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

 

[CraigJ ✅]

SLee[/url]":ueclpgyx]

CraigJ[/url]":ueclpgyx]
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.

That's not surprising, the utility will almost always be able to generate electricity cheaper than you can with rooftop solar. High feed-in tariffs and net metering is the only way to make rooftop solar economical, but at the expense of all non rooftop-solar customers.

Except that it's not, or it doesn't have to be. All they have to do is only pay low wholesale for the consumer generated power. Or hell, don't pay for it at all. If I could connect up and push power back into the grid and not get paid for it, and pay them $25/month for the privilege, I'd still be ahead of the game. But if I want to grid tie, I have to pay $50 for the privilege AND I have to go on time of use. Which would make my bill more than I'm paying now even with the solar...

 

[ProphetM]

SLee[/url]"ane2meh]

CraigJ[/url]"ane2meh]
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.

That's not surprising, the utility will almost always be able to generate electricity cheaper than you can with rooftop solar. High feed-in tariffs and net metering is the only way to make rooftop solar economical, but at the expense of all non rooftop-solar customers.

The Nevada Public Utilities Commission studied the costs & benefits and determined that net-metered solar customers were actually saving the other customers money, because of the savings to the power company in areas like transmission costs and required capacity.

 

[CraigJ ✅]

KGFish[/url]":97tmpzq6]

CraigJ[/url]":97tmpzq6]

Statistical[/url]":97tmpzq6]

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.

I spent many weekends in my attic installing additional insulation. I've callked, I've shaded, I've weatherstripped. I've getting ready to insulate the exposed edges of the slab. We've spent $12K on a super efficient smart heat pump. When it's 115 degrees, ever R46 only goes so far...

 

[Statistical]

CraigJ[/url]":z39nx7rp]
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.

That's not surprising, the utility will almost always be able to generate electricity cheaper than you can with rooftop solar. High feed-in tariffs and net metering is the only way to make rooftop solar economical, but at the expense of all non rooftop-solar customers.

That isn't true at all. There is no feed in tariffs for rooftop solar and net-metering is cost neutral. I give the grid 1 kWh my meter spins backwards 1 kWh. Later I use 1 kWh from the grid and it spins forward 1 kWh. Now we are even. Utilities dislike net metering because it means they sell less power.

 

[pkirvan]

Statistical[/url]":1f1xhifu]

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.

Just because Musk is doing the deal doesn't mean it's a good one- heaven knows that none of his ventures, other than Pay Pal, has ever sustained a profit. Musk could well be doing this for reasons other than because it's in Tesla's best interests. He no doubt believes strongly in Solar City and its cause, which is awesome. The trouble is, by making deals like this he is using investor's money as if it's his own for his own side projects, and it's not the first time. He recently had SpaceX give them a high-risk loan as well. This contravenes his fiduciary responsibility to run Tesla in Tesla's own interests on behalf of Tesla investors, and likewise for SpaceX (which is private but still has plenty of other investors besides Musk).

On a side note, close as it is to Musk's heart, Solar City is not a good company. Their business model was massively damaged by changes to the regulations in just one state. They don't have a monopoly on solar panels nor the best ones. Tesla, meanwhile, needs to stay focused on their core business of fixing the Model X and getting the Model 3 into volume production.

 

[CraigJ ✅]

Statistical[/url]":254op9ic]

CraigJ[/url]":254op9ic]
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.

That's not surprising, the utility will almost always be able to generate electricity cheaper than you can with rooftop solar. High feed-in tariffs and net metering is the only way to make rooftop solar economical, but at the expense of all non rooftop-solar customers.

That isn't true at all. There is no feed in tariffs and net-metering is cost neutral. I give the utility 1 kWh my meter spins backwards 1 kWh. Later I use 1 kWh and we are even. Utilities dislike net metering because it means they sell less power.

Utilities dislike net metering because it means they sell less power.

Right in one. It cuts into Warren Buffett's profits. That's the problem.

 

[pkirvan]

Statistical[/url]":2psaxrdw]
That isn't true at all. There is no feed in tariffs and net-metering is cost neutral. I give the utility 1 kWh my meter spins backwards 1 kWh. Later I use 1 kWh and we are even. Utilities dislike net metering because it means they sell less power.

