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It's not at all clear to me that power generation via solar has anything at all to do with supplying electricity to cars. The power generated can be used for a

by harryh 10y ago

It's not at all clear to me that power generation via solar has anything at all to do with supplying electricity to cars. The power generated can be used for anything. The vast majority will go to things other than cars. Electric cars can consume electricity from any source and, at least for a while, the vast majority will be coming from sources other than solar. Vertical integration can make a lot of sense in weird markets where goods aren't fungible or there isn't a high quality market for trading. Electrical power is basically the opposite of this though. There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers. It's pretty clear to me that the merging of the companies is mostly due to cashflow management on the part of Musk and has little to do with any real synergies between their businesses. Stockholders in one or both companies are likely to suffer due to the merger.

endswapper 10y ago
Electric cars represent a substantial demand for electricity. Solar represents a cost-effective renewable supply of electricity. The two do go hand-in-hand. "Vertical integration can make a lot of sense in weird markets where goods aren't fungible or there isn't a high quality market for trading. Electrical power is basically the opposite of this though. There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers." Yes, but the point is that there is a reason to combine those two, if the long-term agenda is to create a next-generation energy company, as opposed to simply competing in their respective markets, which was a response to pfarnsworth's comments. I do agree with the likelihood of certain shareholders being negatively affected. You are also probably right about the motivation being cashflow, but that is due to circumstances/timing rather than a lack of synergy.
- harryh 10y ago
  Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies. Because there is a deep, liquid market for jet fuel. Just like electricity.
  - endswapper 10y ago
    If they could convince an oil company to do so they might. Given that, "there is a deep, liquid market for jet fuel," is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? You're also omitting the fact/point that the energy industry is evolving very quickly and that calls in to question the established markets. Energy over-supply in general creates opportunities for disruption and new business models.
    - harryh 10y ago
      is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? Yes. The only reason it exists this way is because they're both owned by the corrupt government/monarchy of Dubai. Keep in mind that under the same umbrella you also have everything from banks to a cement company to hotels to a mineral water company. This isn't a coherent business strategy, it's just what happens when a single family rules over an entire economy and basically owns everything.
      - endswapper 10y ago
        Why is it poor strategy beyond liquid markets for jet fuel? You could equally argue that is exists that way because they need to deploy extremely large amounts of capital. So, an infrastructure company in a region that is going through phenomenal, albeit temporary growth, makes a lot of sense. Once that growth levels off they could transition to higher-tech endeavors.
  - barney54 10y ago
    One counter example is that Delta bought an oil refinery for this reason. https://en.wikipedia.org/wiki/Trainer_Refinery https://en.wikipedia.org/wiki/Trainer_Refinery
  - trimbo 10y ago
    > Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies They are creeping in that direction though. Delta purchased their own refinery in 2012: http://www.reuters.com/article/us-delta-jetfuel-exclusive-idUSKCN10E0EZ http://www.reuters.com/article/us-delta-jetfuel-exclusive-id...
mr_spothawk 10y ago
> There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers. I suspect SolarCity's microgrid program and system service contract (which allows for customers to participate in yet-to-be-developed markets) is intended to disrupt the whole shit. IIRC, SolarCity already purchased a utility company. I expect they're looking to buy more utility poles & make their own market, cash squeeze realities notwithstanding.
Tharkun 10y ago
> It's not at all clear to me that power generation via solar has anything at all to do with supplying electricity to cars. Tesla is a battery company that just so happens to also make a couple of cars. When you look at it that way, it makes a lot more sense.
- harryh 10y ago
  This actually makes sense. And perhaps SolarCity will also become a battery company that just so happens to also make solar panels because solar power turns out to be more of a storage problem than generation problem. You are making me rethink my position a little bit. Thanks!
- forgetsusername 10y ago
  >Tesla is a battery company What advantage do they have in battery tech that say, Panasonic (who provides their batteries), doesn't?
  - mr_spothawk 10y ago
    Government backed/funded manufacturing facilities based in the US
  - abledon 10y ago
    Tesla will be the owner of the gigafactory, a factory in which Panasonic will own a small portion of the manufacturing space inside. I suppose an advantage here is the willingness for the two companies to work together.
  - toomuchtodo 10y ago
    Demand. No one is clamoring to buy Panosonic batteries. They are clamoring to buy Tesla vehicles (which so happen to require quite a few cells).
    - semi-extrinsic 10y ago
      Total Tesla sold battery capacity is about 10 GWh. For comparison, Nissan has sold 6 GWh, and Chevrolet has sold 2 GWh. But all are beaten by Toyota, who have sold more than 17 GWh in their hybrid vehicles. For further comparison, the total capacity of existing pumped hydroelectric storage plants is 740 000 GWh. (This puts plans of battery-based electricity storage in a rather harsh perspective.)
ldargin 10y ago
The difference is that solar power works best with battery storage because it's not continuous, so Tesla's vehicles can benefit from that source more easily than most other consumers.
- mr_spothawk 10y ago
  the Powerwall product uses the same battery for home storage. also, a sweet deal like: "charge your electric car for a discounted rate m when your home already has SolarCity brand electricity" is a much easier sale than "Oh, you've got a Tesla... don't you want to charge it with your standard meter rate from Vivent?"

