Tesla offers to buy SolarCity, could be the first long-term clean transport play

Tesla Model 3
© Tesla Model 3

When coupled with clean renewable energy, electric vehicles promise to usher in a new era of sustainable transportation, and guess who's leading the charge?

In what might be a transitional trifecta, Tesla Motors' offer to acquire SolarCity could result in the world's first vertically-integrated clean energy, energy storage, and transport company.

The negative Nellies of the world like to complain about the intermittencies of solar energy, because the sun only shines during the day (duh), but that is rapidly becoming a moot point due to advancements in energy storage and smart grid technology. It's also widely thought (and wrongly so) that solar is expensive, when it's already reached grid parity in many cities around the country, and across the world, and the case can be made that solar generates savings well beyond the initial cost, and can offer a return on investment better than many retirement funds.

These Debbie downers also like to complain that electric cars are (mostly) fueled by coal plants, and that their components rely on resources that come from extractive processes (as if petrol cars don't), and that end-of-life processes aren't developed enough to deal with 'dead' batteries (as if our modern gadget-centric culture isn't already dependent on vast quanitities of decidedly non-reusable batteries).

All of that is a long-winded way of saying that I can't wait to hear what the energy and EV Eeyores have to say about the proposed acquisition of SolarCity by Tesla Motors, simply because there are so many potential challenges to a fully integrated energy company that will most certainly bring out the doubters and naysayers. But I digress, so back to the real story, which is the offer itself.

On Tuesday the 21st, the Tesla Motors team posted its intentions on its blog, saying that "a combination of Tesla and SolarCity would provide significant benefits to our shareholders, customers and employees," and going on to state the reasons why:

We would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers. This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered. With your Model S, Model X, or Model 3, your solar panel system, and your Powerwall all in place, you would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid.

We would be able to expand our addressable market further than either company could do separately. Because of the shared ideals of the companies and our customers, those who are interested in buying Tesla vehicles or Powerwalls are naturally interested in going solar, and the reverse is true as well. When brought together by the high foot traffic that is drawn to Tesla’s stores, everyone should benefit.

We would be able to maximize and build on the core competencies of each company. Tesla’s experience in design, engineering, and manufacturing should help continue to advance solar panel technology, including by making solar panels add to the look of your home. Similarly, SolarCity’s wide network of sales and distribution channels and expertise in offering customer-friendly financing products would significantly benefit Tesla and its customers.

We would be able to provide the best possible installation service for all of our clean energy products. SolarCity is the best at installing solar panel systems, and that expertise translates seamlessly to the installation of Powerwalls and charging systems for Tesla vehicles.

Culturally, this is a great fit. Both companies are driven by a mission of sustainability, innovation, and overcoming any challenges that stand in the way of progress.

The blog post also offers the details of the proposal, which include the proposed share exchange ratio of Tesla common stock to SolarCity common stock, which Tesla says represents a premium "of approximately 21% to 30% over the closing price of SolarCity’s shares," and states that the team believes that its proposal "offers fair and compelling value for SolarCity and its stockholders."

Obviously, there are a variety of aspects to this proposed deal that could be cause for concern for investors, such as the implications of Tesla acquiring a company that has been said to be bleeding cash (in addition to its own indebtedness), or that this deal may cause Tesla more headaches than opportunities, but overall, the cleantech community seems to be in favor of such a move.

The proposal also begs another question, which is why more of the big automakers aren't moving faster toward electric vehicle production, and why they aren't investing in a booming industry such as solar, when the writing seems to be on the wall about the mid- to long-term prospects of our petrol-based transport system. But perhaps that speaks more about the much slower ability for entrenched companies to pivot and diversify their offerings and investments than it does about the viability of the future clean energy and clean transport connection.

Tags: Electric Cars | Solar Energy

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