Solar City Corporation is one company that provides solar energy services and stands out for its integration into the electric car sector. This American company specializes in designing, manufacturing, and installing solar energy systems. Below, we will learn more about this company and how it began its creation.
When was Solar City Corporation created?
The idea of creating a solar energy company came from Elon Musk, who suggested to his cousins (Peter and Lyndon Rive) founding a company related to solar energy. Thanks to this idea, on July 4, 2006, the Rive brothers founded Solar City Corporation, a company created to design, manufacture, sell, and install solar energy systems that can generate electricity in an alternative and clean way for industrial, commercial, and residential customers.
Business model and service capacity
Solar City focused its business model on “door-to-door” sales; however, its primary market strategy was to offer potential customers the possibility of acquiring solar energy systems with no upfront costs. They would only have to pay a lease or rental fee for the system in addition to paying for the energy generated for 20 years.
This business model allowed Solar City to acquire many customers, becoming one of the fastest-growing solar energy installation companies in the United States during that period. It is important to note that in 2009, the solar panels installed could generate 440 megawatts (MW).
Expanding Operations
Solar City began operations in Fremont, California. Adopting its solar system and market strategy, it expanded its operations in 2011 by acquiring Gro Solar, the solar division of Clean Currents, and Paramount Solar (acquired in 2013). By expanding its operations capacity, Solar City expanded its market to include other states on the East Coast of the United States, such as Florida, South Carolina, Vermont, Pennsylvania, and Connecticut.
Tesla Subsidiary
Since its inception in 2006, Solar City has forged its market and growth, by offering its customers the opportunity to acquire their equipment with no upfront cost and only paying rental fees and payment of their energy consumption generated by their solar energy system. However, this boom lasted only ten years, since by 2016, the number of residential installations decreased, in addition to intense competition and high operating costs, which made Solar City Corporation accumulate a debt of more than 1.5 billion dollars at that time.
It was then that Tesla had the initiative to acquire Solar City Corporation for a sum of around 2,600 million dollars and turn it from 2016 into a subsidiary of its corporation, precisely as part of the solar division Tesla Energy, since renewable energies (especially solar energy) was a fundamental part of Tesla’s original vision.
Controversy and lawsuit
However, certain Tesla shareholders did not view the acquisition of Solar City positively. Some argued that the purchase intended to “bail out” the company from Elon Musk’s cousins and that specific personal interests might be involved, as Elon Musk owned 20% of Solar City’s shares at its purchase.
Shortly after the Solar City purchase, a New York law firm announced the opening of an investigation to determine whether Tesla’s board of directors had breached its obligations by paying “more than it should have” for the Solar City purchase, which subsequently turned into a $2 billion lawsuit against Solar City and Elon Musk. However, in April 2022, a Delaware court dismissed the lawsuit and ruled in favor of Elon Musk.
Changes and restructuring at Solar City after the acquisition
As mentioned in Elon Musk’s biography written by Walter Isaacson, after the purchase of Solar City, they made several drastic changes in the company; for example, Elon Musk fired his cousins and changed several managers/employees, on the other hand; instead of focusing on sales, they focused on developing better products (among which were solar roofs), as well as decreasing operating costs and increasing the number of installations. Subsequently, the company began integrating into Tesla’s strategy by developing its Powerpack (for business) and Powerwall (for home and small business use) stationary lithium rechargeable battery energy storages.
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