Not really. They dislike net metering because that arrangement is far from fair. You give them 1 kWh whenever you feel like it, even if they have nobody to sell it to at the time, and then you expect 1 kWh back at a time of your choosing. That's a very asymmetrical arrangement where they are responsible for making sure the lights stay on and you are responsible for essentially nothing. You wouldn't like it if the tables were reversed- say that you could only generate power when your utility says so, and they could leave you without power for most of the day.

 

[Fatesrider]

Megalomania[/url]":1baisige]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).

From a business point of view, it makes sense.

Diversification within the "clean energy" industry spreads the risk, and lowers cost if there's overlap in vendors supplying parts, eliminating the middle-man costs.

As for a billionaire buying out the company using another publicly owned company, that's pure hyperbole. He WANTS to do that, but the stock holders have to agree. And from what I gather, that's pretty SOP for multicorporate entities regardless of who's in charge or the level of their personal wealth.

If by spreading the risk and reducing the costs of manufacturing the products, the value of any stock I might be holding (as a stockholder) will likely go up, I'd be in favor of the plan. From that perspective, it doesn't really matter who brought up the idea.

Edit: If his ownership of either company has any bearing on it, the SEC or FTC will likely veto it.

 

[aleph_nought]

Makes a heck of a lot more sense than Microsoft buying LinkedIn

The combined entity could provide some sweet package deals - get a Tesla car and you'll also get solar panels and batteries, so home charging will always be free and sustainable.

 

[mikiev]

Uxorious[/url]":2dy99bsn]

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.

And for those who aren't aware [from the wiki on Elon Musk]:

Musk provided the initial concept and financial capital for SolarCity, which was then co-founded in 2006 by his cousins Lyndon and Peter Rive.

 

[svzurich]

Statistical[/url]":18zua9q1]

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.

We live in Las Vegas and were paying over $300 in summer for electricity (the house was built in 1961 and was poorly insulated with single pane windows). I had my girlfriend lay down insulation in the attic while I contracted with Solar City to prepay for 20 years of power generation and had new, energy efficient windows installed. The windows were just installed a few weeks ago, and I am looking forward to the energy bill. I have the thermostat set to 70 during the day and 65 at night. So far, even after the PUC and NV Energy screwed us by dropping grandfathering and tilting the rates against us, we were still making money in the form of credits on our NV Energy bill. Last bill we made $50 on top of $700 in credit running the A/C 24/7. I expect these new windows to increase that amount nicely.

 

[beebee]

TomXP411[/url]":3j4qfvwn]

beebee[/url]":3j4qfvwn]

TomXP411[/url]":3j4qfvwn]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.

I know someone who looked at Solar City, deemed it a ripoff, and just got a contractor to install a system. People who have a little money rather own the system.

Musk is already part owner of Solar City, so if he didnt like the plan, he would probably have made his objection evident.

I'm neutral on this acquisition, not being an owner of any Tesla stock or vehicle. But Tesla has much on its plate and Musk hasn't learned the importance of boring stuff like QA. As a chip designer in several semis, I never cared much for test and QA until I worked at a company where there were few product engineers, meaning you owned all the production problems and shared in QA. In that environment you learn novel ain't so novel as tried and true. This is something Musk hasn't learned yet. Tesla is cool, but I'd hate for a Tesla to be my only ride. Do a search on youtube for "boot my Tesla" if you don't believe me.

What I would hate to see is Solar City incentives wrapped into the "price" of a Tesla. (I haven't ruled out buying one. ) I like clean deals and would hate to think if I didn't go with a Solar City combo deal that I'm leaving money on the table.

 

[evighed]

pkirvan[/url]":33pxue07]

Statistical[/url]":33pxue07]
That isn't true at all. There is no feed in tariffs and net-metering is cost neutral. I give the utility 1 kWh my meter spins backwards 1 kWh. Later I use 1 kWh and we are even. Utilities dislike net metering because it means they sell less power.

Not really. They dislike net metering because that arrangement is far from fair. You give them 1 kWh whenever you feel like it, even if they have nobody to sell it to at the time, and then you expect 1 kWh back at a time of your choosing. That's a very asymmetrical arrangement where they are responsible for making sure the lights stay on and you are responsible for essentially nothing. You wouldn't like it if the tables were reversed- say that you could only generate power when your utility says so, and they could leave you without power for most of the day.

