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I wonder why Tesla is selling these systems instead of deploying them directly and profiting off the arbitrage? If Autobidder was as good as they imply, then re

I wonder why Tesla is selling these systems instead of deploying them directly and profiting off the arbitrage? If Autobidder was as good as they imply, then realistically Tesla should be in position to capitalize off global energy markets on their own, earning far more than just the sale of the system.

notatoad 7y ago
Because they need cash, probably
- ethagknight 7y ago
  You can always find debt for profitability in the energy markets, and this seems pretty low risk as energy investments go.
  - notatoad 7y ago
    But you can only take on so much debt as a company, regardless of market, and telsa is kinda already stretching that limit (or at least they are according to HN comments)
    - bduerst 7y ago
      They are. Tesla is debt leveraged to hell which is why they're saying they're going to raise another $2B in cash from equity and bond sales to pay some of it off. Tesla needs cash, and lots of it.
  - astrodust 7y ago
    Debt hurts your fundamentals and hurts your stock price. Cash helps your stock price. If you're concerned about stock price, sell for cash.
    - gingabriska 7y ago
      It depend on how you use the debt. If are able to make slightly less ROI (due to cost of capital, cost of servicing debt) at larger scale, it's worth having debt and will have positive effect on stock price. The relationship is not as simple as you claim.
      - bduerst 7y ago
        True, but we're not talking about an anonymous company in a vaccuum here, but Tesla, which already has plenty of debt.
- rcMgD2BwE72F 7y ago
  No. They are free cash flow positive, and by $600+ million per quarter already.
  - Gustomaximus 7y ago
    Are they? https://finance.yahoo.com/quote/TSLA/cash-flow?p=TSLA https://finance.yahoo.com/quote/TSLA/cash-flow?p=TSLA
dflock 7y ago
To do that would require them to _become_ a power company in each jurisdiction that they wanted to do this in. Those markets are generally highly regulated - the amount of distraction & overhead this would create would be staggering, _immense_. I think Tesla already has enough on it's plate.
- Gibbon1 7y ago
  This is my answer. Selling into unrelated markets creates a need for duplication. At lower ranks that's 'fine' but becomes problematic at the level of senior management. Companies often sell off profitable divisions because management either can't or doesn't want to give them enough attention.
- jillesvangurp 7y ago
  Actually they will do this by selling to consumers directly as well with the same technology. They are getting ready to sell solar + battery directly to home owners at a huge scale (bottle-necked on some production capacity issues currently). Once they get there, they will have a virtual power plant that they can operate and control. So, Tesla is going there but just not in the way people expect. In the same way vehicle to the grid technology is a substantial battery resource that people overlook. Not a stretch of the imagination that a battery + solar solution for your home would play really nice with the Tesla parked in front of it. Vehicle to the grid technology already exists. There's just no way that they are not planning for that.
  - dflock 7y ago
    That seems fairly obvious to me - SolarCity/Tesla have always talked about building a "virtual" utility via residential solar+battery, with the cars working as an (occasionally) mobile battery component. But the OP's question was why don't Tesla install MegaPaks that they own themselves, into diverse energy markets around the world - and become a traditional utility.
boringg 7y ago
Arbitrage isn't as profitable as the other revenue streams in energy storage and, quite frankly, isn't really profitable or attractive. Arbitrage doesn't add any true value to the world - it just lines your own pocket. Not to mention that developing software to monetize the different revenue stacks is demanding and fickle. So many different integrations and different market requirements and dimensions. There's a good reason they aren't doing it - too much work with minimal upside and that whole Tesla/Elon has way too much on their plate thing.
- Nasrudith 7y ago
  Arbitrage does provide value but indirectly and abstractly usually by boosting availability and allowing for some efficiency boosts. The power role is one of the times when it had the most direct utility.
snowwindwaves 7y ago
Because there isn't much money to be made. Frequency control used to be provided inherently in every generator. With renewables that isn't the case and no consumer wants to see a new line item on their bill for all the extra cost of accommodating energy markets and renewables so it is all hidden in the network connection fee which is controlled by regulators. So the return on providing grid services that aren't MWH (energy) is Essentially fixed to what regulators will allow, which isn't that attractive, so better for tesla to make the lump sum profit up front on the equipment sale and let the utility run it for 5 years until the batteries are worn out and the utility have collected their ROI. In terms of actually bidding MWH in to the market when supply is tight so the price is high, it will end up lowering the price by increasing supply, and the intervals of high prices are few. By virtue of existing the system will reduce frequency of high price intervals since the market participants will know that capacity will come on at some price so if they try to bid really high their is will not be accepted. So batteries at this scale is nice for the system operator and politicians to put a lid on high price intervals but won't actually sell enough MWH back to the grid to amount to much.
- 6thaccount2 7y ago
  You are correct. Due to certain tax credits, utilities can break even and even make a little money off of these devices, but it is certainly no slam dunk. One of the most recent FERC orders deals with directing all the ISO/RTOs to add energy storage participation to markets as long as the battery is 0.1 MW or greater if I recall correctly. A lot of folks are interested, but there isn't much money in ancillary services or energy for the reasons you described above. The large-scale storage is pretty sweet though.
mikeash 7y ago
Why does Boeing sell planes instead of operating them directly? Why does John Deere sell tractors instead of operating farms? Companies focus on what they’re good at.
- CommieBobDole 7y ago
  Interestingly (and admittedly unrelated to your point), Boeing used to both build and operate planes, as well as build components for planes. The US government passed a law to break them up in 1934 - the plane manufacturing became Boeing, the air operations became United Airlines, and the eastern components manufacturing became United Aircraft Corporation, later United Technologies.
  - mikeash 7y ago
    That is interesting! I guess that’s not such a great example.

