By: Marc Z. Goldgrub, Cleantech Law Partners
On
Tuesday, June 21st, electric car company Tesla Motors announced its offer to
buy solar power company Solar City. Tesla chief executive, Solar City chairman
and “real
life Iron Man” Elon Musk claims the deal makes perfect sense. Market
analysts, however, saw the move as Musk hurting Tesla to save a struggling
Solar City and reacted unfavorably, resulting in a significant Tesla share
value drop. Less publicly, utility companies were likely also upset by the
news: in the battle over net metering, going up against the company with the
best customer service reputation and brand loyalty outside of Apple will be
very public and very difficult.
On December 22nd last year, Nevada’s Public
Utility Commission decided to triple solar customers’ fixed charges over the
next four years, while at the same time reducing by three-quarters their net
metering credit, by which customers get paid for excess power sold back to the
grid. The decision effectively gutted the cost benefits of current home solar
options in Nevada, leading three of the largest solar companies in the United
States - Solar City, Vivint and Sunrun - to cease operations in the state. The
Commission defended the decision as simply imposing the fair costs of solar
customers’ use of the Berkshire-Hathaway-owned Nevada Energy grid. Many,
however - including angry solar customers who filed a class action lawsuit against
Nevada Energy - believe the state and utility company conspired to squeeze out
more innovative competition on bogus grounds.
Solar City shares have since tumbled from a
52-week high of $61 to their recent home in the lows $20s. The Nevada decision
not only shut down the company’s immediate prospects in the state, it also
served as a bitter example of the uncertainty surrounding the political future
of net metering in other states, and by proxy, solar’s financial viability in
the U.S.
As the Nevada decision demonstrated, traditional
utility companies wield considerable political power and will not give up entrenched
positions without a fight. A fight, however, against companies like Solar City,
with little popular name recognition, is a lot easier than against a behemoth like
Tesla.
Tesla is already no stranger to corporate
lobbying wars. In a number of states, auto dealerships successfully lobbied to
block Tesla from selling its cars directly to consumers. In some though of
states though, like New Jersey, Maryland, and Georgia, Tesla managed to reverse
ban laws by its own lobbying efforts. Even the
Federal Trade Commission was won over.
Tesla also chimed in on the Nevada net
metering debate last year, sending a letter to Nevada’s Public Utility
Commission arguing against the merits its decision. In that conflict, Tesla was
a bit player, concerned about the decision because of its connection to Solar
City and the implications it could indirectly have on Tesla Powerwall battery
sales. If the Tesla-Solar City acquisition deal goes through though, the net
metering debate will effectively turn into the utilities vs. Tesla. The
utilities will also be going up against the thousands of Tesla loyalists just
as ready to protest
on behalf of the company as camp
overnight to get an early order in for its latest car. Politicians will
then have to decide whose side they want to be on: the side of the companies
that shuffle customers through bureaucratic hell over a contested electric
bill, or the company trying to sell them cool electric cars powered by the sun.
Disclosure: Marc Z. Goldgrub owns shares of
Tesla and Solar City.
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