That doesn't follow. Solar panels generate power during daylight hours, which include peak power consumption times. Power grid customers with solar will typically consume most of their grid power at night, when power companies have lots of generation capacity and nobody to sell it to. Except for the total number of kWh sold, the arrangement favors power companies.

 

[CRandyHill]

I don't want to dump on Musk, but from a shareholder perspective this stinks to high heaven. He may "recuse" himself from the vote, but just negotiating the deal is enough to make it likely to pass. It's pretty easy to induce the firms that make shareholder recommendations to approve even the worst possible deals (i.e. HP-Compaq) and that means a ton of pension funds/index funds will be forced to vote for it.

There are zero synergies here, unless you count more ways to obfuscate the financials of two money losing companies as one. Thats what deals like this typically look like and it's the reason someone made a Trump reference. Trump specializes in putting together whacky deals like this to keep his awful businesses out of bankruptcy and continuing to pay cash into his pockets.

Now I don't think Elon is lining his pockets here, he's clearly a builder who wants to create amazing things. But he's also thin skinned about criticism and not above gaming the system to his advantage, and it sure looks like he's going to use the money he's raising for Tesla to keep Solar City afloat longer. Which is pretty scary given Tesla is still years away from cash flow positive on any long term basis.

 

[argamond]

Statistical[/url]":uzvst8jq]

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.

Apart from the conflict of interest from owning both (and being the CEO of one and the chairman of the other), the CEO and CTO of solar city are also Musk's relatives (cousins).

There is investment talk that this is more a bailout of SolarCity rather than a genuine acquisition and the price being paid for SolarCity is way too high

 

[SLee]

evighed[/url]":2afhic9b]
That doesn't follow. Solar panels generate power during daylight hours, which include peak power consumption times. Power grid customers with solar will typically consume most of their grid power at night, when power companies have lots of generation capacity and nobody to sell it to. Except for the total number of kWh sold, the arrangement favors power companies.

Peak electricity demand is in the late afternoon to mid-evening, when solar is weakening or non-existent.

http://www.caiso.com/outlook/SystemStatus.html
http://www.ercot.com/content/cdr/html/l ... ntDay.html
http://www.ieso.ca/Pages/Power-Data/default.aspx

California, Texas and Ontario, the two most populous states and the most populous Canadian province all show the same pattern.

Roof-top solar households consume most of their electricity at the same time everybody else does, when they get home and up to bedtime.

 

[dobrien75]

I like this a lot. A full stack solution (and hopefully later competitors) is what the consumer renewable sector needs to get moving.

 

[ej24]

Didn't Musk help start/fund solar city? I vaguely remember reading his brother-in-law or someone of distant relation to Musk was put in charge so Musk wouldn't have too much in his plate.

Edit: reading more of the other posts it seems it was his cousin that was in charge. Is his cousin still in charge as of the acquisition?

 

[BloodNinja]

Megalomania[/url]":15553g4a]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).

Agreed, except the word "optics" used in this sense gave me cancer.

 

[pkirvan]

evighed[/url]":2bqz5k1b]

pkirvan[/url]":2bqz5k1b]

Statistical[/url]":2bqz5k1b]
That isn't true at all. There is no feed in tariffs and net-metering is cost neutral. I give the utility 1 kWh my meter spins backwards 1 kWh. Later I use 1 kWh and we are even. Utilities dislike net metering because it means they sell less power.

Not really. They dislike net metering because that arrangement is far from fair. You give them 1 kWh whenever you feel like it, even if they have nobody to sell it to at the time, and then you expect 1 kWh back at a time of your choosing. That's a very asymmetrical arrangement where they are responsible for making sure the lights stay on and you are responsible for essentially nothing. You wouldn't like it if the tables were reversed- say that you could only generate power when your utility says so, and they could leave you without power for most of the day.

That doesn't follow. Solar panels generate power during daylight hours, which include peak power consumption times. Power grid customers with solar will typically consume most of their grid power at night, when power companies have lots of generation capacity and nobody to sell it to. Except for the total number of kWh sold, the arrangement favors power companies.

