Tesla-SolarCity merger: why Elon Musk is playing chess while everyone else is playing checkers


Tesla recently put out a $2.8B bid to acquire SolarCity. The initial reaction was less than favorable. Here are some of the headlines:

Is Tesla’s SolarCity Move Actually a Bailout? – Bloomberg

Why Tesla and SolarCity Have an Elon Musk Problem – Fortune

Tesla’s Deal With SolarCity Is A Remarkably Bad Idea – SeekingAlpha

At this point, a lot has been written about the short term impact of the deal. However, I haven’t really read anything that explored the long term potential of the product that the combined company can build together.

By putting solar panels together with battery storage, the 2 companies can create an end to end solution that allow people to produce, store and consume clean energy at a cheaper price than what they would have otherwise paid for.

I think in order to understand the value and feasibility of it, the most important thing is to figure out the unit economics of solar panels and batteries. Electricity isn’t sexy or entertaining. In order to achieve mass adoption, the solution needs to save people money and be viewed as an asset. To get a high level understanding, let’s start ask a few basic questions about solar panels and batteries.

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