By Dan Gearino, Inside Clean Energy For two days this week, much of the financial media was paying close attention to a Delaware courtroom where Tesla CEO Elon Musk faced intense questioning about the 2016 merger of Tesla with SolarCity. Because of Musk’s celebrity and tendency to say wild things, much of the coverage treated this as an entertaining performance, but the case touches on a pivotal moment in the U.S. solar market that set the stage for where we are today. Click to read the full story In 2016, SolarCity was the dominant player in the U.S. market but it was running out of money. Musk, who was chairman and a major shareholder of both Tesla and SolarCity, helped to engineer Tesla’s $2.6 billion purchase of the solar company. The deal may have saved SolarCity, but some shareholders are now suing Musk, arguing that the transaction amounted to a bailout of SolarCity that was not in the best interests of Tesla. Aside from questions of whether this was a bailout, it is now clear that Tesla was not ready to build on what it had with SolarCity. While Tesla’s top executives were focusing on developing their make-or-break product, the Model 3 sedan, the company’s rooftop solar business was withering. As the trial plays out, I asked Bryan White, an analyst for Wood Mackenzie, to reflect on the significance of the Tesla-SolarCity sale. “The decline of SolarCity following the Tesla acquisition opened the door for companies like Sunrun, Vivint, and Sunnova to be the largest residential solar lease players,” he said. “And it’s hard to say whether Sunrun would have ascended and achieved enough scale to have acquired Vivint without Tesla-SolarCity’s decline.” White was referring to Sunrun’s 2020 purchase of Vivint, which combined the companies that were then No. 1 and No. 2 in market share, while Tesla was No. 3. Sunrun is now acting like a market leader, with high-profile partnerships like the one with Ford, related to integrating the all-electric F-150 pickup for use as a home battery. There’s no way to know if SolarCity would have taken a similar path to what Sunrun has done as the leader, but it’s a fascinating “what-if” because Sunrun has done so much. Also, it may be that SolarCity’s problems with its operations and finances were so great that it was going to lose its leading status regardless of the sale to Tesla. But we can say for sure that Tesla has had a difficult time figuring out how to manage and build its solar business. “I would describe Tesla’s approach (to rooftop solar) as very in flux,” White said. “They have been playing around with their pricing and product offerings quite a bit in the last year or so. As they try to re-assert their dominance in this space, they are clearly trying to figure out what works best for them to achieve profitable growth.

If you liked this post you’ll love our daily newsletter, EnviroPolitics. It’s packed with the latest news, commentary, and legislative updates from New Jersey, Pennsylvania, New York, Delaware…and beyond. Don’t take our word for it, try it free for an entire month. No obligation.