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Is Elon Musk’s One-Stop-Shop Model the Renewable Energy Sector’s Next Big Thing?

Elon MuskTesla’s $2.6 billion proposed merger with SolarCity got a chilly reception from investors on Monday as shares in both companies slumped following the news about the deal.

But is Elon Musk, the electric-car maker’s CEO, onto something big with his plan to create a one-stop shop for renewable energy and storage?

In announcing what it called “the world’s only vertically integrated sustainable energy company” on the company’s blog, Tesla said the merger would fully integrate residential, commercial and grid-scale solar generation and storage. “By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app,” the blog said.

This vertically integrated business model differs from a network approach to solar deals in which one company handles the financing, another handles the installation — and electric vehicles are an entirely different sector.

REC Solar, which last month expanded its channel partner program, says partnering with other companies is a better way to expand access to solar.

“There are many views on the business model best fit to accelerate solar adoption,” Alan Russo, senior vice president of sales and marketing at REC Solar, told Environmental Leader. “The Tesla-SolarCity acquisition represents an ambitious one-stop-shop vision driven by vertical integration. At REC Solar, we believe customers are seeking greater choices, not fewer.”

REC Solar is building a partner network of engineering, procurement and construction (EPC) companies and solar developers and giving them direct access to REC Solar’s commercial power purchase agreement. Last month the company said it will make $225 million in Duke Energy-backed funding available for projects ranging from 50KW to 2MW.

Duke Energy, the largest utility in the US, owns the majority interest in REC Solar.

In addition to wanting more choices, customers “also want to work with a proven energy partner with deep roots in the energy business that can reliably reduce energy costs while helping to make their organizations greener and more sustainable,” Russo said. “We have combined our 19 years of solar expertise with flexible financing options from Duke Energy, partnerships with providers like GreenCharge networks, and our growing authorized dealer network to give customers choice and confidence in who they are working with.”

Chris Robinson, a research associate on the Energy Storage team at Lux Research, told Environmental Leader that the industry is moving toward a one-stop-shop business model.

“A one-stop shop for customers would give Tesla better access to solar customers and also allow SolarCity to leverage Tesla’s brand and storefront locations,” Robinson said, noting that Tesla’s plan isn’t actually the first instance of a vertically integrated solar-plus-storage company. “Total, who owns a majority stake in SunPower, purchased battery maker Saft earlier this year. We expect the industry to move more toward vertical integration, with companies reducing soft costs by offering a more complete product to customers.”

Robinson said this will affect the residential solar market more than commercial solar. “The commercial space is not as reliant upon solar installations as the residential space,” he explained. “Applications such as demand response and UPS [uninterruptible power supply] systems don’t require solar, which means that relationships with solar companies are less important.”

But that’s not to say a one-stop-shop model isn’t gaining traction in the commercial sector as well. “In short,” Robinson said, “yes we do see the commercial space moving toward vertical integration and will in many ways involve the same players as the residential space.”

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