Tesla Energy?

Word broke yesterday that Tesla has applied to be an energy retail provider (REP) in Texas.

Juan Muldoon on our team is a fan of saying "decommoditize the commodity" and Tesla has as good a chance at doing this with power as anyone. There are obvious opportunities to make power free with the purchase of an EV, power wall, and solar.

Bundling hides the actual cost of each component, which then allows you to charge more for power avoiding the traditional race to the bottom.

REP's are notoriously tough businesses that essentially boil down to two core competencies - customer acquisition and power procurement.

Tesla checks the box on differentiated customer acquisition. Their brand is one of the strongest in the world and Elon has created a cult-like following.

Power trading is fairly similar to commodities trading with the added nuance of needing to cover predicted demand for a given interval. Predicting that demand is getting more difficult due to distributed energy and electric vehicles. Companies like Amperon are helping to solve this problem for REP's.

The other part of procuring power is capital availability, state or ISO regulations require a certain amount of cash on hand or access to it via a line of credit - neither will be a problem for Tesla.

Normally, I would say getting into the REP business is a disastrous decision. In this case, Tesla is well-positioned to take advantage especially in homes with EVs, storage, and/or solar.

Most REP's currently don't have insights into which homes have devices that significantly impact energy consumption and thus affect procurement - Tesla will.

Most REP's don't have a branding machine that has figured out differentiation and customer loyalty - Tesla will.

Most REP's don't have Elon Musk - Tesla will.