Tesla Makes Offer to Buy SolarCity

Here’s some news that should rock the clean-energy world. Electric vehicle superstar Tesla just tendered an offer to buy America’s largest solar company, SolarCity.

The announcement, posted Tuesday on Tesla's blog, opens by saying, “Tesla’s mission has always been tied to sustainability.” It then goes on to say, “It’s now time to complete the picture. Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.” Lyndon Rive, the CEO of SolarCity, also happens to be Tesla CEO Elon Musk's first cousin.

The move would make Tesla “the world’s only vertically-integrated energy company offering end-to-end clean energy products,” the company said.

According to a letter sent to Rive by the Tesla board, the proposed acquisition would involve an exchange of SolarCity stock for Tesla stock. Tesla proposed a ratio of between 0.122 and 0.131 of Tesla stock for each SolarCity share. That would place SolarCity's valuation in the range of $2.5 billion to $3 billion, depending on the final price of the shares. That’s good news for SolarCity shareholders, who would see a 21 to 30 percent bump in SolarCity stocks.

Tesla CEO Elon Musk, who sits on the board of SolarCity and will recuse himself from voting on the offer, called the deal a “no-brainer.” He explained how a customer can buy an electric car, a battery storage system, and solar to power it all -- all with a few clicks and without leaving the Tesla website.

SolarCity is America’s No. 1 full-service solar provider. Back in 2014, the company decided to expand from sales and installation to incorporate manufacturing as well. The company put plans in place to be build a gigafactory in Buffalo, New York, which is now under construction.

If completed, this will make SolarCity the fourth vertically-integrated solar company, in addition to First Solar, SunPower and SunEdison. Musk said SolarCity's decision to move into manufacturing stemmed from concern that there would not be enough solar production capacity to meet anticipated demand.

At that time the company had recently acquired the racking company Zep Solar, and CTO Peter Rive said: "We will be the most vertically-integrated solar company in the world.”

In solar, cost is king and SolarCity has long seen vertical integration is key to lowering costs.

Now, that integration will extend to an entire transportation energy ecosystem, in which a complete carbon-free automotive solution can be realized.

In the past, some studies found that electric vehicles are no cleaner than fossil fuel-powered cars if the electricity they receive comes from coal plants. Less than a decade ago, more than half the electricity in this country was produced from coal. By combining an electric car with rooftop solar, concerned consumers can eliminate, or at least minimize, the uncertainty as to the actual impact of their driving on the planet, after having spent a considerable sum of money to purchase an electric car.

This addition of solar integration is also an aggressive move by Musk in the race to claim the future of personal transportation for the EV, at a time when fuel cells -- and a variety of other alternative-fuel vehicles -- are vying for a piece of tomorrow’s market.

Image credit: RP Siegel