Tesla recently announced a major restructuring of its solar business following several quarters of declining solar installations and dropping to third in the ranking of the country’s largest solar installers by capacity.
As reported by The New York Times, Tesla will begin selling solar entirely online, offering systems in increments of 4 kilowatts and at a price of $1.75-$1.99 per watt, compared to the national average of $2.08 per watt published by the Solar Energy Industries Association.
The strategy is a bold pivot for a company that has struggled with high overhead and customer-acquisition costs and relatively expensive product offerings.
After diving into the details on Tesla’s website for its new solar portal, we ended up with more questions than answers.
First, while the Times repeats Tesla’s claim of “$1.75-$1.99 per watt,” these figures are actually after the 30 percent federal Investment Tax Credit has been taken off the price. It is a solar industry standard to evaluate the price per watt of a solar project using the full contract price, not after rebates incentives are taken into account.
Tesla’s obfuscation of the price in this way should raise concern among buyers.
As seen in the chart below, the Tesla website calculator demonstrates that its actual price per watt for a project in California is $2.85 ($11,400 per 4,000 watts), excluding an electric main panel upgrade or hidden conduit runs. Other typical cost “adders” for solar projects with difficult roof types include:
- Clay, metal tile, slate and cool roofs
- Roofs that are inclined more than 37 degrees
- Multiple roof planes
- Trenching work
These adders typically add around $0.50 per watt to the project cost. It is unclear if Tesla intends to increase its price for projects with these requirements or if they would be turned away entirely in order to upsell customers on the elusive solar roof as they have been accused of doing on their vehicle sales.
These additional costs are common for solar projects and contribute to the national average price of $2.98/watt ($2.08/watt after the tax credit). From this information, we cannot conclude that these panels are demonstrably cheaper than the national average in any sense.
Source: Tesla’s updated solar estimate page
At Pick My Solar, we solicit and analyze solar quotes from our nationwide network of solar contractors after designing a solar array customized for the customer’s energy needs. Based on our marketplace data, a comparable system using high-efficiency photovoltaic panels, Tier 1 inverters, and no adders sold through our marketplace in California would be 8 percent cheaper than Tesla’s system.
Then consider that on Tesla’s solar page you are required to pay a $99 down payment and provide your credit card information before you have any actual details about the product you are receiving. Tesla’s webpage does not explain what panels or inverters your system will use, does not detail any warranty information for workmanship or the specific products, and does not provide any kind of production guarantee, all elements that could add significant cost to a solar project.
To be sure, online solar sales do have the potential to offer customer savings. According to a recent report by the National Renewable Energy Laboratory, with input from analysts at Wood Mackenzie, online solar marketplaces can save customers up to $0.40/watt.
Tesla’s financing product for its solar projects is not particularly competitive. With a 20-year, 5.99 percent loan, Tesla’s loan product would be one of the least competitive financing offerings on our platform.
The most common financing product there is a 12-year, 3.99 percent loan with a $1,000 buydown, giving monthly payments lower than the previous energy bill average. The total cost of financing for this product is roughly $6,000, compared to $16,000 with Tesla’s financing for the same 8-kilowatt system.
Tesla is also employing a new sales tactic by selling systems in increments of 4 kilowatts, as opposed to the traditional method of sizing the system based off each customer’s specific annual electricity usage and bill amount. Almost all customers will see their optimal savings when a system is sized to their specific needs. Tesla customers will either be producing too little and will be left with a potentially sizable utility bill or producing too much and receive little compensation from the utility for the pricey panels they purchased.
So what are you really gaining from Tesla’s cookie-cutter approach to solar installations?
The price is not demonstrably cheaper; you don’t know what solar products you are actually receiving; you have to provide credit card information upfront; and the system is not optimized for your property and energy consumption.
Tesla advertises on its site that a customer can request to have the system uninstalled from their property if they are unhappy within seven days of the installation, but it is unclear if this actually entails a full refund and repairing the roof to its original state. Seven days is also not nearly enough time for a customer to know if their system is functioning adequately and achieving the desired production.
Tesla’s solar pivot is reminiscent of other recent announcements by the company that has a reputation for overpromising and underdelivering. Last March, Tesla announced its long-awaited $35,000 Model 3, only to remove the offering less than a month later after capturing thousands of preorders and failing to deliver a single vehicle.
Our conclusion is that this “streamlined” rooftop solar product is a public relations move to revitalize interest in its rooftop solar products while laying off sales, engineering and supply chain staff.
The announcement also serves to continue to keep the pipe dream of the solar roof tiles alive, a product which nearly two and a half years after its unveiling still shows no sign of mass production.
We have seen Tesla’s sales tactics previously, and we caution homeowners to source multiple quotes before proceeding with any solar project.
Max Aram is founder and CEO of Pick My Solar, an online platform for comparing solar companies.