Musk’s energy master plan: Is this the beginning of the end of the utility?

When Elon Musk published part 2 of his Tesla Masterplan last week, it was his vision of a future where cars from a huge shared fleet of driverless electric vehicles could be summoned by the touch of a mobile phone app that dominated headlines.
But Musk’s vision for a world of energy self-sufficient households with solar and battery storage was equally ambitious – and threatens to be as disruptive to the world’s electricity industry as his autonomous shared vehicle plan could be to the automotive industry, not to mention Uber.

As we reported last week, Musk’s Tesla Master Plan, Part Deux was published on the Tesla website on Thursday, just over a week after he hinted at its release on Twitter, and 10 years after the release of his original master plan – a list ranging from building a series of increasingly affordable EVs to providing solar to the masses, that has pretty much been ticked off.
Along the way, Musk has developed the Tesla Powerwall and Powerpack, the sleek looking and masterfully marketed lithium-ion residential battery storage packs he plans to mass produce in the Gigafactory that is currently being built in Nevada.
As per the new master plan, the idea is to merge an increasingly energy-focused Tesla with SolarCity, the publicly listed rooftop solar leasing business that is headed up by Musk’s cousin, Lyndon Rive, and in which he is already a major shareholder.
In this way, Musk plans to “create a smoothly integrated and beautiful solar-roof-with-battery product that just works, empowering the individual as their own utility, and then scale that throughout the world. One ordering experience, one installation, one service contact, one phone app.”
To Musk, the merger is an obvious progression.
“That (the two companies) are separate at all… is largely an accident of history,” he said in his Thursday blog. “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.”

Of course, as Think Progress noted last week, “this corporate pivot was not wholly unexpected.” Like the quiet adjustment of the company’s corporate web address from teslamotors.com to tesla.com, it seems to be part of a “shift in direction from an auto company, to an energy company that also makes vehicles.”
But what does it all mean for consumers? Is Musk the white knight the clean energy revolution has been waiting for? Maybe not, but he is certainly dedicated to the cause.
“The point of all this was, and remains, accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good,” he wrote in his blog.
“That’s what “sustainable” means. It’s not some silly, hippy thing – it matters for everyone.
“By definition, we must at some point achieve a sustainable energy economy or we will run out of fossil fuels to burn and civilization will collapse. Given that we must get off fossil fuels anyway and that virtually all scientists agree that dramatically increasing atmospheric and oceanic carbon levels is insane, the faster we achieve sustainability, the better.”
It’s hard not to be impressed with Musk’s enthusiasm. “He makes a reasonable bid to be the Henry Ford of this era,” said Bill McKibben, the environmental activist and author, quoted in The New York Times. “He’s trying to kick off the mass market for renewable energy.”
But are utilities paying impressed. Are they paying attention? According to some reports – yes.
“Elon is truly the archetype of the disruptive entrepreneur,” said Andrew Beebe, a former electric industry executive who is now a venture capital investor, also quoted in the New York Times. “Utilities and utility executives, because of the success on the vehicle side, are absolutely taking note.”
And Think Progress also sees a threat: “If SolarCity can expand its market share in enough (US) states to become a serious player in the utility and power sector, the goal, it seems, would be to integrate their solar systems into the networks of Tesla owners with their very own home Powerwalls.
“Far enough down the road it’s possible to see a functioning vertically-integrated energy infrastructure provided by Tesla,” it says. “Practically speaking, this would mean you drive your Tesla electric vehicle and charge it up on your home battery, which is fueled by your SolarCity panels. Your home is also powered by the Powerwall home battery, making each homeowner into their own utility.”
This, of course, applies to the US market. But in Australia, a market Tesla has targeted as a strategic starting point for the roll out its battery storage products, Musk’s plan has just as much potential.
As the New York Times put it, “Musk has positioned Tesla as an agile responder that can help consumers save the planet while the policy makers are still drafting position papers.” It’s a statement that seems to sum up the situation in Australia perfectly.
Here is a consumer market that, polls tell us, loves renewable energy – particularly solar – and which is growing increasingly weary of high electricity prices and seemingly omnipotent utilities.
But the rooftop solar market is stagnating as government subsidies and premium feed-in tariffs are withdrawn, while power prices continue to spike – a situation the conservative side of politics is trying to blame on, you guessed it, rooftop solar (and wind power).
It’s a market ripe for the picking – especially for a potentially vertically integrated solar, battery and EV company that would delight in offering frustrated consumers everything they need to take the power back.
Already – despite the costs of the technology remaining prohibitive – the concept of Tesla battery-enabled energy independence is taking root in Australia.
As we have reported, in the last two weeks alone, two new property developments in Melbourne – including a 2,500 home mini-suburb – have been announced, each with solar panels and Tesla Powerwalls as standard features in the new-build homes.
One of them even promises residents their own solar and storage micro-grid, where PV power generated by the housing complex is stored and shared, to maximise independence from the grid.
Which brings us back to Musk’s grand plan. But first the merger has to happen – and the market is divided over whether it will, despite Musk’s confident bid of about $2.5 billion and his expectations that shareholders will strongly approve.
As the Times reports, many in the US financial community have dismissed the proposal as a clever way for Musk to protect his investment in SolarCity.
But not everyone is skeptical. Credit Suisse have reportedly suggested the deal might be an “act of genius” by Musk, and “a steal” for Tesla, achieving as much as $US387 million in cost savings through shared sales functions and installation teams, while Solar City gets access to Tesla’s customer base and its brand.
“Decades from now, if electric vehicles adoption takes off … Tesla would have a full product portfolio that could seamlessly integrate to maximise the transition away from fossil fuel,” they wrote.