And who is expected to have idle generating capacity ready during peak daytime hours for when it gets cloudy? The utility. You essentially expect your utility to build extra capacity in the same amount as your solar panels and have it idle whenever you decide to generate some power. Building and maintaining said capacity costs them money, and there's no reason you shouldn't be paying your share.

Put another way, there is no jurisdiction in the world where utility A can turn on their generator whenever they feel like it expecting utility B to find some use for that power, then expecting utility B to be able to give them that power back, for free, at some random time of utility A's choosing. Such a grid would collapse quickly. Net metering only works so far because the amount of solar generated has been trivial (solar and wind together are around 5-6% right now). If you want it to go further than that you have to accept that if you put power on the grid you are a utility and you need to act like one. That includes paying and being paid based on demand.

 

[KillaGorillaa]

Here's the offer letter:

June 20, 2016

Mr. Lyndon R. Rive
Chief Executive Officer
SolarCity Corporation
3055 Clearview Way
San Mateo, CA 94402

Dear Lyndon:

We are pleased to submit to you and the SolarCity board of directors a proposal to acquire all of the outstanding shares of common stock of SolarCity in exchange for Tesla common shares. Subject to completing due diligence, we propose an exchange ratio of 0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock. This proposal represents a value of $26.50 to $28.50 per share, or a premium of approximately 21% to 30% over the closing price of SolarCity’s shares, based on today’s closing price of SolarCity’s shares and the 5-day volume weighted average price of Tesla shares. We believe that our proposal offers fair and compelling value for SolarCity and its stockholders, while also giving SolarCity’s stockholders the opportunity to receive Tesla common stock at a premium exchange ratio and the opportunity to participate in the success of the combined company through their ongoing ownership of Tesla stock.

The board of directors of Tesla is excited at the prospect of a potential combination of SolarCity’s business with Tesla. We believe that the possibilities for product, service and operational synergies would be substantial, and that a combination would allow our companies to build on our respective core competencies and remain at the forefront of delivering innovative approaches for sustainable transportation and energy. We believe that a combination would generate significant benefits for stockholders, customers and employees of both Tesla and SolarCity.

We are committed to a possible transaction that is fair to SolarCity’s and Tesla’s respective stockholders. To help ensure that, Tesla is prepared to make the consummation of a combination of our companies subject to the approval of a majority of disinterested stockholders of both SolarCity and Tesla voting on the transaction. In addition, as a result of their overlapping directorships, Elon Musk and Antonio Gracias have recused themselves from voting on this proposal at the Tesla board meeting at which it was approved, and will recuse themselves from voting on this proposal at the SolarCity board as well. We believe that any transaction should be the result of full and fair deliberation and negotiation by both of our boards and the fully-informed consideration of our respective stockholders.

Our proposal is subject to the satisfactory completion of due diligence, the negotiation of mutually agreeable definitive transaction documents, and final approval by the Tesla board. While a transaction would be further subject to customary and usual closing conditions, we believe that Tesla is well positioned to negotiate and complete the transaction in an expedited manner. We do not anticipate significant regulatory or other obstacles in consummating a mutually beneficial transaction promptly.

In light of Elon Musk’s SEC disclosure obligations in his individual capacity as a stockholder of SolarCity, this proposal will be publicly disclosed, but Tesla’s intention is to proceed only on a friendly basis.

We look forward to discussing a potential transaction with you, and hope to expeditiously enter into a definitive agreement.

Sincerely,

The Board of Directors of
Tesla Motors, Inc.

 

[Bicentennial Douche]

Megalomania[/url]":2vf7albp]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).

If the stock is down, it might make sense to buy. And yeah, Musk in a shareholder in both, but he will not be voting on this deal, other shareholders will decide.

 

[Althernai]

CRandyHill[/url]":3uc0fytg]There are zero synergies here, unless you count more ways to obfuscate the financials of two money losing companies as one.

There's at least one obvious synergy: Tesla will soon start mass-producing the Powerwall. Solar City is at the mercy of regulators because the sun doesn't shine at night which results in all of these arguments about net metering and the like, but if you could store the energy (even at a slight cost) and either use it yourself later or sell it to the utilities when the demand is high, this problem goes away. It makes perfect sense for a solar company to also mass-produce large batteries.

