News recently that car company and battery maker Tesla were looking to buy the biggest US solar company hasn’t come as a surprise to many in the renewables industry. On the surface it makes perfect sense considering Tesla have been at the forefront of developing the battery technology that could revolutionise clean energy production in the future.
The Upside of a Tesla/SolarCity Merger
Tesla have long been at the forefront of the electric car industry and have recently been forging ahead with the development of battery storage technology for renewable products such as solar panels. One of the key drivers for success when it comes to wind and solar is how we store electricity for later use. Solar panels don’t produce energy all the time – they depend on the sun shining. Without a way to store all that power, the efficacy of solar as an energy source, particularly off grid, is reduced.
The development of batteries that can be added to solar panel systems has been a long time coming. After all, we’ve had panels for the last twenty years. But in recent times, companies like Tesla have made big steps forward and their latest Powerwall has been making a decent splash on the world market. Merging with the largest solar panel provider in the US therefore makes good sense and could help Tesla market and develop their battery technology further.
The Downside of the Merger
News from Forbes and other news outlets recently however have suggested that this is less than a marriage made in heaven. SolarCity has been struggling for a while and Tesla could be buying a company in what is tantamount to a bailout. According to Forbes, recent losses may make the acquisition of SolarCity a bad move for the electric car company:
“Much of the losses have been covered by debt, but I think that source of capital may be drying up. The firm’s total debt, which includes off-balance sheet operating leases, has grown from $342 million in 2012 to $4 billion over the last twelve months.”
There is also a suggestion that Tesla is overvalued itself on the stock market and that could make the deal dangerous for the company. A lot depends on the vision of Elon Musk and how he sees the long term impact of the merger.
Tesla and Elon Musk
The electric car company is owned by multi-billionaire entrepreneur Elon Musk and there is surprise on the markets that he still wants to buy SolarCity even though his shareholders are deeply suspicious of the potential deal. According to Forbes:
“Tesla’s TSLA -0.45% shares dropped over 11% in after hours trading, temporarily knocking billions of dollars from Tesla’s market value. The deal, if approved, would only be worth $2.5 billion to $3 billion.”
While the short term risks for the merger are big, Musk sincerely believes that aligning with SolarCity could be highly beneficial in the long term, creating a major player in the energy market. In the end it would create a company that would be able to generate electricity through solar panels and store it using Tesla batteries, a player that is highly attractive to consumers and could lead to a domination of the market. It’s a pretty big gamble and could see Tesla gaining traction that will have many other energy producers scrambling to keep up.
The figures don’t entirely add up and it’s probably one of the biggest calculated gambles that Musk has taken on in recent times. If it works, the sky’s the limit. If it fails, it could see the end of Tesla, SolarCity and Elon Musk.