panels, which can be mounted on top of existing shingles. Apple sells its customers on
a portfolio of products—iPhones, iPads, MacBooks—but that same kind of integration
isn’t as feasible when you’re dealing with a $70,000 Model S, a $6,000 Powerwall, and
a Solar Roof that can cost $65,000 or more.
The combined companies aim to develop financing models that will make the technology affordable, streamline the rollout process (thanks to SolarCity’s army of installers), and take advantage of Tesla’s retail footprint to sell the vision. While the up-front
price for its Solar Roof looks high, SolarCity asserts that tax credits and the estimated
value of energy created over the product’s 30-year power warranty will save customers money in the long run. Solar is a massive market, the company notes, with about 5
million new roofs built every year in the U.S. alone, and SolarCity hopes to capture 5%
of that business, or 250,000 homes annually, an ambitious goal considering the company only made 325,000 solar installations in its decade of operation before the merger.
SolarCity isn’t the first company ever to produce a solar tile, and most in that space
have floundered (see “The Shingle Factor,” page 70). But the merger with Tesla allows
the company to offer vertical integration, potentially meeting all of its customers’ energy needs. “If you just created a solar shingle, you’re kind of fucked,” Peter Rive says.
“I don’t think anybody but the combination of SolarCity and Tesla can pull this off.”
When it was founded, SolarCity wasn’t concerned with product at all. The Rive
brothers—who grew up with Musk in Pretoria, South Africa, and built (and later
sold) an IT software company in the Bay Area—were looking to make a bigger impact
with their next startup. Musk, Lyndon recalls, suggested they look into solar. They
launched SolarCity in 2006 with a $10 million investment from Musk.
They came up with a plan to drive costs
down by controlling the experience from sale
to installation (while third-party manufacturers provided the panels). They hired 150
employees, the majority of them construction
workers, and by the next year, the company
was installing about 70 solar systems per
month around Northern California. Having
sold panels himself in the early days, Lyndon
knew that the biggest barrier to adoption was
price: Customers simply didn’t have capital
to purchase the system, which typically costs
upwards of $40,000. What if they could lease
it instead? Other companies had explored
similar financing models in the commercial
space, but banks told them it was impossible
to bring that to the residential market. “But
we just kept hammering and hammering at
it,” recalls Lyndon. The company pioneered an
arrangement that allowed it to offer systems
to homeowners without any down payment.
SolarCity would handle all the up-front costs—
for the consultations, rooftop designs, panels,
and installation—and worked with banks to
help front the capital, giving SolarCity long-term recurring revenue. The customer would
pay back SolarCity and its financial partners
over the course of a 20-year lease, ideally at a
monthly cost that would be lower than their
traditional utility bill. (This financial model
was feasible in part thanks to a 30% federal
solar tax credit, which SolarCity could claim
on the value of each installation.)
Business began to grow, and the company
eventually expanded to more than a dozen
states. Musk, who was at the time busy building Tesla and SpaceX, wasn’t involved much beyond the board level. But the Rives—who share
a passion for extreme sports such as mountain
biking (Lyndon also plays underwater hockey,
which involves holding your breath and shuttling a puck across a pool floor)—brought a
Muskian intensity to their jobs.
When SolarCity went public at the end of
2012, at $8 a share, the stock surged 47% on
its first day of trading, and the company effectively doubled its sales every year thereafter.
In early 2014, it boasted more than 70,000
customers, and its stock hit $86 per share, an
all-time high. Lyndon set a Musk-size goal for
his employees: 1 million installations by 2018.
Of course, as with any booming startup,
there was also chaos. Peter and Lyndon were
successfully bringing residential solar mainstream, but the company culture began to
shift, especially with the ascent of two particu-
larly polarizing executives, Tanguy Serra and E d d
“It is crazy to think that
we needed any type of
bailout,” says Lyndon Rive,
SolarCity’s former CEO.
“If we needed to raise
capital, we could have.”