Tesla, solarcity, and the sustainability of sustainable energy – tesla motors (nasdaq_tsla) _ seeking alpha

I have taught six different courses on sustainable energy at a couple of different academic institutions over the years. Kansas gas service bill pay On each occasion the incoming students have started the semester with the expectation that we will spend all of the lectures covering topics such as energy resource depletion, pollution, and greenhouse gas emissions. La gasolina daddy yankee mp3 While these are indeed crucial elements to any discussion on the sustainability of energy, I prefer to spend the first few weeks of class covering what I consider to be its most important element:

This is especially true in a capitalist and relatively-free market economic system such as that of the United States. Electricity around the world It really doesn’t matter how sustainable an energy resource is in terms of resource depletion – renewables such as sun and wind power being especially so – or lack of pollution. Electricity history in india After all, the technology for stably sequestering atmospheric carbon underground has been available for at least several hundred years. Gasoline p We are still worried about atmospheric carbon levels despite this availability because of the costs that reducing them to pre-Industrial Age levels would incur.

Furthermore, to be sustainable, an energy resource needs to be affordable enough to generate demand. Electricity merit badge worksheet A 2009 YouGov poll found that more than 50% of Americans supported a climate bill along the lines of the American Clean Energy and Security Act if the annual household cost was $80 or less. U gas hampton Support fell to 30% as the annual cost increased to $175 and less than 10% at $770. Electricity receiver definition Most Americans want to be green, but only if it doesn’t have a negative impact on their wallets. Youtube gas laws And without demand, economic feasibility is unlikely to be achieved.

This sustainability requirement was on my mind this morning as I read about Tesla’s (NASDAQ: TSLA) proposed buyout of SolarCity (NASDAQ: SCTY), both of which are closely linked to CEO and co-founder, respectively, Elon Musk:

Tesla Motors Inc. Electricity lab activities has offered to buy SolarCity Corp., a $2.8-billion deal that would unite two Bay Area companies funded and driven by Los Angeles billionaire Elon Musk.

If a deal for the struggling rooftop solar giant is approved, Tesla would become more than just an electric car maker, evolving into an increasingly diverse company with interests across a range of green technologies.

“The world does not look for another car company, the world looks for sustainable energy companies,” Musk told reporters and analysts in a call Tuesday.

The combination would allow customers to generate solar power from Tesla rooftop installations, store the energy in Tesla batteries and transfer the energy into Tesla electric cars.

“It’s now time to complete the picture,” Tesla said in a blog post. Electricity and magnetism online games “Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.”

Tesla is using the phrase “sustainable energy” frequently to describe the rationale behind its proposed acquisition. Gas out game commercial Ars Technica reports that the goal of the move is to create the world’s first vertically-integrated sustainable energy company, one capable of handling transportation electricity production, distribution, storage, and consumption. Electricity omd The result would be akin to Ford Motor Co. 935 gas block (NYSE: F) owning oil E&P, refining, fuel logistics, and fuel retail segments. Current electricity definition physics (The fact that such integration has never occurred before in more than a century of automotive history might create some awkward questions in the minds of Tesla and SolarCity investors.)

At first glance the acquisition would represent a major branding coup. Electricity 2015 Electric vehicles [EV] such as those produced by Tesla only achieve substantial reductions to emissions of greenhouse gases and particulate matter relative to fossil-fueled vehicles if powered by clean sources of electricity, especially the renewable variety. No electricity jokes The proposed vertical integration would completely do away with the debate over the questionable impact of EVs on climate change by making it possible for EV owners to truly achieve zero lifecycle greenhouse gas emissions while driving. Gas mask art Whereas most EVs today simply relocate vehicle pollution from the point of the tailpipe to the point of the power plant, Tesla’s acquisition would allow drivers to become completely “green” as part of a package deal.

[W]e do not view this acquisition as the best and highest use of TSLA’s capital and human resources given the potential return on capital possible in the electricity industry (typically ~8%-9%) versus the potential leverage of the TSLA auto platform which we believe could demonstrate [return of invested capital] of 15%-20%+,

The best case scenario, then, is that the capital of Tesla’s shareholders (the acquisition will be financed via an exchange of shares) will be used to attain the shares of a firm that is expected to, at best, achieve lower returns than the acquiring firm. Electricity gif In the process Tesla will be doubling its negative free cash flow and doing additional damage to a bond rating that is already at junk status.

Seeking Alpha’s Paulo Santos is most likely correct when he interprets the buyout proposal as the attempted bailout of an almost-bankrupt related company rather than a value-added acquisition. Online electricity bill payment However, let us generously assume for the sake of discussion that, as Dana Blankenhorn phrases it, Tesla investors bought into a vision rather than a mere company. Gas zone pricing In other words, Tesla investors believe that the firm has value as part of the overarching “Musk Brand” rather than just as an auto producer. M gastrocnemius medialis Mr. La gasolina Musk himself has said as much by saying that the acquisition is a “no-brainer” because this “is the right time to complete the picture.” Does the acquisition make sense when cast in that light?

Frankly, I don’t see how it does. 9gag tv What Tesla needs as a stand-alone company is positive cash flow, not a rebranding of its image. Gas meter in spanish While its cash flow and EBITDA results have fared better than those of SolarCity over the last five years, they have still moved inversely to revenue (see figure). Monroe la gas prices Admittedly this is more expected since Tesla has yet to begin what could be termed production at scale, something that won’t occur until the Gigafactory begins to make deliveries. Electricity powerpoint template What Tesla really needs, however, is a segment capable of generating the steady positive cash flows that will finance the scale-up and initial implementation of its untested mass-production segment.

A good comparison in the renewable energy sector is that provided by many utilities. Gas ks Utilities have some of the least volatile operating cash flows seen in the market since electricity and natural gas are always in demand. Electricity office near me This is especially true for regulated utilities, which operate under a compact with state regulators that ensures their profitability so long as their returns don’t exceed a cap. Types of electricity generation methods Utilities are required by both state and federal laws to generate an increasing share of renewable electricity, however, despite the inherent riskiness of wind and solar farms. Gas in babies how to get rid of it They are able to meet their legal obligations by financing investments in these riskier assets with their reliable cash flows.

The problem with SolarCity is that it operates outside of the utility model (and, as some would argue, possibly in direct opposition to it). Static electricity diagram It has no reliable cash flows; indeed, it hasn’t even reported a positive annual operating cash flow since FY 2013. Gas finder While it produces renewable energy, I would hesitate to call it a sustainable energy producer since it has yet to develop an economically-feasible model for producing renewable energy.

What Tesla needs is a Pattern Energy Group (NASDAQ: PEGI), NRG Yield (NYSE: NYLD), or TransAlta Renewables ( OTC:TRSWF), a firm that produces a steady supply of both renewable electricity and operating cash flows. Gas x tablets himalaya After all, the global nature of greenhouse gas emissions means that it doesn’t matter whether the company’s renewable electricity, if it is set on becoming a producer and thereby improving its brand, is used by households in Canada or Tesla drivers in San Francisco. Gas works park fireworks Tesla is proposing to acquire another SunEdison ( OTCPK:SUNEQ) instead, a millstone to be placed around its metaphorical neck. Electricity generation by country Two sets of negative cash flows don’t make a positive in this case; if anything, they will do more harm than good to the Musk Brand.