Or why I hope the Tesla/SolarCity merger proves the bears wrong… and why I fear it won't.
Cleantech spectators are watching the Tesla Motors (NASDAQ: TSLA) and SolarCIty (NASDAQ: SCTY) merger vote on November 17 almost as closely as a certain other vote nine days earlier. And while the scale of the outcome is far from comparable, the impact on the renewable energy world could be significant. If the merger results in the failure of both companies, it will eclipse Solyndra as a stain on the industry.
There’s a slim chance that the merger won’t go through. The numbers not only don’t support it, but the SEC should have significant concerns about the corporate governance—or lack thereof—inherent in the overlapping interests of owners and board members. There are enough arguments against the merger from that angle alone to give pause to a purely rational investor. However, the companies have enough shares held by family, fanboy small investors, and institutional investors who have a stake in saving SolarCity’s skin that they may swing the numbers and see the merger go through. If that happens, it’s not good news for the renewables industry. Why not? Because the acquisition of SolarCity may just put the cash-strapped Tesla into a tailspin from which it can’t recover. The result: another large greentech failure that can be used as a poster child by Old Industry.
We all know about Solyndra—the oft-cited failed solar company that is the darling of anti-renewable talking heads and lobbyists funded by Big Oil. It’s a darling because they just love being able to take one big example and use it to extrapolate the potential failure of all things solar and wind. Solyndra is painted as a lesson in why there should be no support for or subsidies of renewables. The talking heads don’t counter the arguments with a list of all the oil and gas companies that have benefited from tax breaks, attractive policies, and subsidies and ended up bust… they’re not being paid to be fair and balanced, in the true sense of the poached phrase.
The concern with the merger is that SolarCity’s increasingly poor financials will pull Telsa down with it, especially if a lot of funds are diverted into R&D for a pretty but pretty-unlikely-to-succeed solar roofing product. Can the solar roof get pulled off? Perhaps, but unlikely in the timeframe touted or at the cost suggested, especially given the installation challenges. If it’s successful, it may increase penetration of solar, but it may also put solar sales on hold for years if aesthetically-oriented homeowners delay their solar purchase.
If the worst-case scenario happens—merger approved and combined company fails—then we see not only another major solar failure that the Right can point to, but also an electric vehicle and storage company thrown in. After all, the three business units have each benefitted substantially from government incentives, direct and otherwise. In fact, you could say that the thing that most ties SolarCity and Tesla together is not their focus on clean energy, but their large-scale leveraging of government subsidies and incentives.
Still, there’s a chance that the merger won’t be approved. While we’re damned if it does or damned if doesn’t, at least it will be only solar that gets tarnished if SolarCity goes under. I hope neither fails, but if there’s going to be a failure, lets make it surgical. There’s less collateral damage if the merger doesn’t go through and SolarCity alone goes under. There’s nothing stopping Tesla still developing its integrated solar + storage + EV vision, it can just do it as a hardware plus software play and leave the installation to the existing installer market.
Copyright Deborah Knuckey, 2016.
I'm passionate about sustainable architecture + energy + food and how advances in their technology can help save the planet.