The Solar City Promise
As a key player in the U.S. solar panel and alternative energy sector, SolarCity aims to convince U.S. consumers that solar power is a viable alternative to traditional energy sources. Through products like the Powerwall and Solar Roof, SolarCity aims to reduce the U.S. household carbon dioxide footprint from 7.43 to 1.41 metric tons within one year of transition to a “SolarCity home.”  According to its 2015 Impact Report, the “solar systems deployed by SolarCity produced over 1.7 billion kilowatt-hours of electricity…that if produced instead at a conventional power plant, would have released 2.38 million pounds of nitrogen oxide, 2.58 million pounds of ozone, and 5.82 million pounds of sulfur dioxide.”  While this reduction appears promising, SolarCity faces two significant obstacles moving forward if they want to have a tangible impact on global anthropogenic climate change through their closed system. First, in order to achieve globally scaled results, they must make the “SolarCity home” or business a ubiquitous presence. This will likely be difficult to achieve given the price sensitivities of U.S. and global consumers and the high upfront installation costs associated with SolarCity systems. Additionally, the pushback they are likely to receive from utility companies who strongly want to dis-incentivize consumers from going “off the grid” will present a significant challenge. So how can these obstacles be overcome? I posit it lies in SolarCity’s ability to integrate with other sustainability and alternative energy companies. Apparently they are on the same page, given the Tesla vehicle that is depicted in the SolarCity home above.
Is it a Worthy Endeavor?
While energy consumption is the greatest anthropogenic contributor to greenhouse gas emissions , this must be broken down further to understand the individual impact SolarCity might have in reducing the greenhouse gasses (GHG) in our atmosphere. According to the U.S. Environmental Protection Agency, carbon dioxide made up 82% of total U.S. GHG emissions in 2014, while U.S. commercial and residential made up only 12% of total GHG.  If we look solely at the carbon dioxide aspect of emissions, this means that if SolarCity were somehow able to convince every U.S. household and business to become a “SolarCity home” or business, this would result in only an average 14.7% yearly reduction  in total U.S. carbon dioxide emission. Now, 5,633 million metric tons of carbon dioxide reduction over 20 years would be an incredible feat, but this is an important revelation. It shows that even an ambitious company like SolarCity cannot solve the anthropogenic climate change problem by itself. So it needs collaborators, both in the U.S. and abroad, to move towards a fully integrated “climate solution.”
Synergies with Other Solutions
A promising development that could drive SolarCity towards achieving a “climate solution” model, is its pending merger with Tesla. As SolarCity’s chairman, Elon Musk stated, the new goal of the merged company would be to “[create] a seamlessly integrated Tesla battery & solar power product that looks beautiful.”  Given the hypothesis discussed above, this appears to be a step in the right direction. But this decision to synergize the sustainability efforts of these two companies is not just one grounded in a desire to overcome anthropogenic climate change; it is also an excellent business operations model. By combining the manufacturing efforts of both companies, vertically integrating their supply chains, and increasing demand visibility, both companies will be able to find operational synergies that will result in a more cost efficient business structure. For example, once Tesla’s Gigafactory in Nevada is operating at full capacity, it will likely manufacture lithium ion batteries not just for Tesla vehicles, but also SolarCity Powerwalls. As demand ramps up for both products, the opportunities for operational synergies will be replete. Tesla could create design symmetries between their batteries in both products, thereby reducing the number of SKUs produced and reducing production variability. The idea here is that the synergies created will fuel the growth of both companies to the point they have the scaled impact on both household and transportation energy consumption our world so badly needs.
The Business Model of a Sustainability Company
The pending merger of Tesla and SolarCity presents a promising opportunity to begin consolidating renewable energy, transportation solution, and other climate-conscious companies into a unified front, geared towards achieving sustainability and reducing human greenhouse gas emissions. Until now, the private sector effort to do this has been piecemeal, as smaller companies focused on singular projects with uncertain net present values. But this pending merger presents an opportunity for two of the most promising players in the sustainability arena to forge ahead together, cumulatively impact GHG emissions across two different sectors, and create value for shareholders, consumers, businesses, industry, and ultimately the human race. (789 words)
 Assumed 1% annual growth of total U.S. households over 20 years, starting at 124.59 million in 2014  and modeling from 2015 to 2034. Utilized SolarCity’s household reduction estimate as stated in  and calculated the projected difference between current household CO2 and reduced household CO2 footprint. Found average yearly difference of 829 million metric tons of CO2 and total projected reduction of 1.576 billion metric tons over 20 years. Given 82% of 6,870 million metric tons (2014 U.S. GHG emission, footnote 2) consisted of CO2 (5,633 million metric tons CO2): 829 million/5,633 million metric tons = 14.7% average yearly reduction.