Tesla's Purchase of SolarCity Was Inevitable as its Technologies Were Integral to the Mission

by Eva Fox January 18, 2022

Tesla's Purchase of SolarCity Was Inevitable as its Technologies Were Integral to the Mission

Photo: @weddleandsons/Twitter

The topic of Tesla's purchase of SolarCity in 2016 continues to gain momentum recently and some investors are increasing their demands. Elon Musk planned to develop a solar business long before Tesla's purchase of Solar City, as he was striving for a solar electric economy, and the purchase itself was inevitable for the company since it needed to have technologies for generating and storing energy for its vehicles.

"When I was at Penn [University of Pennsylvania], I started thinking about what would most affect the future of humanity," Elon Musk said during a lecture at the University of Pennsylvania’s College of Arts and Sciences in 2009. "The three things that I thought would be the most effective were the Internet, the transition to a sustainable energy economy, and space exploration, particularly extension of life to multiple planets. That's not to say I thought I would be involved in all those things. But as it turns out, I am."

Upon leaving Penn for California in 1995, Musk planned to enter a Ph.D. program at Stanford to study materials science and the potential of high-energy-density capacitors for energy storage. Instead, he was involved in the development of the immediate possibilities of the Internet, although the desire in him for the development of a sustainable energy economy remained strong.

Moving towards achieving the most effective things Musk defined, he indeed contributed to the development of the Internet and space exploration. And in 2004, Musk plunged headlong into his goal of helping the world transition to a sustainable energy economy when he became a major investor and the co-founder of Tesla. Musk's initial interest in electric vehicles was dictated precisely by the desire for the transition to a sustainable energy economy, so now it was time to develop in this area. Electric vehicles were his first significant step in making a difference in the industry.

Since accelerating the transition to sustainable energy is directly related to the transition to renewable energy, creating batteries to store it—something that Musk had been striving for since his youth—was integral to the plan. But, in order to capture and accumulate the sun’s energy, photoelectric converters were needed—semiconductor devices that convert solar energy into direct electric current, or solar panels. That is why, in 2006, the head of Tesla invested about $9 million of his personal funds in the startup SolarCity.

Thus, Musk's plan began to materialize: now he was actually working on creating an electric car that could receive energy from the sun through solar panels and that could be stored in battery storage systems. 2006 was a turning point when all the pieces of the puzzle began to fit together.

On August 2, 2006, Musk publishes his "The Secret Tesla Motors Master Plan (just between you and me)," which is essentially Tesla's roadmap for the coming years. In it, he talks not only about electric vehicles and their higher environmental friendliness compared to ICE cars but also voices the company's goal and ways to achieve it.

"As you know, the initial product of Tesla Motors is a high performance electric sports car called the Tesla Roadster. However, some readers may not be aware of the fact that our long term plan is to build a wide range of models, including affordably priced family cars. This is because the overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution."

There, Musk publicly voices the idea of ​​vertical integration, the creation of a closed-loop that will make driving an electric car even greener, thanks to solar panels from SolarCity. His plan is simple and clear:

  • Build sports car
  • Use that money to build an affordable car
  • Use that money to build an even more affordable car
  • While doing above, also provide zero emission electric power generation options

Having gone through many difficulties, Musk has literally dedicated his life to achieving these goals, while simultaneously developing the aerospace field through his SpaceX. The history of these years is told by only a few and is often only briefly recalled, describing only some individual events. Nevertheless, despite all the immense challenges, Musk relentlessly sought to accelerate the transition of the world to sustainable energy and did not give up even in the most difficult situations.

Initially realizing that achieving the goal will require not only the creation of electric vehicles but also systems that will collect and store solar energy, in 2016 Tesla buys SolarCity. This was a logical continuation of Tesla's plan, announced back in 2006, and the purchase was approved by 85% of Tesla's shareholders—that is, by an overwhelming majority.

However, this caused a lot of controversies, and some shareholders filed a lawsuit, alleging that Musk forced the company's board of directors to conclude the SolarCity deal, influencing the deal negotiations in every possible way. Today it became known that the situation escalated even more and the plaintiffs urged the court to recognize that Musk forced the company's board of directors to conclude the SolarCity deal in 2016, and oblige him to pay the company $13 billion.

In fact, the purchase of SolarCity was inevitable for Tesla for one simple reason—it was in line with the company's plan and roadmap announced back in 2006. This was part of the vertical integration of the company, and although the process of merging and equally focusing on the development of the two areas was difficult, at the moment SolarCity—renamed Tesla Energy—is a rapidly growing business that generates profit.

© 2022, Eva Fox | Tesmanian. All rights reserved.

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Article edited by @SmokeyShorts, you can follow him on Twitter









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