During a Monday morning Tesla Motors conference call Elon Musk, in response to several questions regarding designing a new system wide (solar, storage & car) inverter, said –

We don’t want to jump the gun on future (hardware) announcements, but we are internally betting on the merger. If it doesn’t go through, It would a bit awkward…we are betting on the merger for integrated power electronics.

This and other comments essentially answered the question we posed Saturday, ‘Will TeslaSolar continue to outsource the brain of its solar systems – the inverter – or develop in house?’ That design of this inverter occurred as part of the behind the scenes work of a merger, is testament to the importance of this piece of hardware in Musk’s vision of Tesla Energy’s future.

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The broader purpose of Monday morning’s conference call, as shown via the investor slides (pdf), was to reiterate the benefits gained through integrating the businesses of energy storage, solar power and electric vehicles. Financial benefits were outlined to come from sales and marketing gains via cross selling, manufacturing capabilities increasing at the Buffalo factory because of the Tesla team’s experience with the Gigafactory , lower installation and maintenance costs , and other areas.

Multiple callers from major financial institutions asked specifically how Tesla planned to manage the inverter that was to integrate the main hardware systems. When asked about continuing to buy an inverter from other companies, CTO JB Straubel responded:

Power electronics is something that is really something quite core to Tesla. And something we see as a really strong competency of ours –most people don’t realize it but Tesla is one of the biggest manufacturers of power electronics in the world. If you look at all the charging equipment in the cars, the inverters that run the motors in the cars. Something we see a lot potential – we see an interesting and lucrative opportunity if we can more aggressively innovate and integrate that with storage.

Musk’s gentle reminder that the sun goes down was used to point out to importance of a centralized system managing all of these energy resources. Musk’s statement that knowing when to charge your car versus when you should charge your batteries and or use energy elsewhere in the house laid clear that this system design will take into account a PowerWall, the rooftop solar and the car. Additionally, there were multiple comments about time of use charging (taking into account the cost of electricity at the moment when charging) and providing grid services (power grid support from stored energy) – all higher level functions of a smart inverter looking to optimize the hardware’s financial position.

I feel it is fitting that the inverter is getting such attention when combining two companies like this. Literally, the Tesla Central inverter is going to combine the hardware of the various business groups. This inverter will increase charging efficiency because of no conversion losses when moving DC electricity from the solar modules to the batteries in the storage system or the car. This piece of hardware will probably save $5000-10,000 when installing a solar pv/storage/car system – instead of installing three unique inverters, and paying for installation, you’ll do it once. This same theme was referenced by Musk when he spoke about working the Hawaii deal between Tesla and SolarCity.

Technologically speaking, it might even make sense to build in fast DC charging at the home if there is enough Solar/storage available. The current model where DC solar energy is converted into AC to charge the car, where it is changed back to DC by the car’s inverter to be stored by the battery has to keep engineers like JB Straubel and Elon Musk up at night.

It might be a challenge for analysts to determine the value of the following benefits, however, it seems it’d be prudent to determine: SolarCity will gain access to some of the best and experienced design and build teams in the world when it comes to power electronics. This will probably be worth hundreds of millions of dollars per year. Tesla will gain SolarCity as an internal market for its already developed skill in making inverters.

Near the end of the conversation, while responding to questions about launch times needed for an inverter, it was made clear the company’s level of confidence regarding whether Tesla has the talent to build this piece of hardware:

I think the we are probably the best in the world on advanced inverter technologies – Elon Musk

Tesla’s frustration with the Powerwall rollout has been focused on the interface with 3rd party inverter makers like SolarEdge. It wouldn’t be surprising if Tesla announced their own inverter at the close of the SolarCity deal. Like Musk said, it would be “awkward” if the deal doesn’t close.

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