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Sunshine State

Andrew Leonard | September 1, 2016 | Story Tech World

Lyndon Rive remembers his first impression of Silicon Valley with a wistful grin. The year was 1998, near the absolute peak of dot-com boom go-go insanity. “You could feel the vibe in the airport,” recalls Rive. He and his now-wife, Madeleine, had arrived in San Jose to compete in the Underwater Hockey World Championships. In underwater hockey, players spend 15 or so seconds shoving a lead-weighted puck across the bottom of a swimming pool before surfacing to grab some air. And then they dive right back in. Much like the tech industry during one of its upcycles, the pace is grueling and frenetic. And much like the tech industry, it’s a sport that makes more sense to the people playing it than to spectators who can’t see much more than inscrutably roiling turbulence.

So maybe it’s no accident that Rive liked what he saw in the Bay Area and decided to stick around. He dove right in. Nearly two decades later, he is not only still competing with the U.S. men’s national team, but he has also built one of the Valley’s more impressive, not to mention socially meaningful, success stories.

The first order of business was starting the tech-support company Everdream with his brother Russell; their other brother, Peter, later joined them. The firm somehow managed to thrive during the dot-com bust. Next up, the brothers sold their company to Dell, and Lyndon and Peter pivoted to a much bigger game: weaning the world from fossil fuels by channeling the power of the sun. The new company, SolarCity, rode the popularity of a no-money down financing program for installing rooftop panels onto homes into a dominant position in the U.S. solar industry. “When you are in the grind,” says Rive, who serves as CEO, “you don’t quite realize the ground you are gaining because you are just fighting the battle. But then when you look back at everything that has been done, it is pretty amazing.”

While recently paging through a volume of SolarCity’s highlights, fresh from the printer in commemoration of the company’s 10th anniversary, Rive reminisces: SolarCity had started in Peter’s kitchen and then moved into “a really crappy warehouse office,” says Rive. The company, he notes, now employs 13,000 workers, and handles one out of every three rooftop solar installations in the country. More than 90 warehouses stacked full of panels are scattered across the country. By the end of 2017, SolarCity also expects to begin manufacturing its own solar panels at a massive state-of-the-art facility in Buffalo, N.Y., designed to go head-to-head with China. “The mission,” says Rive, speaking with a strong South African accent, “is to change the way energy is delivered into a sustainable lifestyle.”

Every immigrant to Silicon Valley is pursuing some version of the American dream, but there’s a uniquely Californian tint to Rive’s mixture of the offbeat—underwater hockey?—and the hubristic—end the era of fossil fuels! But the story is nowhere near complete without a mention of Rive’s cousin Elon Musk, the CEO of Tesla and SpaceX, who orchestrated a $2.6 billion buyout of SolarCity in August as part of his “master plan” to ensure a sustainable future for humanity. The merged company will market solar and battery combinations at Tesla’s roughly 200 stores. “Silicon Valley is full of people who say they want to change the world,” says Musk biographer Ashlee Vance, “and most of them are making really crappy little apps that do nothing. But these guys are taking concrete steps to try and solve what they see as a problem.”

That’s the essence of California cool, right? Go as big as possible? Reinvent the future in hues of clean and green? Save the world from climate change? When you look at the long game for SolarCity, it’s hard not to root for Rive. Unless, perhaps, you are a Wall Street analyst worried about all the debt SolarCity is piling up to pay for its expansion plans. Or an entrenched power utility fearful that SolarCity will rip out the heart of your business. Or a politician beholden to the fossil fuel industry. What Rive and his family are trying to do is very, very cool. But it is not going to be easy.

Toward the end
of a Tuesday in July, Rive looks like he would rather be doing at least a dozen other things instead of posing for photographs and talking with a journalist. Like making training videos to instruct his sales people on best practices. Or raising another round of capital to pay for additional solar installations. Or keeping morale up for his employees in the wake of the string of negative headlines that has been chasing SolarCity all month: Wall Street hates SolarCity deal. Elon Musk’s plan for Tesla to buy SolarCity raises fears of shaky financials and unclear motives. Why Elon Musk is making a terrible mistake with SolarCity. In June, Musk and Tesla shocked everyone who follows the solar sector by offering to buy SolarCity in an all-stock deal. The vision for the combined company, Musk reasoned, was “blindingly obvious.” Synergies would abound! In the not so far off future, Tesla owners would recharge their cars directly from rooftop panels on their homes manufactured, installed and often financed by SolarCity. Each such home would be a mini power generator plugged into a new “smart grid” that could respond in real time to the fluctuations of supply and demand across the nation. Wall Street reacted with an immediate and overwhelming thumbs down, a Bronx cheer that underscored the peculiar contradictions built into the solar industry in 2016.

On the one hand, the long-term prospects for solar have never been brighter. In mid-July, California set an all-time record for solar-generated electricity. Gigawatts of new generating capacity are coming online worldwide. Prices for equipment and installation have been dropping for years. Rooftop installations are booming: It took 50 years to get the first million rooftops hooked up with solar power, Rive tells me, but it will only take two and half more years to get the next million done. The raw growth numbers are undeniable.

And yet the business of solar power, right now, is grim. In 2015, a utility-backed regulatory change in Nevada amended the rules for how rooftop solar owners would be compensated for the energy they contributed to the power grid. The Public Utilities Commission slashed the credits that consumers would get for generating more power than they used, while tripling the fees that consumers had to pay to install solar. The new rules struck at the heart of SolarCity’s business model and crippled the rollout of solar in the nation’s sunniest state. Wall Street interpreted the shift as the first domino to fall and sent the stock prices of a score of solar companies into a downward spiral. In April, one of SolarCity’s biggest competitors, SunEdison, declared bankruptcy. In May, SolarCity further unsettled investors by lowering its prediction for how many rooftop installations the company would complete in 2016.

