What a Tesla + SolarCity Future Looks Like

by Anna Gretz
November 19, 2016
Energy

Earlier this year, Tesla CEO Elon Musk proposed a merger between his electric vehicle company, Tesla, and the solar energy company SolarCity which was originally founded by his cousins, Lyndon and Peter Rive. In order for the Tesla/SolarCity deal to go through, it had to be approved by both Tesla and SolarCity shareholders. On November 21, the deal was finally done.

Musk says that uniting Tesla with SolarCity has been part of his “Master Plan” to provide customers with a one-stop-shop for energy, storage, and consumption. In Musk’s words, SolarCity merging with Tesla would created “the world’s only vertically integrated sustainable energy company.” What does this mean exactly? It means that Tesla owns its own supply chain. Merging Tesla with SolarCity means that Musk can scale his products in an unprecedented way, cutting R&D and overhead costs, resulting in, hopefully, big savings in the market. The deal also allows Tesla appeal to his eco-conscious audience under one united brand.

Though the merge won’t be without its challenges, the deal fits with Musk’s style of movement, change, and growth within Tesla. If there was ever a CEO who had mastered the art of keeping shareholders and customers excited about the unlimited possibilities of the future, it would be Elon Musk. His new product launches and announcements, especially those surrounding his energy storage projects like the Tesla Powerwall home battery, have been inspiring and electrifying (if you’ll pardon the pun.) Musk somehow remains both understated in his mannerisms, yet captivates his audience, getting them on board to whatever big destination Tesla is headed next. Yes, Elon Musk has an infectious presence, but he can’t make it on charisma alone. To really succeed, Tesla needs to churn out some big numbers.

The most recent profit reports released by Tesla are giving shareholders a confidence boost. Recently, Tesla announced that it turned a profit of $22 million last quarter (while the US oil industry managed to lose $67 billion last year due to low gas prices.) These stats put Tesla in a great position, but it’s one that hinges on a number of factors, including the success of the merger with SolarCity. The future of Tesla also depends on a large chunk of the Nevada desert… Yes, we’re talking about the Gigafactory.

Much of Musk’s net worth has been put at stake with the Tesla Gigafactory. The factory, when finished, will be the largest building in the world by footprint. The Gigafactory is a clear, visual example of how ambitious Elon Musk is, and his very high hopes for the future of Tesla. If everything goes according to plan, the factory will be able to churn out 150 gigawatt hours of batteries every year (to give you an idea, that’s enough for 1.5 million Tesla Model 3s.) The end goal of Tesla’s Gigafactory is to drive down the cost-per-kilowatt hour of batteries to an unprecedented low. This will make Tesla’s cars and lithium-ion batteries much more accessible and affordable to a wider customer base.

Affordability and accessibility will be a huge asset to Tesla as they continue to unveil their renewable energy-fueled products. Since products relying on renewables, like solar panels and home batteries, have historically been geared toward a more affluent crowd, it’s going to take some work to get a wider audience to identify Tesla’s products as something that fits with their lifestyle, and their budget. Tesla is starting this shift with their new solar roof.

Just minutes after the shareholders approved the Tesla/SolarCity merge, Musk made another announcement about the newly unveiled solar foot. Tesla’s solar roof, he says, will actually cost less to manufacture and install than a traditional roof. This is big news. Many customers were doing the math, factoring in the savings on their electrical bills from generating their own electricity, seeing if Tesla’s solar roof would be worth the investment. The power generation, Musk says, is just a bonus.

“So the basic proposition will be: Would you like a roof that looks better than a normal roof, lasts twice as long, costs less and--by the way---generates electricity?” Musk said. “Why would you get anything else?” Why indeed. But how does Tesla anticipate such a low cost on an obviously premium product? A lot of it comes down to shipping, and product durability. Traditional, cheap, asphalt shingles are a heavy, bulky product to ship, and they break easily in transport. Cost of shipping and lost product due to breakage are high costs. Tesla expects it’s tempered-glass roof tiles to hold up much better in transportation, and since they weigh as little as a fifth of the weight of other shingles, they should be much cheaper and easier to ship. Tesla is counting on cutting overhead costs to drive down the price of a product that would otherwise be out of reach for the majority of Americans.

Merging Tesla and SolarCity is another step toward bringing solar and energy storage products into the mainstream. The future of clean, dependable energy depends on the widespread adoption of renewable energy generation and storage. Driving down costs through vertical integration, cuts in overhead, durable, easy-to-ship products will introduce new price points to a wider population. When the price drops low enough for average households to Tesla’s products, and others like them, the last barrier will be an educational one.

The benefits of adopting new technology like the solar panels and energy storage batteries offered by Tesla goes beyond the luxury and excitement of owning advanced technology. It also goes beyond saving the earth. Renewable energy generation and energy storage is the best, simplest way for homes to protect their own power.

We have built a thriving, vibrant society that absolutely depends on a functional electrical grid. Most Americans depend on the power grid to energize the devices that wake them up, brew their coffee, light up their closet, and signal when it’s their turn to drive across the intersection to work. And that’s just the beginning.

Every area of modern life is touched by the electrical grid. Today in 2016, we quite literally cannot live without it. Without electricity, every system that is working together to keep our society going would break down, on both an individual and a structural level.

Without electricity, things get really dark, really fast.

It’s time for us to start thinking about how we can protect our power, instead of relying on a vulnerable, unreliable power grid. Energy security can be found by harnessing the free energy offered every day by the sun, and storing it in batteries so it’s available whenever we need it.

Tesla’s products give homes everywhere the ability to secure their own energy. A Tesla + SolarCity future could mean energy security for all.