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Comment by jobu | Hacker News Reader

Most articles paint this deal as solar + battery + car, but the car part really doesn't matter here. The key part is solar + battery.

Over the last year states have started increasing fees to hook solar into the grid and at the same time are reducing net metering rates (payouts for power generation). This has hurt Solar City over the last year and likely would've killed it long-term.

I see Tesla using the Power Wall to make an in-home grid that uses solar + battery as the primary power source, and the grid is the backup power (for charging the battery with off-peak rates) . That way people can avoid paying fees for net generation, and the net metering rates don't matter.

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I agree. TSLA aims to be GE, not GM.

From a stock perspective, I'm long TSLA. The car business is nice, but its just a vehicle for changing the world (and already priced into the stock, really). The real things we have to price is how the technology in a car can apply to all transportation problem/solution sets, how legitimate electric is as a solution for fuel/energy problems (and, long, for space), and also - can TSLA avoid existing regulation barriers and use the US market/economy in time.

That's the "low road," (Tesla vs the utilities) but the "high road" (Tesla plus the utilities) is much more interesting imo.

The plan is to offer grid stabilization services -- voltage boosting, phase correction, and demand shifting/response -- by aggregating together home batteries, utility-scale batteries, and scheduling EV charging. These are all valuable services for the utility. The revenue from these would be passed on to the end customer, "closing the loop" in our current perverse residential electricity pricing.

What do I mean by perverse pricing? Ideally each customer would be billed based on and tailor demand to the real-time generation+distribution cost at their location on the grid (accounting for their individual line loss and utilization of their distribution and transmission connections), but this is far too complicated and prone to market manipulation. Even TOU pricing has an information lag from actual demand because of changes in demand and the rising percentage of renewable and distributed generation. And net metering is subject to the "solar death spiral" problem, which is quite real (though overhyped by utilities for their own purposes).

One of the big advantages to making their own inverters is that each one acts as a grid monitoring station, relaying voltage drop and phase lag information back to the mother ship. Their EVs can already do this as evidenced by their OTA rollout of charging software that slows charging when overheating wires (voltage sag) or arcing (voltage spikes) are detected.

In the not-too-distant future Tesla will have more raw information on the grid than the operators themselves, though obviously it's even more powerful when combined with their existing data. This combination can be done directly through data sharing or emergently simply by interfacing with the existing pricing system.

None of this is speculative btw -- SolarCity's CEO Lyndon Rive[1] and Tesla's CTO and SolarCity board member J.B. Straubel[2] have talked directly about these plans before.

[1] http://www.ustream.tv/recorded/87401050 (mentions planned "smart inverter" that can monitor grid, returning revenue to customers, and that the goal with storage isn't off-grid systems but grid cooperation)

[2] https://www.youtube.com/watch?v=zWSox7mLbyE (mentions aggregating storage and EV charging over the internet)

Oh man, I completely forgot about smart inverter applications. Just thinking about the possibilities gets me excited.

You make a great point which is spot-on overall. I wouldn't go as far as saying "the car part doesn't really matter", though. Having a viable primary vehicle (pun intended) to drive (heh) your technology forward is important. SolarCity + Tesla Battery tech would be much harder to pull off if they didn't have a large in-house initial "customer" in Tesla cars. This will help them identify and solve technology problems, achieve economies of scale to drive down cost, and prove out the viability of these technologies in-market. And the requirement to sign up other customers on the battery side is alleviated early on.

Tesla's showrooms are also a great asset in promoting both solar and battery tech for the home, and the car is important in rationalizing the expense of these showrooms (at least for now) as well. Moreover, a very consumer facing brand and product in the car helps tremendously.

Anyhow, not to nitpick. You're right on about the overall strategic rationale and why this makes so much sense as a combination. But it's too far to say the car doesn't really matter. In fact, the car is a very important part of the strategy and especially of the nearer-term tactics.

> and the grid is the backup power (for charging the battery with off-peak rates) . That way people can avoid paying fees for net generation, and the net metering rates don't matter.

You will end up paying a larger grid connection fee. If you touch any part of the grid you are going to help pay for it's upkeep. The traditional model is changing but the grid itself still has extensive maintenance. Want to ensure that some power generation plant 2 states over doesn't accidentally dump a metric ton of electricity and fry every substation between your house and Kalamazoo? Or what happens when your town has an earthquake, tornado, hurricane, blizzard that disables your solar generation, you'll be forced to rely on the grid getting back online to help assist the people that eventually will assist your solar. People will stop paying for generation but I don't believe people realize what goes into keeping this kind of infrastructure up and running safely.

How is a centralized grid more likely to be functioning after a disaster than decentralized solar panels?

It's not but I put WAY more faith into people that work for power company's to know how to fix things on a large scale than most fly-by-night solar companies. If the wall battery gets flooded, solar panels damaged, etc... there won't be enough skilled people to fix every decentralized install. And they may need power from on the grid to help with repairs.

This is a good point. Sometimes it's hard to remember that the true innovation of Tesla was the battery. Once they had that, they built a car around it (I understand this is a massive oversimplification). But SolarCity probably helps Tesla continue it's biggest advantage for the future: the most likely Tesla for X remains Tesla itself.

That said, the conflicts of interest and pretty clear move to bail out a failing company still bothers me

Not just an in-home grid, but the potential with the power packs and utility-scale solar for the grid as a whole is quite large as well, if they can get traction. Tesla is going to be the only one for quite a while with the battery manufacturing scale to make it cheap enough.

That still doesn't explain why they can't use cheap panels from China.

Have they ever said they wouldn't use cheap panels from China? Why would you assume Tesla would procure more expensive panels if it didn't make sense to do so?

OK, I was thinking of SolarCity as a panel manufacturer. Are they just an installer? If so then what makes them worth $2.6 billion?

They were just an installer but they acquired Silevo in 2014. They built a 1GW plant in Buffalo, NY, cut the ribbon last year and are supposedly ramping production right now:

http://www.pv-tech.org/editors-blog/solarcitys-1gw-buffalo-f...

Supposedly panel costs are not that significant compared to installation, and kW per unit area matters more in the rooftop economics. That was the rationale at the time of the Silevo acquisition anyway.

That sounds like a good idea. But solar is pretty competitive. Was Solar City the best deal, or was it convenience?

I'll also add there has to be some solar power generation tie in, eventually, to Space-X as well.

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