With SolarCity’s slumping stock price, flattening growth and significant debt payments looming at the end of the year, Wall Street had turned sour on the business well before the Tesla buyout offer. Analysts savaged the offer as a bailout of one family member by another that reeked of conflict of interest. The claims of synergy were “tenuous” at best, wrote one analyst. SolarCity would be an unnecessary “distraction” to Musk, who already had more than enough on his plate with Tesla and SpaceX, wrote another.

Before the merger with Tesla was announced, Rive told Silicon Valley that legal considerations prevented him from commenting on the deal. But if there’s one thing that becomes clear when you delve into the biographies of any members of the Rive and Musk families, it’s that they are all grinders who push ahead regardless of whatever storm is buffeting them. Point by point, Rive shrugs off the critics. The assets that SolarCity has been steadily accumulating, he says—all those solar power installations that the company leases to customers or provides financing loans for—will throw off steady streams of income for years to come. The setback in Nevada was more than compensated for by multiple “wins” in other states. Jon Wellinghoff, a former federal regulator who was recently hired as SolarCity’s chief policy officer, tells me that Nevada was an “aberration” and that the state’s anti-solar decision would likely be reversed in another year. As if underlining his words, in the weeks after the deal, both Rhode Island and Utah announce new solar-friendly regulations. And two of the biggest state electricity markets in the country, California and New York, are aggressively pushing solar. As for bankrupt SunEdison, they “tried to do too much too fast,” says Rive.

And the overall trajectory of the energy industry? That’s set in stone, as far as Rive is concerned. “It’s just obvious,” he says. “The sun will be the primary source of energy. So you have your cycles where Wall Street may be in favor of solar and may not be. But the fundamentals are just there: If you can provide energy that is cleaner at a lower cost than the alternative, then long term, it has to become the dominant energy.”

Lyndon Rive and
Elon Musk are first cousins—the sons of twin sisters. Musk has a brother and a sister, and Rive has two brothers. According to Vance, the five boys grew up without much parental supervision. From childhood, every single one of them, says Vance, displayed two key attributes of a successful entrepreneur: “They have a high appetite for risk, and they’re all quite driven.” Musk was the leader, and a visionary early on. In his biography, Vance recounts how Musk’s interest in solar power can be traced at least as far back as high school, when, “during a science-class debate, Elon gained attention for railing against fossil fuels in favor of solar power.”

Musk never let go of that dream and, by all accounts, is directly responsible for the creation of SolarCity. The story has been told many times: While driving from California to Burning Man in 2004, Rive complained to his cousin that he was bored with IT support. His motivation was beginning to slip. (“Getting up in the morning was hard,” he acknowledges). He wanted to do something new, something more substantial. Musk suggested “solar.” As Rive recounted to Vanity Fair in 2015: “I said, ‘Great. I have my marching orders. Let’s go.’”

It’s not often that one hears a Silicon Valley CEO talk about receiving “marching orders” from someone else. But that’s what life is like in Musk’s universe. Indeed, according to a “master plan” released by Musk in late July, the fact that SolarCity and Tesla “are separate at all, despite similar origins and pursuit of the same overarching goal of sustainable energy, is largely an accident of history.” I ask Rive if, in the context of Musk’s plans for space travel and utter transformation of both the automobile industry and the energy business, there were ever moments when he felt like he was nothing more than a character in a science-fiction movie written and directed by Musk? How much agency did he ultimately have in his own life? “Elon Musk is one of the greatest individuals in the world,” says Rive. “Hands down. He has a clear vision. He knows what we have to do to save humanity, and so we do it. That’s it. We have to do it.”

He continues: “But let’s be clear—myself and my brother, we run the company. I’ll turn to [Musk] for advice: He’s a great adviser; he’s a great mentor. But he’s not involved in day-to-day operations.” Would that stay the same in a merged company? “I can’t comment on that.” To address Wall Street’s conflict-of-interests concerns about the deal, both Rive and Peter, SolarCity’s chief technology officer, had recused themselves from making decisions about the buyout offer. But in a conference call held with Musk on the morning the merger was publicized, Rive said: “I am very excited about this next phase, and I think we can really accelerate the adoption of clean energy.”

There are some
perks to being a Silicon Valley CEO. At the end of our first interview, Rive mentions that for the Fourth of July weekend, he had taken his two young sons to the Komodo Islands in Indonesia after they had expressed interest in seeing Komodo dragons firsthand. But for detail-oriented CEOs like Rive, the days are usually long. His evenings, he says, are typically devoted to taking care of emails from 7 to 11 p.m., sandwiched around dinner with the kids.

I get a sense of his dogged attention to detail and the consuming nature of his work when, first thing the morning after our initial interview, I receive a message from his publicist. Rive wanted to schedule another interview. One possible explanation for the CEO-initiated follow-up came moments before our second conversation started: SolarCity announced that the company had raised another $345 million in capital funds. It was hard not to see the announcement as a direct retort to Wall Street’s uncertainty about SolarCity’s financial prospects, and my own questions the previous week on whether SolarCity’s ability to obtain additional capital was in doubt. Raised from four different investors, the new cash, says Rive, is specifically targeted for building more solar power installations on rooftops across America. The future of SolarCity, as least for now, would appear to be brighter than some of its noisier critics are claiming.

Of course, when the goal is getting the entire world off of fossil fuels, $345 million is an infinitesimal drop in the bucket. Energy infrastructure is hard and expensive. And as any underwater hockey player or Silicon Valley CEO is all too aware, it can be a challenge keeping your head above water when you are in the middle of the fray. But here’s Rive, 18 years after first dipping his toes in the Valley’s choppy waters, still paddling like mad.

Originally published in the September issue of Silicon Valley

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