Tesla and SolarCity are discussing a merger that could potentially grow the market for renewable energy sources and increase demand for batteries that will make it easier for companies to sell storage systems.
SolarCity already has a large customer base that reaches 27 states, allowing Tesla the ease of targeting a large group.
If the acquisition becomes successful, the new market can create space for many other companies to grow as well.
If both companies’ investors approve the purchase, 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.
Tesla isn’t 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 they have already started with their larger-scale offerings. 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.
Many of these projects will get developed alongside utilities, and utilities like to minimize risk. Put simply, they’d rather have one entity to sue if things don’t turn out the way they’re supposed to.
That’s what a unified Tesla-SolarCity would offer: a one-stop shop for utility-scale solar and storage.
The streamlining of the customer relationship will help in the residential sector, as well. Having one company to contract with and pay back for solar and storage makes things simpler for everyone involved.
SolarCity brings something else to the table as well: a captive and willing audience.
None of these possibilities guarantee that Tesla will succeed. The company has a new Model 3 to roll out, a Gigafactory to finish construction, and existing production targets to hit. Adding a solar company, with debts of its own, to the mix is not going to make any of those challenges easier.
If the companies do come together and march toward positive cash flow, their success will advance more than their own stock value. Already, Tesla has grown public awareness of energy storage more than any other entity.
It’s hard to find a news story about storage geared toward a general audience that doesn’t lead off with Elon Musk and the Powerwall. That fame creates space for all the other energy storage companies.
The acquisition will enable Tesla to bring that public attention to the combination of solar and storage. Best case scenario, the company opens new markets for integrated clean energy services, thus creating space for others to grow, too.