As to fiduciary stuff: come on, anyone who did any research on Musk at all should know exactly what they're dealing with when investing in any one of his companies. Of course, he might still get sued by somebody who knew and invested anyway specifically to file a lawsuit, but Musk's vision is pretty clear and the individual companies are just jigsaw pieces.

 

[billybeer]

Ah, yes. I forgot I can't speak ill of Tesla here, so my comment was buried into oblivion. Here's some actual facts to back up my claims that nobody felt like refuting, but down-voted anyway:

SolarCity has a large amount of debt (+3 Billion), negative earnings, and a stock price that has dropped from $80 to $20 in the last two years. It makes small amounts of money over very long terms (20 years) but requires massive amounts of money up front to do installations. It would also not be the first solar company to have trouble making money (see Sun Edison). It is a very tricky business model to value and can quickly spiral out of control once the debt gets too high - I would argue SolarCity is currently in that spiraling phase....

Now enter Tesla: They also have 3 Billion in debt and negative earnings. But they want to ramp up production to 500k vehicles by 2018. An increase of 10x over current rates in less than 2.5 years! Here's an extra exclamation point to let that sink in: !. Guess what? Tooling required to increase your production rate 10x will cost at least a billion dollars. It normally takes 3-4 years to get that up and running for established car companies. You also need all of your suppliers on-board to ramp up their production 10x. Emphasis on all of them. To say this is a challenging goal is an understatement. Now factor in that the +400 Million in pre-orders for the model 3s are refundable and you are once again stuck needing several more billion dollars to actually build these cars.

As an aside, I honestly question the people pre-ordering a car they have never driven, wont get for over 2 more years (assuming there are no delays) and coming from a company ramping up production at a 10x rate (say hello to manufacturing mistakes as they try to pump out all those cars!). Keep in mind, there is way more competition at the model 3s price level than at the Model S or X, and these more mainstream buyers will likely be less tolerant of the manufacturing issues that have come up with the S and X. If The Model 3 comes out and it isn't spectacular or the competition comes out with something comparable, Tesla is going to have a lot of debt and not nearly enough sales to keep things moving. That is why I say the financial certainty of Tesla is not nearly as clear as it might seem.

So now he wants to take a company that doesn't make money and dilute the stock of his other company that doesn't make money because I guess people will want to buy a set of solar panels for their electric car as well? Maybe. Might as well throw in a SpaceX rocket ride while we're at it. I don't see how either company can truly benefit from the other being under the same roof. It reminds me of going to Radio shcak to buy a resistor and getting a cell phone plan peddled to me as well....Don't forget, this stock buy is at a 25% premium to SolarCity's current price. It really looks like a bailout of a company for himself and friends/family and not a sound financial decision.

Is it possible Tesla can get the model 3 production going that quickly without issues? Of course, but it would be a manufacturing feat not seen since Henry Ford. Now throw in a money-losing solar panel company and I remain firmly in the skeptical camp. But if anyone alive today can pull it off, it's probably Musk...In that case I promise to come back here and eat my hat in 2018.

 

[Dadlyedly]

Now I just wonder how SpaceX is going to figure into this eventually. Is Solar City going to work on space-based beamed power satellites? If not, will it now?
Elon? Do you read this site?

 

[billybeer]

pkirvan[/url]":1ac5t8ke]

evighed[/url]":1ac5t8ke]

pkirvan[/url]":1ac5t8ke]

Statistical[/url]":1ac5t8ke]
That isn't true at all. There is no feed in tariffs and net-metering is cost neutral. I give the utility 1 kWh my meter spins backwards 1 kWh. Later I use 1 kWh and we are even. Utilities dislike net metering because it means they sell less power.

Not really. They dislike net metering because that arrangement is far from fair. You give them 1 kWh whenever you feel like it, even if they have nobody to sell it to at the time, and then you expect 1 kWh back at a time of your choosing. That's a very asymmetrical arrangement where they are responsible for making sure the lights stay on and you are responsible for essentially nothing. You wouldn't like it if the tables were reversed- say that you could only generate power when your utility says so, and they could leave you without power for most of the day.

That doesn't follow. Solar panels generate power during daylight hours, which include peak power consumption times. Power grid customers with solar will typically consume most of their grid power at night, when power companies have lots of generation capacity and nobody to sell it to. Except for the total number of kWh sold, the arrangement favors power companies.