notatoad 7y ago

Because they need cash, probably

ethagknight 7y ago
You can always find debt for profitability in the energy markets, and this seems pretty low risk as energy investments go.
- notatoad 7y ago
  But you can only take on so much debt as a company, regardless of market, and telsa is kinda already stretching that limit (or at least they are according to HN comments)
  - bduerst 7y ago
    They are. Tesla is debt leveraged to hell which is why they're saying they're going to raise another $2B in cash from equity and bond sales to pay some of it off. Tesla needs cash, and lots of it.
- astrodust 7y ago
  Debt hurts your fundamentals and hurts your stock price. Cash helps your stock price. If you're concerned about stock price, sell for cash.
  - gingabriska 7y ago
    It depend on how you use the debt. If are able to make slightly less ROI (due to cost of capital, cost of servicing debt) at larger scale, it's worth having debt and will have positive effect on stock price. The relationship is not as simple as you claim.
    - bduerst 7y ago
      True, but we're not talking about an anonymous company in a vaccuum here, but Tesla, which already has plenty of debt.
rcMgD2BwE72F 7y ago
No. They are free cash flow positive, and by $600+ million per quarter already.
- Gustomaximus 7y ago
  Are they? https://finance.yahoo.com/quote/TSLA/cash-flow?p=TSLA https://finance.yahoo.com/quote/TSLA/cash-flow?p=TSLA

dflock 7y ago

To do that would require them to _become_ a power company in each jurisdiction that they wanted to do this in. Those markets are generally highly regulated - the amount of distraction & overhead this would create would be staggering, _immense_. I think Tesla already has enough on it's plate.

Gibbon1 7y ago
This is my answer. Selling into unrelated markets creates a need for duplication. At lower ranks that's 'fine' but becomes problematic at the level of senior management. Companies often sell off profitable divisions because management either can't or doesn't want to give them enough attention.
jillesvangurp 7y ago
Actually they will do this by selling to consumers directly as well with the same technology. They are getting ready to sell solar + battery directly to home owners at a huge scale (bottle-necked on some production capacity issues currently). Once they get there, they will have a virtual power plant that they can operate and control. So, Tesla is going there but just not in the way people expect. In the same way vehicle to the grid technology is a substantial battery resource that people overlook. Not a stretch of the imagination that a battery + solar solution for your home would play really nice with the Tesla parked in front of it. Vehicle to the grid technology already exists. There's just no way that they are not planning for that.
- dflock 7y ago
  That seems fairly obvious to me - SolarCity/Tesla have always talked about building a "virtual" utility via residential solar+battery, with the cars working as an (occasionally) mobile battery component. But the OP's question was why don't Tesla install MegaPaks that they own themselves, into diverse energy markets around the world - and become a traditional utility.

boringg 7y ago

Arbitrage isn't as profitable as the other revenue streams in energy storage and, quite frankly, isn't really profitable or attractive. Arbitrage doesn't add any true value to the world - it just lines your own pocket. Not to mention that developing software to monetize the different revenue stacks is demanding and fickle. So many different integrations and different market requirements and dimensions. There's a good reason they aren't doing it - too much work with minimal upside and that whole Tesla/Elon has way too much on their plate thing.

Nasrudith 7y ago
Arbitrage does provide value but indirectly and abstractly usually by boosting availability and allowing for some efficiency boosts. The power role is one of the times when it had the most direct utility.

snowwindwaves 7y ago

Because there isn't much money to be made. Frequency control used to be provided inherently in every generator. With renewables that isn't the case and no consumer wants to see a new line item on their bill for all the extra cost of accommodating energy markets and renewables so it is all hidden in the network connection fee which is controlled by regulators. So the return on providing grid services that aren't MWH (energy) is Essentially fixed to what regulators will allow, which isn't that attractive, so better for tesla to make the lump sum profit up front on the equipment sale and let the utility run it for 5 years until the batteries are worn out and the utility have collected their ROI. In terms of actually bidding MWH in to the market when supply is tight so the price is high, it will end up lowering the price by increasing supply, and the intervals of high prices are few. By virtue of existing the system will reduce frequency of high price intervals since the market participants will know that capacity will come on at some price so if they try to bid really high their is will not be accepted. So batteries at this scale is nice for the system operator and politicians to put a lid on high price intervals but won't actually sell enough MWH back to the grid to amount to much.

6thaccount2 7y ago
You are correct. Due to certain tax credits, utilities can break even and even make a little money off of these devices, but it is certainly no slam dunk. One of the most recent FERC orders deals with directing all the ISO/RTOs to add energy storage participation to markets as long as the battery is 0.1 MW or greater if I recall correctly. A lot of folks are interested, but there isn't much money in ancillary services or energy for the reasons you described above. The large-scale storage is pretty sweet though.

mikeash 7y ago

Why does Boeing sell planes instead of operating them directly? Why does John Deere sell tractors instead of operating farms? Companies focus on what they’re good at.

CommieBobDole 7y ago
Interestingly (and admittedly unrelated to your point), Boeing used to both build and operate planes, as well as build components for planes. The US government passed a law to break them up in 1934 - the plane manufacturing became Boeing, the air operations became United Airlines, and the eastern components manufacturing became United Aircraft Corporation, later United Technologies.
- mikeash 7y ago
  That is interesting! I guess that’s not such a great example.