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Elon Musk Explains Why The Tesla-SolarCity Merger Is All About Solar Microgrids

January 12, 2017

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Tesla offered to buy SolarCity last week for $2.8 billion, causing confusion and criticism from some TESLA shareholders who saw the offer as a distraction from their core business. Elon Musk asked shareholders to to examine the deal in terms of the products and value it can offer customers by owning the solar company. The value he is referring to goes beyond offering solar panels to Electric Vehicle (EV) customers. When Trip Chowdhry of Global Equities Research asked, Musk made it clear that he was also referring to a “click-and-buy-microgrid.”

Microgrids can be expensive and complicated with a multitude of vendors and consultants involved from design to construction. Microgrids need power generation, energy storage, power management, and financing. “Paralysis by analysis” is common, keeping many microgrid projects from escaping the planning stages. In the near future – utilities, corporate customers, and communities may design and purchase a microgrid with a few clicks on Tesla’s website.

Musk insisted that utilities and large corporate customers appreciate fast, simple, and easy purchase options as much as regular consumers. “They don’t have to go through this big laborious process that’s a pain in the butt for them. It blows their mind when they can just click a button and then we install their [microgrid] and it works.”

This represents Musk’s affinity for productizing things. “I think it’s always good to productize things — you can click here and buy your microgrid versus having a tailored situation for all over the place. If you can productize it, it can happen so fast. I think that productizing a microgrid — just click here and get a microgrid and it just works — I think that’s a good way to go.”

But can a microgrid really be properly sized and designed without custom up-front engineering? Elon thinks so: “Just because a product is big doesn’t mean the whole process needs to be complex. Bigness and complexity are not the same thing. Our utility customers have been quite pleasantly surprised by just how easy it is to implement. And it’s going to get a lot easier in the future.”

It’s true that the type of microgrid offered by TESLA-SolarCity is far simpler than microgrids with a multitude of generator types. TESLA will also have demand response assets in the parking lot to help balance the microgrid. It is likely they will continue SolarCity’s dive deeper into the home, where they have installed smart thermostats and water heaters.

Solar + Storage + EV could become simple building blocks of a microgrid, the opportunity might even help explain Elon’s $1 trillion valuation target.