‘Tesla Solar’ Wants to Be the Apple Store for Electricity
Bloomberg Technology, June 29, 2016
Tesla Motors Inc.’s bid to buy the biggest U.S. rooftop solar installer has little to do with selling cars. Rather, it’s about solving two of the biggest problems standing in the way of the next solar boom. And perhaps a good deal more.
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When Chief Executive Officer Elon Musk came out last week with his $2.86 billion plan to acquire SolarCity Inc., it was almost universally derided as a risky financial move that threatens to derail the electric car maker at its most critical moment.
That’s undoubtedly true. But in the dozens of analyst notes and news stories that picked apart the deal, there’s been little attention paid to what we’ll call “Tesla Solar” and how it could transform the power sector. It’s actually a really big idea.
Consider the average homeowner who might be vaguely interested in adding rooftop solar. Where does the process start?
Adding solar requires customers to sort through competing technologies and complex financing schemes with no household names to turn to. And then there’s the aesthetic impediment: Solar panels alter the look and value of one’s most important personal asset—the home. It’s a big leap of faith, even in regions where adding solar is an economic no-brainer.
This problem has dogged solar companies for years. Vivint Inc. has legions of door-to-door salesmen, while others have deployed mailers, robocalls, sports sponsorships, and internet search ads. None of it resonates all that much.
Tesla showrooms are cast from the same mold. At the new Tesla outpost in Brooklyn’s Red Hook neighborhood, customers sip free espresso and chat about cars. People go there to learn about electric vehicles often for the first time, and much of the experience is focused on education. Central to all of the showrooms is a stripped-down aluminum Tesla chassis, so customers can get a feel for how the battery and electric motors work. You can even take a test drive with the kids in a tricked-out $130,000 Model X SUV, and no one will ever ask if you want to buy a car, let alone haggle over prices and options if you do.
Instead, what ties the cars-plus-solar Tesla store together is an implicit guarantee of good customer service and sophisticated technology that’s easy to use. That’s branding that can never quite come together so long as Tesla and SolarCity remain separate companies. But together, it just might expand the entire market for solar. A Tesla showroom finally answers that question asked by millions of homeowners: Where do I start?
Solar Problem No. 2: The sun goes down
Here’s where things get interesting. Tesla isn’t just a car company looking to buy a solar company. It’s also a battery company that wants to link its two biggest markets: energy supply (solar) with energy demand (electric cars). Cheap and efficient batteries are what make Tesla cars possible, and they have the potential to change the economics of solar, too.
The solar-plus-battery bundle hasn’t really caught on yet. SolarCity’s total bundled sales thus far number in just the hundreds. But that’s because the batteries are still too expensive, and because a government policy known as net metering makes it more profitable to sell solar power back to the grid. Both of these obstacles are about to be flattened. Musk is betting that, in the next five years, the price of solar bundled with batteries will cost less than electricity from the power company.
A Tesla Powerwall battery currently costs about $3,000 for a 6.4-kilowatt-hour (kWh) battery, not including the considerable costs of the power inverter and installation. That’s a lot of money for a little bit of electricity. But Tesla plans to announce the first production of battery cells from its massive “Gigafactory” in Nevada later this summer: When fully up and running, it will produce more battery capacity than the entire global market for lithium ion batteries made last year. The scale is crucial for the rollout of Tesla’s mass-market Model 3 electric car, due in 2017.