by harryh 10y ago

endswapper 10y ago

Electric cars represent a substantial demand for electricity. Solar represents a cost-effective renewable supply of electricity. The two do go hand-in-hand. "Vertical integration can make a lot of sense in weird markets where goods aren't fungible or there isn't a high quality market for trading. Electrical power is basically the opposite of this though. There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers." Yes, but the point is that there is a reason to combine those two, if the long-term agenda is to create a next-generation energy company, as opposed to simply competing in their respective markets, which was a response to pfarnsworth's comments. I do agree with the likelihood of certain shareholders being negatively affected. You are also probably right about the motivation being cashflow, but that is due to circumstances/timing rather than a lack of synergy.

harryh 10y ago
Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies. Because there is a deep, liquid market for jet fuel. Just like electricity.
- endswapper 10y ago
  If they could convince an oil company to do so they might. Given that, "there is a deep, liquid market for jet fuel," is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? You're also omitting the fact/point that the energy industry is evolving very quickly and that calls in to question the established markets. Energy over-supply in general creates opportunities for disruption and new business models.
  - harryh 10y ago
    is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? Yes. The only reason it exists this way is because they're both owned by the corrupt government/monarchy of Dubai. Keep in mind that under the same umbrella you also have everything from banks to a cement company to hotels to a mineral water company. This isn't a coherent business strategy, it's just what happens when a single family rules over an entire economy and basically owns everything.
    - endswapper 10y ago
      Why is it poor strategy beyond liquid markets for jet fuel? You could equally argue that is exists that way because they need to deploy extremely large amounts of capital. So, an infrastructure company in a region that is going through phenomenal, albeit temporary growth, makes a lot of sense. Once that growth levels off they could transition to higher-tech endeavors.
- barney54 10y ago
  One counter example is that Delta bought an oil refinery for this reason. https://en.wikipedia.org/wiki/Trainer_Refinery https://en.wikipedia.org/wiki/Trainer_Refinery
- trimbo 10y ago
  > Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies They are creeping in that direction though. Delta purchased their own refinery in 2012: http://www.reuters.com/article/us-delta-jetfuel-exclusive-idUSKCN10E0EZ http://www.reuters.com/article/us-delta-jetfuel-exclusive-id...

mr_spothawk 10y ago

> There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers. I suspect SolarCity's microgrid program and system service contract (which allows for customers to participate in yet-to-be-developed markets) is intended to disrupt the whole shit. IIRC, SolarCity already purchased a utility company. I expect they're looking to buy more utility poles & make their own market, cash squeeze realities notwithstanding.

Tharkun 10y ago

> It's not at all clear to me that power generation via solar has anything at all to do with supplying electricity to cars. Tesla is a battery company that just so happens to also make a couple of cars. When you look at it that way, it makes a lot more sense.

harryh 10y ago
This actually makes sense. And perhaps SolarCity will also become a battery company that just so happens to also make solar panels because solar power turns out to be more of a storage problem than generation problem. You are making me rethink my position a little bit. Thanks!
forgetsusername 10y ago
>Tesla is a battery company What advantage do they have in battery tech that say, Panasonic (who provides their batteries), doesn't?
- mr_spothawk 10y ago
  Government backed/funded manufacturing facilities based in the US
- abledon 10y ago
  Tesla will be the owner of the gigafactory, a factory in which Panasonic will own a small portion of the manufacturing space inside. I suppose an advantage here is the willingness for the two companies to work together.
- toomuchtodo 10y ago
  Demand. No one is clamoring to buy Panosonic batteries. They are clamoring to buy Tesla vehicles (which so happen to require quite a few cells).
  - semi-extrinsic 10y ago
    Total Tesla sold battery capacity is about 10 GWh. For comparison, Nissan has sold 6 GWh, and Chevrolet has sold 2 GWh. But all are beaten by Toyota, who have sold more than 17 GWh in their hybrid vehicles. For further comparison, the total capacity of existing pumped hydroelectric storage plants is 740 000 GWh. (This puts plans of battery-based electricity storage in a rather harsh perspective.)

ldargin 10y ago

The difference is that solar power works best with battery storage because it's not continuous, so Tesla's vehicles can benefit from that source more easily than most other consumers.

mr_spothawk 10y ago
the Powerwall product uses the same battery for home storage. also, a sweet deal like: "charge your electric car for a discounted rate m when your home already has SolarCity brand electricity" is a much easier sale than "Oh, you've got a Tesla... don't you want to charge it with your standard meter rate from Vivent?"