Recent Tesla Moves Both Good and Bad for Solar Industry

By: Forest Langhorne, Tufts University

Tesla Motors, a brand most associate with its high-end electric cars, is much more than just an automobile manufacturer. In their attempts to increase the power and range of their automobiles, Tesla has become an industry leader in battery manufacturing and development. As they have shown, improved battery technology could be extended to make America’s energy grid more efficient by allowing energy producers to store energy for use during peak consumption times and increasing the viability of renewable energy sources by giving solar and wind an “all-weather” capacity.

The potential benefits from the union of solar energy and improved battery storage were affirmed last week when Tesla acquired SolarCity, which specializes in the production of photovoltaic cells for residential use through long-term lease agreements with its buyers. Tesla’s proposed takeover of SolarCity would allow the two companies to sell solar PV systems and batteries for energy storage as packages, streamlining the two products and encouraging further use of solar systems. This acquisition is a strong move towards increasing solar viability and is a great step forward in creating a larger market for the marriage of battery and solar technologies.

This is a great opportunity for both companies, opening up new markets and introducing each to new audiences. SolarCity’s stock has fallen as competition in the solar industry has become fiercer, due in part to greater supply and innovation in the solar industry, as well as changing political landscapes on the state level. For example, energy utilities are now pushing states to decrease net-metering rates in response to more economic behind-the-meter solar units. These changes have already come in several states, and more are evaluating similar changes. With the drop in rates, utilities will pay consumers for their excess energy, the incentive to use solar drops too.

While part of the motivation for the Tesla acquisition of SolarCity is rooted in pushback against solar by utilities, the merger itself offers a solution to this problem. With increased battery use, solar could offer consumers enough energy savings to make up for drops in net-metering.