Musk has taken his jet to Silicon Valley for yet another Tesla CEO interview. So I'm keeping myself busy by climbing onto the roof of a two-story house in Santa Monica, California. I'm here to have a look at SolarCity, Musk's latest--and in some ways, his best--bet. The company is based in an unassuming office park in Foster City, in the heart of Silicon Valley. But if you really want to understand what Musk is up to, the best place to go is a rooftop, far removed from the world of software and stock options and talk of innovation. Two guys in green SolarCity T-shirts, Wade Meier and Johnny Davis, are using power wrenches to attach shiny black solar panels onto the flat roof. They work carefully: Each 5-foot-by-3-foot panel costs $950, and this house looks to be worth well over $2 million. The installation takes six days and costs $35,000, and it will save the homeowners about $250 a month on their electric bill.
All over California--and before long in Arizona and Colorado--SolarCity crews in snappy green trucks and matching uniforms are signing up customers. Musk seeded the company last year with $10 million and an idea to do for solar energy what Dell did for computers. The company, which Musk says will probably be the highest returning of his three investments, already employs some 180 in offices in Berkeley, Foster City, Los Angeles, San Diego, and Sacramento, and averages 90 installations a month. In October, it won a contract to outfit eBay's headquarters with solar panels. Revenue for 2007 will exceed $23 million.
SolarCity's business plan, which Musk first proposed to company co-founders (and his cousins) Lyndon and Peter Rive at the Burning Man festival several years ago, is to leave panel manufacturing--an increasingly competitive and commoditized business--to the likes of BP and focus on building a retail brand. Installing solar capacity in a home or small business costs about $9 per watt, but the panels cost only $4 per watt. The installation business, which includes surveying, planning, sales, and the actual bolting on of panels, is expensive and inefficient. "It's all mom-and-pop contractors, and they basically suck," Musk says. "None of them have put any serious effort into honing the whole process--you know, squeezing out excess parts and labor--and then they have no economies of scale as far as buying panels en masse or establishing best practices."
Accomplishing this has meant creating what might be the new economy construction company, amid a housing downturn. Technicians like Meier and Davis--who would otherwise be making an hourly wage working for roofers or contractors--get stock options in a company that Musk says is headed for an IPO and a nationwide expansion. They're also encouraged to try out different installation techniques--for instance, ways to drill fewer holes into a roof--and report back on their findings. "We have all the engineers' personal cell phone numbers, and they're listening to us," says Davis, a former construction worker. When a customer calls SolarCity's toll-free number, a salesperson uses satellite imagery to assess whether the house gets enough sunlight. Next, laptop-toting employees are dispatched to survey the roof, work up an estimate, and produce a contract. In addition to actual installation, SolarCity processes customers' rebate applications with the state government, remotely monitors the performance of the panels, and handles any maintenance. "Our goal is to reduce the cost of solar so that everyone can adopt clean power," says Lyndon Rive. "We definitely want to be a consumer brand."
A half hour's drive south of the SolarCity work site is another construction project, a new headquarters for SpaceX. The rocket company, which occupies five large warehouses in El Segundo, is ready for a home becoming of its grand ambitions, and Musk has picked out an absurdly large one. The building, a giant shed right next to the Hawthorne airport, takes up 11.4 acres and once housed the factory that made the fuselage for Boeing 747s. This fact seems to excite Musk immensely: To reclaim a factory from an old aerospace titan--Boeing, no less--is too good to be true.
The place is still under construction when Musk shows me around, but you can see that it will be special. The entire company will be housed on a single open floor with low-walled cubicles. Musk's cube is dead center, right behind a place where two steel girders form a giant X. When it's finished, an engineer will be able to walk right over to the manufacturing floor and see a rocket engine milled from a piece of stainless steel or a fuel tank formed from giant sheets of aluminum. Salespeople will be able to hear the factory workers welding, and the workers will pass by the salespeople when they arrive in the morning. Everyone will eat free meals in the cafeteria.
Musk designed the building's interior. Bob Reagan, who is supposed to be in charge of SpaceX's manufacturing operation, has been detailed to duty as construction foreman. After pausing briefly to urge Reagan to make sure Scotchguard is applied to the new cubicles, Musk points to some glimmering metal on the ceiling. "You're never going to see ducts like that anywhere else," he says, grinning. "Look at those contours." As we stroll onto what will become the factory floor, he again looks up. "Those are 60-foot ceilings with catwalks," he says. He pauses to marvel at the number and then adds, "If there were people walking up there, they'd be tiny." During the visit, Musk is in fine form, smiling, laughing, gawking--in fact, almost calm. There's something strange and touching about a man this intent on reaching the heavens who can pause to marvel at a really high ceiling.
