Tesla-SolarCity deal highlights pillars of sustainable energy future
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Tesla's surprise offer last week to buy SolarCity was quickly panned in The Wall Street Journal as a deal that "defies common sense." Both companies are burning through cash as they expand their operations, and the role of Elon Musk as chairman and largest shareholder of each company raises ethical questions. Other experts have praised the deal, which Musk calls a "no-brainer."

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Markets and shareholders will ultimately decide whether pairing the companies makes financial sense. However, the triad of technologies pioneered by the two companies — electric vehicles and battery storage systems by Tesla, and solar power by SolarCity — share crucial synergies in the broader pursuit of sustainable energy. Whether marketed by merged or separate companies, each technology depends on the successful proliferation of the others to achieve its full potential.

Tesla stunned most observers by receiving 400,000 deposits for its Model 3 electric car. If those deposits become purchases, they would far exceed total electric car sales forecast by the Energy Information Administration for the next decade. Other manufacturers also offer fully electric or plug-in hybrid vehicles or expect to introduce new models soon. Bloomberg New Energy Finance projects that electric cars could reach 35 percent of new car sales globally by 2040.

Whether these electric cars benefit the environment depends on where their electricity comes from. Under current conditions, electric cars don't substantially reduce life-cycle emissions compared to conventional cars. This is especially true in regions where coal provides a substantial share of electricity.

That could change as electricity is generated by lower emitting sources. Wind has provided most of the growth in renewable electricity over the past decade. However, solar is expected to dominate new additions of renewable energy in coming decades. Accelerating the deployment of solar can reduce the carbon footprint of electric cars.

That reduced carbon footprint matters not just for climate, but also for policy and purchasing decisions. Policymakers are more likely to extend tax credits for electric cars if their electricity is obtained from greener sources. Meanwhile, purchasers of electric cars are often motivated by the perception that these vehicles are better for the environment. For the most environmentally conscious consumers, rooftop solar coupled with battery storage enables their electric cars to be charged with solar power, even when the sun doesn't shine.

Thus, solar and storage can boost electric car sales. Electric cars and battery storage can in turn boost solar deployments.

As a variable energy source, solar power faces limitations economically as more solar is added to the grid. In California, abundant solar is already diminishing the value of daytime electricity and shifting peak power prices to the evening hours. Further growth in solar could require the grid to curtail some of the solar power at sunny times when supply exceeds demand.

Enabling greater penetrations of solar requires more flexibility in either supply or demand. On the supply side, battery storage in solar-rich regions can shift power from oversupplied daytime hours to increasingly valuable evening hours. Costs of battery storage are falling rapidly as these technologies improve. While some energy is inevitably lost in charging and discharging batteries, these losses are preferable to outright curtailment when the grid is oversupplied.

On the demand side, "smart chargers" can charge electric cars at times when supply is most abundant, and even discharge electricity back to the grid when supply is scarce. This essentially allows smart-charged electric cars to serve as "batteries on wheels," providing additional storage capacity to the grid.

Smart charging could be especially valuable to rooftop solar owners as states consider rolling back net metering. Without net metering, surplus solar sold back to the grid receives a lower price than electricity purchased at night. Electric vehicles with smart chargers or battery storage could use some of that surplus solar.

None of this addresses whether Tesla is wise to acquire SolarCity, or whether bringing the technologies under one corporate roof would benefit the company or consumers. Nevertheless, a symbiosis clearly exists among electric cars, battery storage and solar power as pillars of a sustainable energy future. Further development and adoption of each technology can catalyze a brighter future for the others.

Cohan is associate professor of civil and environmental engineering at Rice University.