Under Tesla's wing, SolarCity's future remains uncertain

Wed Aug 3, 2016 7:07am EDT
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By Nichola Groom

(Reuters) - After four rocky years as a publicly traded company in the volatile renewable energy sector, SolarCity Corp SCTY.O may now be wading into an equally uncertain future.

With a tentative agreement to be purchased by its sister company, Tesla Motors Inc (TSLA.O: Quote), SolarCity is going all in on a strategy that some analysts say is ahead of its time: pairing solar systems with the automaker's energy-storage batteries. The company has also said it will seek to build more solar systems for utilities - a part of the market in which SolarCity has limited experience.

Marketing rooftop solar systems with batteries has advantages, especially as state governments grow increasingly skeptical of requiring power companies to purchase extra power generated on their customers’ rooftops. With batteries, electricity generated during the sunniest parts of the day can be stored for use at night.

SolarCity said the merger has a big upside.

"We are aligning with what we believe is the most innovative manufacturer and product developer in the world," said spokesman Jonathan Bass, referring to Tesla. The combined company, he said, will be able "to accelerate the adoption of clean energy with a one-stop shop for renewable energy and battery storage.”

Tesla did not respond to a request for comment.

Battery storage remains unproven - and expensive. A home battery, which currently costs thousands of dollars, does not yet make economic sense for most homeowners, and analysts and investors are leery of the cost and time it will take for Tesla to sell enough batteries to have a meaningful impact on its bottom line.

    "We are very big, very long term believers in solar-plus-storage,” said Shawn Kravetz, president of Boston-based Esplanade Capital, which used to own SolarCity shares. “But the capital that will have to be deployed - and the years that will have to pass before it's more than just a rounding error for SolarCity - make it not a real factor today."   Continued...

The logo of U.S. car manufacturer Tesla is seen in Zurich, Switzerland July 14, 2016.     REUTERS/Arnd Wiegmann  - RTSKQ2L