And who is expected to have idle generating capacity ready during peak daytime hours for when it gets cloudy? The utility. You essentially expect your utility to build extra capacity in the same amount as your solar panels and have it idle whenever you decide to generate some power. Building and maintaining said capacity costs them money, and there's no reason you shouldn't be paying your share.

Put another way, there is no jurisdiction in the world where utility A can turn on their generator whenever they feel like it expecting utility B to find some use for that power, then expecting utility B to be able to give them that power back, for free, at some random time of utility A's choosing. Such a grid would collapse quickly. Net metering only works so far because the amount of solar generated has been trivial (solar and wind together are around 5-6% right now). If you want it to go further than that you have to accept that if you put power on the grid you are a utility and you need to act like one. That includes paying and being paid based on demand.

I believe Hawaii is having serious issues with their power grid for this exact reason: too much solar/wind from individual houses causing wacky swings in power output. It got so bad they had to limit the number of new solar installations.

 

[dio82]

CraigJ[/url]":1emthm29]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!

Net metering was a classical case of "De minimis non curat preator", the utility companies did not concern themselves with trifles. Now that solar is no longer a trifle, it is time to treat Solar equal like any other power source, and that means solar buy-back at market rates.

That is 20-30$/MWh and not 200$/MWh for net metering. The time of externalising costs by piggy-backing the grid and paying for grid usage are over.

There is no conspiracy. If anything there is still a conspiracy in favor of solar, since the utility companies are not hitting home owners with the book of standards and regulations that are actually binding for all power feed-ins.

 

[isparavanje]

aleph_nought[/url]":39mxhb2w]Makes a heck of a lot more sense than Microsoft buying LinkedIn

The combined entity could provide some sweet package deals - get a Tesla car and you'll also get solar panels and batteries, so home charging will always be free and sustainable.

Actually, no, it doesn't. Microsoft has rather good financials; they could have easily purchased linked in as a "high risk" thing, and it wouldn't hurt them much to write the sum off. On the other hand, the only company out of the 30ish I'm watching with worse financials than TSLA is AMD. And being financially better than AMD really isn't saying anything.

 

[helloukw]

TomXP411[/url]":2mknrm5h]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.

So what you basically say is you'd rather pay for all the hardware (solar panels, batteries, etc) instead of paying in monthly fees that are less than an actual "normal" electricity bill. You must be rich and don't earn your own money.

 

[Althernai]

helloukw[/url]":2gao941x]So what you basically say is you'd rather pay for all the hardware (solar panels, batteries, etc) instead of paying in monthly fees that are less than an actual "normal" electricity bill. You must be rich and don't earn your own money.

I think you'd pay for the Powerwall in any case. Regarding the different payment methods: as a general rule, people who let you pay in monthly installments and are trying to make a profit will charge more than they would if you simply bought the product in a single payment. They practically have to do this because there's always an element of risk to spreading payments out over the years. Thus, you do have to be rich to buy it outright, but it might ultimately be cheaper to do it this way.

 

[Damnicus]

What a crazy idea that Elon Musk is having! No one else would do anything like this!

Elsewhere in the news, BMW is turning old BMX i3 batteries into power walls.

https://www.engadget.com/2016/06/21/bmw ... y-storage/

 

[THavoc]

Statistical[/url]":1jwa2pzf]

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.

There's also the large upfront costs to getting them installed. Not everyone has that kind of money / credit laying around.

 

[picturefever]

Digital Dud[/url]":tj02cf0q]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.

Sounds like credence goods (see http://meincmagazine.com/science/2016/06/ ... insurance/)

 

[Pjerky]

TomXP411[/url]":1uj7r4yn]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.

They have multiple models you can choose from, but that is the most affordable as they also maintain the system for you. Personally I am interested in setting up solar and wind at the new house I am buying if it can significantly reduce our power bill and not look too terrible in the process.

 

[startled]

TomXP411[/url]":nm0v6n5l]

Statistical[/url]":nm0v6n5l]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.

And for at least some of us apartment dwellers, the only stumbling blocks are working with our neighbors/local authorities to share roof space and put charging posts in the street. Certainly within the country I live, its a hassle but definitely solvable problems.

Anyway at face value, a highly admirable initiative from Mr Musk and I wish him all the best in making it successful. Hopefully his future plans include making a electric motorcycle, although including the bio-weapon defense mode option will be a interesting engineering challenge.

