Why the Tesla/SolarCity Marriage is an Industry Milestone

Image: Heisenberg Media
Image: Dan Taylor / Heisenberg Media – www.heisenbergmedia.com

Quick: Name somebody in the solar sector who has high enough name recognition to have influence outside the business. Okay, there’s Elon Musk. And, well, that’s it.

The bottom line is that Tesla’s acquisition of SolarCity, if it closes, is good news for the solar business from the marketing perspective. “Frankly he validates our thinking and our work in last seven years,” said Ken Munson, the CEO of Sunverge, a vendor of intelligent distributed energy storage systems that both competes and cooperates with Tesla.

It is about image. “[The acquisition] shines a huge spotlight on the industry and says, ‘Yeah, there is real money to be made from the investment perspective and value from the consumer perspective. Now is the time you can have societal impact.’ It hugely validates the direction of Sunverse as well as many in the space who have worked hard for the last few years.”

The industry is undergoing both great growth and great change. While it is far more common to see solar panels on the roofs of homes and businesses today than even a year ago – not to mention five years or a decade ago — they still aren’t ubiquitous. Getting to the point where solar panels are as common as chimneys depends on several things: Solid companies, support (begrudging or not) from utilities and the government, methodical advances in photovoltaic science and increasingly sophisticated ways of storing the sun’s energy.

A combination of Tesla and SolarCity checks several of those boxes. First and foremost, however, is that Elon Musk is a personality. He is the guy who championed electric cars and his intention to send a rocket to to Mars. His deeper involvement is a major step.

Thus, the newly consolidated company will be headed by a man that most people know – and a man who will talk about solar power along with his electric vehicles wherever he goes. He will be talking about the importance of storage and batteries, which are key enablers of renewables. In essence, the highest profile person in the alternative energy field will be talking about a united, all-inclusive business that focuses on renewable energy both within structures and on the road.

It is a very important time in the history of solar energy. SolarCity is one of the companies racing to increase the energy yield of solar panels. There is a tremendous amount of research in that area. Bringing in Tesla’s engineering capabilities will no doubt help push the science. It also could help in the integration of those panels with the battery technology in which Tesla specializes.

There also may be a transition in the emphasis of the solar business. In its quarterly report, SolarCity said that its residential business is down. J.P. Morgan analysts released a note on the development, which was excerpted at MarketWatch: “We believe the lowered guidance, consistent with our expectations, will fuel concerns that demand is tapering in more mature (residential solar) markets, such as California, and that the shift to cash purchases or loan-based sales is also spurring a shift from national solar brands toward the regional and local installer market,” the note read.

The growth of Property Assisted Clean Energy (PACE) financing — which must be approved at the state and local levels — is an example of the increasing localization of the energy efficiency sector. If the fundamentals of the residential business are changing and it indeed is becoming more local, it makes sense that a company that runs car dealerships will have valuable insights and experience.

An even bigger transition, however, would be a refocused emphasis on the non-single family home market. A building – be it a factory, an apartment building, a school or other structure—has different dynamics than a house. There is a different amount of space available on roofs and within for the batteries. The monitoring, fail-over and backup requirements are no doubt far different – and more exacting.

The point isn’t that a combined Solar City/Tesla entity has all the answers as the solar industry faces the future. It doesn’t. What is clear, however, is that featuring a high profile entrepreneur – the guy who pioneered electric vehicles and wants to send people to Mars – will help make the industry more fully mainstream.

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