By Eugene Wilkie VIA: www.linkedin.com
Elon Musk has intrigued me since he first popped up in the solar market. He seems to be able to view the world from a perspective as one place with many different market opportunities. I have never been a fan of complicated financial models. The early movers like Elon Musk and Jigar Shah developed models that were making money on money. It was one of the first times solar energy could be billed as the primary product when the real moneymaker was the financing mechanisms behind it.
In my companies, I have always tried to present and push a cash buy as the economics stay in the consumer’s pocket. Nonetheless, both Elon Musk and Jigar Shah busted open the solar markets with their lease financial models. If it had not been for them showing the financial community the earnings that were available, we probably would not have emerged as the legitimate industry we are today. I know that Elon Musk has many more business endeavors, but I am just focusing on my known industry involvements.
Elon Musk and Jigar Shah are not the only ones, but they are the front-runners in my mind as they have developed legacies that have included moving forward to bigger and better. I have nothing but respect for both even if I do not agree with their financial models being the best option for the end consumer (it is good for the investors as it is long term income). It is true that it was almost impossible back in the day to get a solar loan, but that is not the case now.
Now that you have a little background on my view from the renewable sector of Elon Musk in my early days, I am going to explain why (from my point of view) Elon Musk could own Energy /Transportation. Sun Edison, the company Jigar Shah founded, is also running neck and neck with Elon Musk in a new energy super model.
Often we can get tunnel vision when it comes to our particular industry and then it can be narrowed down to even smaller sub-sectors, for example, the energy industry has renewables. In addition, there is the wind, solar, and hydro that are significant renewables. Then in those emerging markets, like solar, you have many different models. The obvious big difference with solar is that anyone can use it, unlike other power products.
My career has allowed me the opportunity in working in all renewable sectors although solar was my primary. My early career was off-grid-power for places such as remote resorts in Latin America. The reason I mention this is that I developed a model that was very effective. First, one has to wipe out the fact that fossil fuel is available, but the customer wants all the enmities that are available to resorts fed with grid power.
I would first assess what their power needs were, both existing and expected growth, I would then look at the natural resources available and engineer/build a system that included golf carts that could be recharged for transportation. Solar was very expensive back then, but I could show a great financial model even then with the amount they were spending on fossil fuel. Some of the islands pay up to $15 a gallon for diesel. I did incorporate wind, hydro and some geothermal but solar was the primary choice.
The reason I am telling you about my early career is that I realized early on to envision from a point of view of off grid, stripping all fossil fuel from the equation. It is an eye-opening financial model especially when you compare it against fossil fuel at $10-15 a gallon. That is in reality what gas would be if you stripped all their tax incentives and that is coming. I have financial friends in the oil and gas industry, and they have told me they are preparing for this eventuality.
In my mind, there are three things in off grid to address energy, transportation, and communication.
If you look at where Elon Musk has spent his investments, it is in a holistic view of zero fossil fuel with fully integrated energy production/management and transportation. Remember he also watched a market, solar, go from nothing to a major player, and a big part of that was a dramatic price reduction due to consumer demand because of access to financing. Financing is no longer a problem in the market it just needs some maturity. He is following that thought process into the energy storage sector. When solar was first experiencing strong movement into the energy markets, there were more solar inventions than I could keep up with but in reality, it was bringing known technology prices down that sparked a fire in solar.
Think about this, he could sell you an entire energy production/management transportation package in one integrated product. Your solar system has energy management (storage included) it provides your power and fuel for your car that can communicate with your production, and the fact is the batteries in your car when not in use is part of your residents energy storage system. The excess energy produced by your solar system offsets the cost of recharging your Tesla on the road. When the cost of fuel is removed from the equation of energy and transportations, the ability to integrate more functions into one package substantially increases.
Elon Musk's huge manufacturing of batteries factory is a great example of mass manufacturing bringing down prices of known technologies. Think about this for a moment. Once there is an established market all these young folks entering into the field are seeing opportunities to make their mark and huge potential earnings. Therefore, if you already have established yourself as the biggest and best whom are they going to seek out?
I have no less than five new inventions or idea presented to me a month, and some of them are astounding. I cannot imagine what Elon Musk has been presented with and what he knows is coming. I have watched this many times with solar technology. Someone has a great innovation; they first go out to raise funding, start their company, and then sell to someone with more longevity and financial stability in the market. This same thought process can be spread across the spectrum of energy and transportation.
Elon Musk has addressed the total off grid picture, and that is the only way to dominance in this market.
I have seen ten different solar panels that have an inverter, charge controller (built in communication at the module level accessible by consumer and utility) and battery built in as part of the solar module. I was impressed with the size of a few as I thought they would be bulkier, but it still needs a greater reduction in size and weight.
Think of it this way your cell phone used only to make calls and now, multi-functions have been integrated into the phone in a seemingly short period. We will see models in complete form like this soon; it has already happened with the integration of micro-inverters and power optimizers into the actual model. Just like the cell phone, the list is endless of all the features one could put into a total package. Vertically integrated business models are difficult as you are bouncing more off internal data versus competition doing the same thing, but it can also be an advantage if managed right.
One needs to basically, own a bank as it is all projections and that is a hard check to cash. Elon Musk has intimate experience in the financials of all these different components and if it can be made into one product, they will dominate several industries at once. It is a brilliant idea. Bring management of all components into one marketable product. If I can afford a Tesla, I can afford the full package.
If current utilities are going to maintain their presence in the energy market, they need to prepare and change models. It is probably too late for some. The problem I have seen with some utilities that they are so indebted to fossil they cannot remove themselves from it. That would be a real tough spot to be in as folks like Elon Musk and Jigar Shah (who have that Zero fossil fuel perspective) have and are developing sophisticated models that are less cost and offer way more advantages to the consumer in one product. It will be that management software, which really will be the long-term residual generator. One has to keep updating hardware and software right.
We are working with some local utilities, and they are preparing themselves for power management models. Very Smart! I like to remind folks that change can be scary but going broke while watching others prosper is a horrible option. In the military my commander used to tell us to adapt and change to the circumstances, we were experiencing ( actually went like this Adapt and change you %$@#@$%'s or I'm gonna beat your %$@# @$$ before it kills your @$$) . It rings true in all sectors of my life.