 

[gizmotoy]

CraigJ[/url]":2wodgv4a]

SLee[/url]":2wodgv4a]

CraigJ[/url]":2wodgv4a]
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.

That's not surprising, the utility will almost always be able to generate electricity cheaper than you can with rooftop solar. High feed-in tariffs and net metering is the only way to make rooftop solar economical, but at the expense of all non rooftop-solar customers.

Except that it's not, or it doesn't have to be. All they have to do is only pay low wholesale for the consumer generated power. Or hell, don't pay for it at all. If I could connect up and push power back into the grid and not get paid for it, and pay them $25/month for the privilege, I'd still be ahead of the game. But if I want to grid tie, I have to pay $50 for the privilege AND I have to go on time of use. Which would make my bill more than I'm paying now even with the solar...

I guess I don't know your power situation, but this seems surprising to me. To me, Solar+TOU seems like the perfect match. Your panels are generating when rates are high (day), and you get a substantial discount on the power you use when your panels aren't generating (night). The only way I can figure you'd come out behind with Solar+TOU is if you have a small install that can only offset a fraction of your daytime usage. What am I missing?

 

[Statistical]

CraigJ[/url]":2jldxf8i]

SLee[/url]":2jldxf8i]

CraigJ[/url]":2jldxf8i]
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.

That's not surprising, the utility will almost always be able to generate electricity cheaper than you can with rooftop solar. High feed-in tariffs and net metering is the only way to make rooftop solar economical, but at the expense of all non rooftop-solar customers.

Except that it's not, or it doesn't have to be. All they have to do is only pay low wholesale for the consumer generated power. Or hell, don't pay for it at all. If I could connect up and push power back into the grid and not get paid for it, and pay them $25/month for the privilege, I'd still be ahead of the game. But if I want to grid tie, I have to pay $50 for the privilege AND I have to go on time of use. Which would make my bill more than I'm paying now even with the solar...

I guess I don't know your power situation, but this seems surprising to me. To me, Solar+TOU seems like the perfect match. Your panels are generating when rates are high (day), and you get a substantial discount on the power you use when your panels aren't generating (night). The only way I can figure you'd come out behind with Solar+TOU is if you have a small install that can only offset a fraction of your daytime usage. What am I missing?

It depends on the exact details of the TOU. If the peak rate of the TOU is something like $0.25 per kWh and the peak is 4pm to 8pm it is very very tough to come out ahead in solar. The devil is in the details. Exactly what the individual TOU rates are, exactly what times they occur, and what exactly what your solar output looks like.

As the cost of solar declines it may be possible to align with the TOU. Instead of having all south facing panels you could have some west facing panels. They will produce less energy overall but they will produce it later in the day (when solar output usually declines and TOU rates rise).

That being said TOU + Solar doesn't have to be bad. Here in VA (Dominion power) it lines up pretty well because the peak TOU isn't that much higher than the flat rate is for non-TOU (something like $0.14 vs $0.11). It really depends on the power company. If they want to make solar noncompetitive to reduce the number of installs it is pretty trivial to set the tou rates and times to ensure you don't gain much by using solar.

 

[fivemack]

I'm pretty sure that Elon Musk is not in fact Eike Battista.

And maybe with the continuing low interest rates it makes sense to try to do something innovative using enormous amounts of borrowed capital.

But I really don't like the look of this deal, tying together a highly-leveraged company with billions of dollars of commitments out into the future (Solar City borrowed the money to build the panels from which it's getting the monthly rent) with another company that's borrowed massively to build the gigafactory and will need to borrow massively again to build the factory to build the Model 3.

If Brexit ends up knocking the world economy into recession tomorrow, I would not bet that Tesla, Solar City, and regrettably SpaceX would all go down together.

 

[fivemack]

THavoc[/url]":24abcl8h]There's also the large upfront costs to getting them installed. Not everyone has that kind of money / credit laying around.

Yes. But it's not clear to me that people who don't have that kind of money or credit line lying around should be able to borrow Solar City's credit line to get the solar panels installed, because the timescale on which the bankers lending Solar City the money that builds the panels can change their contract is much shorter than the timescale of the contract you signed to get the panels installed.