. So if you rent and I buy on the same day, I'll get 100% free energy in (pick a number) years, and your rates may have risen every year, thanks to the "annual escalator" that can run up to 2.9%. Assuming the usual 20 year break-even, my system costs 0 after that, and yours costs, potentially, 58% more than it did on installation day. And your costs continue forever.

Except that the contract isn't forever, it's for 10 years. So you can re-evaluate when the contract is up and decide again what works for you - run the numbers, see what they can offer, etc. If you want their hardware gone, they have to come and put your house back the way it was. So, while you're waiting for 20 years to get here to start the real savings, I'm saving right now. It has its merits.

 

[mla]

Market is not enamored with the deal: TSLA down 12%+ after hours: http://finance.yahoo.com/q?s=TSLA&ql=1

The CEO is a cousin of Elon, BTW: https://en.wikipedia.org/wiki/Lyndon_Rive

SolarCity's burn rate was pretty high along with debt levels. Looks like this is a bailout from TSLA.

 

[CraigJ ✅]

Statistical[/url]":z85b6xmi]

AFAIK the biggest problem that Solar City is having is that local and regional power companies (owned by the likes of Berkshire Hathaway, etf) are getting the net metering rules changed because they are eating into profits. Over the last few years they have been able to buy seats on the regulatory commissions that oversee the utilities. Regulatory capture says hi!

In Central Arizona SRP was able to change their rating to actually make solar more, not less, expensive for a lot of consumers. I ran the numbers and at best solar would be break even for me. It sure wouldn't save any money.

Looking at ownership, Musk owns about 20% of the outstanding shares of both SCTY and TSLA. Not surh how the deal would be structured, but I can't imagine that a lot of cash will be involved. Probably most if not all a stock swap.

Powerwall would be a way around that. If you are right this would be another area where synergies make sense. Granted net metering is better for most consumers so lobbying to keep net metering in effect makes sense but having storage is a fallback when they lose a territory to the ruinous powers.

Powerwall might be. The problem is in the summer my house can easily pull 20kW due to the AC (and my house isn't that large) and the fact that we don't have natural gas. I calculated that I would need 3 powerwalls (7kWh) maybe 4, to make it from dusk to dawn on hot nights. So that's $10,000 or $13,000 in addition to a properly sized PV system. In this case properly sized is in excess of 18kW. I could go on a rant about how SRP decided that net metering customers had to be on time of use metering, but no one else does. And the $50 fee to connect. But I won't. SRP is run by a bunch of people who think they are the reincarnation of Barry Goldwater...

 

[KGFish]

CraigJ[/url]":i85yqv95]

Statistical[/url]":i85yqv95]

AFAIK the biggest problem that Solar City is having is that local and regional power companies (owned by the likes of Berkshire Hathaway, etf) are getting the net metering rules changed because they are eating into profits. Over the last few years they have been able to buy seats on the regulatory commissions that oversee the utilities. Regulatory capture says hi!

In Central Arizona SRP was able to change their rating to actually make solar more, not less, expensive for a lot of consumers. I ran the numbers and at best solar would be break even for me. It sure wouldn't save any money.

Looking at ownership, Musk owns about 20% of the outstanding shares of both SCTY and TSLA. Not surh how the deal would be structured, but I can't imagine that a lot of cash will be involved. Probably most if not all a stock swap.

Powerwall would be a way around that. If you are right this would be another area where synergies make sense. Granted net metering is better for most consumers so lobbying to keep net metering in effect makes sense but having storage is a fallback when they lose a territory to the ruinous powers.

Powerwall might be. The problem is in the summer my house can easily pull 20kW due to the AC (and my house isn't that large) and the fact that we don't have natural gas. I calculated that I would need 3 powerwalls (7kWh) maybe 4, to make it from dusk to dawn on hot nights. So that's $10,000 or $13,000 in addition to a properly sized PV system. In this case properly sized is in excess of 18kW. I could go on a rant about how SRP decided that net metering customers had to be on time of use metering, but no one else does. And the $50 fee to connect. But I won't. SRP is run by a bunch of people who think they are the reincarnation of Barry Goldwater...

I'd suggest you'd get more mileage out of better insulating your home as a first step.