SEC comes knocking for GE, Tesla gets a reprieve

Tesla’s latest results have reversed much of its recent losses on the stock market, and now that the SEC has largely finished investigating CEO Musk, General Electric appears to have drawn the ire of the SEC. GE’s infamous $22bn write-down is now the subject of an SEC and DoJ investigation.

The probe comes as GE is attempting to restructure the Power division, into two units. One half will house the natural gas assets, and the other will collate the coal, grid, and nuclear products and services. However, this investigation is going to do nothing to alter GE’s downward trajectory, which has seen its share price fall and fall.

The $22bn goodwill charge would be painful enough by itself, but the SEC seems to think that there’s enough to go on to launch an investigation into accounting practices at the company. GE CFO Jamie Miller had to explain to investors that the SEC had expanded the scope of its initial investigation, and that the DoJ is now also investigating the charge.

The write-down is due to GE’s own valuation of its assets and future attributable revenues, many of which were acquired in a bid to boost the Power wing – such as Alstom, a coal generation equipment provider, for $10.7bn in 2015, followed by buyouts of Alstom joint ventures for another $3bn. GE had effectively said that the assets were going to lead to losses, but the apparent scale of the write-down has been poorly received by the SEC.

The restructuring should let GE focus on its gas business, without worrying so much about the coal side of things. Coal is dying, and while gas is a turbulent market at the moment, it is the safer long-term option for GE. The nuclear assets are another long-term possibility, but if other countries copy Germany’s strategy for abandoning nuclear, then there could be further repercussions for GE here.

Smart grid assets are an area that GE should be focusing on, particularly for Distributed Energy Resources (DERs) and their consequent integration into the core distribution grid. Energy storage is another area that GE should be promoting, and to that end, GE did restructure its storage business – moving assets and staff out of its Current wing into a standalone division inside Power called GE Energy Storage. Major rivals AES and Siemens made similar moves, setting up Fluence.

Part of the DERs sector that GE is investigating is the use of blockchain technologies to coordinate and monitor generation and storage. Speaking to GreenTech Media, GE Power’s Chief Digital Officer, Steven Martin, said that the wing was exploring incorporating blockchain functions into a Virtual Power Plant (VPP) offering, which would likely be delivered from GE’s Predix PaaS.

VPPs are essentially a group of DER assets linked together to reach an equivalent scale to a conventional power plant. An awful lot of software and coding is requiring to amass and integrate the distributed generation assets, but a transactional system like blockchain is required to keep tabs on who contributed what – and consequently, who a utility or producer needs to pay for contributing their solar generation to a VPP. It’s a high growth area, but GE has a pretty good track record for mistiming things.

Elsewhere, Tesla is enjoying a break in the negative publicity, posting ‘historic’ quarterly results that include a 70% increase in revenue and $312mn profit. It looks like the company might just have got a handle on Model 3 production, which bodes well for future success in the automotive world, but its energy results are also enthralling.

In Q3 2018, Tesla installed 239 MWh of energy storage. This is an 18% increase over Q2 2018, and a 118% increase over Q3 2017. Solar installations came to 93 MW, up 11% from the previous quarter, but way down on what Solar City was doing before Tesla acquired it. Tesla notes that it expects to ramp production of its Solar Roof tiles in H1 2019.

Customer acquisition costs for its solar business have fallen dramatically, after Tesla gutted the third-party channels. It has also increased Powerwall production, according to its filing, and says that manufacturing efficiencies have improved its margin. However, Tesla has recently increased the price of the Powerwall line too.

There will be a focus on selling rooftop solar and storage as a bundle, and to this end, Tesla says that the 450,000 Tesla vehicle owners will “become the largest demand generator for our residential solar and Powerwall business.” In that view, a Tesla car owner is going to be pursued as a likely buyer for the rest of the Tesla portfolio, as they look to power their EV with electricity generated by their homes. CEO Musk has talked extensively about that view, in the past.

Other firms are leveraging Tesla’s battery storage success. While grid-services suppliers in Australia have made the most headlines, a tidal power specialist called Nova has claimed what it says is a world first – using Tesla batteries to store energy produced by its M100 tidal turbines.

As part of the Scottish government’s Low Carbon Infrastructure Transition Program (LCITP), which is supported by the European Regional Development Fund, Nova is hoping to prove the viability of renewable energy sources. Other projects in the LCITP include solar, wind, and flywheel storage, but Nova seems to be having success with its Tidal Energy Storage System (TESS).

TESS started supplying power to the grid in October, after it had successfully linked its Shetland Tidal Array with its Tesla Powerpack units. Because of the predictability of the tides, Nova can use TESS as both baseload and emergency capacity.

“By storing the clean energy generated by the natural ebb and flow of the tide, we can control the supply of electricity to the grid to match demand. This creates a consistent source of completely predictable power from a clean, sustainable resource,” said Nova Innovation CEO Simon Forrest.