Tesla Motors chief executive Elon Musk revealed the hotly anticipated next stage of his “master plan”, intensifying his argument that Tesla should buy SolarCity to hasten the advent of an era of seamlessly integrated distributed PV, storage and electric vehicles.
Musk also confirmed his intention to scale SolarCity’s offering globally if the two companies are brought under the same roof. Today California-based SolarCity, which is the largest US installer of rooftop PV systems for homeowners and businesses, is only present in its home market and Mexico.
In a letter posted online, Musk laid out the second phase of his master plan for Tesla, with the integration of distributed solar and home storage now considered a central pillar of the electric-vehicle maker's strategy going forward.
Tesla intends to “create a smoothly integrated and beautiful solar-roof-with-battery product that just works, empowering the individual as their own utility, and then [scaling] that throughout the world”, Musk writes.
“We can’t do this well if Tesla and SolarCity are different companies, which is why we need to combine and break down the barriers inherent to being separate companies.”
Tesla offered to buy SolarCity last month in an all-stock deal valuing the company at up to $2.8bn. Musk is the largest shareholder of both companies, and will not vote on the offer.
Musk famously released the first stage of his master plan a decade ago, and even his critics acknowledge the big strides made on his strategy of first creating an expensive but low-volume electric vehicle (the Roadster), then a more moderately priced one (the Model S), and finally a high-volume one for the masses (the Model 3, with first deliveries slated for 2017).
Tesla has also made a high-profile push into the stationary storage business, selling its Powerwall battery systems into the residential and commercial markets, and larger systems to utility-scale operators.
But Tesla has not yet made much progress on a lesser known part of Musk’s initial plan: providing solar power.
That would change in a big way if Tesla were able to acquire SolarCity, which is run by Musk’s first cousins Lyndon and Peter Rive.
The fact that the two companies are separate at all “is largely an accident of history”, Musk says. “Now that Tesla is ready to scale Powerwall and SolarCity is ready to provide highly differentiated solar, the time has come to bring them together.”
Last month Musk said that while SolarCity's offering is not "significantly differentiated" at present, it "certainly will be in the very near future".
It is not exactly clear what he meant, but SolarCity is in the process of ramping up North America’s largest PV module factory in upstate New York.
At the centre of Musk’s strategic vision for Tesla -- and the world -- is a rapid transition to a “sustainable energy economy”.
The future of energy generation will be “overwhelmingly in the form of solar”, he has said.
Critics of Tesla’s plan to buy SolarCity, including some of the company’s own shareholders, see electric vehicle production and distributed solar as two very different businesses, best handled by separate companies.
But Musk insists that it makes good business sense to sell, install and maintain the two products together.
SolarCity intends to install as much as 1.1GW of PV capacity in 2016, and be generating positive cash flow by the end of the year.
In addition to the heightened focus on solar, Musk’s updated strategic vision includes plans to expand the company's product line to include pickups, semi trucks and buses, and to continue the roll-out of autonomous driving capabilities.
The 300MW Blackspring Ridge wind farm in Alberta, owned jointly by Enbridge and EDF Renewable Energy
Canada’s renewables operators are flexing their muscles as never before, and the effects are increasingly being felt around the world
The latest example is Brookfield Asset Management’s surprising revelation that it spent nearly $100m acquiring a 12% stake in TerraForm Power, SunEdison’s troubled yieldco, and it may look to take control of the company through further investment. TerraFormowns 3GW of wind and solar assets in the Americas and western Europe.
But Brookfield’s announcement is only the latest in a flurry of big investments Canadian renewables players are making beyond their borders. And while many of them – like TransAlta Renewables and Alterra Power – are investing in the US market, that’s only a small part of the story.
Start with Northland Power, the Toronto-based independent power producer. Northland had scarcely ventured beyond eastern Canada several years ago when it decided to buy a majority stake in the 600MW Gemini offshore wind project off the Dutch coast. A year later it doubled down, buying RWE’s trio of Nordsee projects in German waters.
Northland’s sudden blast into the European offshore wind market apparently inspired envy in Calgary-based Enbridge, which is Canada’s second largest owner of wind capacity alongside its massive oil and gas pipelines business.
Having stated its desire to triple its renewables capacity by 2020, Enbridge late last yearbought a quarter-stake in the Rampion project off the UK coast, and then followed this year by investing C$282m ($217m) in a French offshore wind project company owned by EDF Energies Nouvelles.
Montréal-based Boralex, meanwhile, has quietly become France’s largest independent onshore wind generator. Boralex recently cemented its position in the French market by buying a 350MW pipeline of projects, much of it to be brought online over the next two years.
Innergex, too, has been on the hunt for projects in France, closing recently on a portfolio of seven operating wind farms from German developer wpd. Intriguingly, Innergex, which is also based in Montréal, has signaled its interest in investing in renewables projects in Mexico.
Guelph, Ontario-based Canadian Solar – already among the most active solar developers in North America, on top of its China-based manufacturing business – has expanded recently into project development in Brazil and Mexico. Even privately owned Canadian developers, like Calgary-based BluEarth, are known to be contemplating pushing into foreign markets.
There are a number of factors behind the overseas expansion of Canada’s renewables developers.
The relatively weak Canadian economy of recent years has meant that there have been scant opportunities to build new power plants of any kind in the country. Ontario’s most recent wind tender was massively oversubscribed, leaving many ambitious developers emptyhanded.
At the same time, most Canadian renewables companies have maintained robust balance sheets and stock prices compared to their US counterparts – and most especially compared to US yieldcos, with whom they compete for projects.
Canada’s renewables developers have money to spend and limited options for spending it at home. And with countries around the world embracing wind and solar, the opportunities for spending that money abroad have never looked more enticing.
It helps, too, that Canadian pension funds have demonstrated a fast-growing appetite for renewables, both at home and abroad. Some, like the Desjardins Group Pension Plan, are investing alongside Canadian developers like Innergex; others, like Caisse de dépôt et placement du Québec, are investing directly in renewables markets as farflung as India.
There’s plenty of precedent, of course, for renewables developers to build and buy projects in foreign countries – with Europe’s industry the most obvious example. Spain’s Iberdrola is the second largest owner of US wind capacity, and Italy’s Enel Green Power has emerged as a powerhouse in Latin America’s blossoming renewables market.
But Canada’s deeply experienced renewables operators are finally taking their place on the global stage. Their role will only grow in importance from here.